We learned that J.P. Morgan Asset Management released the results of their "Global Liquidity Investment Survey 2011" to listeners on a conference call yesterday. In the latest edition of the annual survey, Robert Deutsch, Head of Global Liquidity for J.P. Morgan Asset Management, says, "I am delighted to introduce the J.P. Morgan Asset Management Global Liquidity Investment Survey 2011. Now in its 13th edition, the survey has provided an unbroken global benchmark for corporate treasurers since its launch in 1999. The 2011 survey is the most comprehensive yet, with a record 487 treasurers from around the world providing their views.... The survey maintained a truly global focus, with treasurers responding on behalf of organisations in a wide range of regions and markets.... Our longstanding partnership with the Association of Corporate Treasurers (ACT) continues to play a vital role in the success of the survey."

The Survey's Executive Summary explains, "Surplus cash levels have continued to grow, and treasurers are less satisfied with the returns they are able to obtain on their cash balances. After the financial crisis, preservation of principal became the main focus for treasurers, but last year we noted the beginnings of a renewed appetite for yield, and the trend has continued this year. However, treasurers emerged from the financial crisis with a new focus on risk, and they are not willing to set this aside. Counterparty risk is a particular concern, and risk management is perceived as a more important part of the treasury role than it was last year. Treasurers must therefore walk a tightrope between their appetite for yield on one hand and their caution about risk on the other -- a delicate balance that was summed up by one treasurer as 'managing the margin: getting the best return for minimum/zero risk'."

The survey's Key Findings include: "The appetite for yield is returning - After several years of extremely low yields, treasurers are becoming frustrated with the returns they are able to access on their cash investments. Return on investment is now the key metric for measuring investment success, with preservation of principal dropping to second place. A greater proportion of treasurers are now looking for higher yields, and they are more willing than last year to take on additional risk to achieve it. Liquidity is still key - Liquidity is the biggest concern in treasury departments today, and is also the most important consideration for those who segment their surplus cash. However, over a quarter of treasurers would now be prepared to sacrifice daily liquidity for higher yields -- a marked increase versus last year."

Additional key findings also include: "Risk remains in focus - Risk management is now the third-highest area of importance for the treasury department, moving up from fifth in 2010. Counterparty risk is a key concern, with the financial strength of the institution now the most important criterion for treasurers when selecting a primary bank, overtaking the quality of relationship management for the first time. Banking relationships have increased further - Treasurers increased their number of banking relationships again in 2011, continuing a trend seen since the beginnings of the credit crisis back in 2007.... Regulatory change is not yet a significant concern – So far, treasurers appear relatively sanguine about the potential impact of regulatory change, with only a very small number of respondents citing issues related to regulation as the biggest challenge they face in the next year. However, with two thirds of treasurers unwilling to consider investing in fluctuating net asset value funds if regulatory change makes stable value money market funds unavailable, it is possible that regulation may have a greater impact than treasurers currently anticipate."

JPMorgan's Global Liquidity Investment Survey 2011 also comments, "General cash management portals are the most widely used online portals/platforms, with 33% of treasurers using single bank cash management portals and 47% using multi-bank portals. By region, treasurers in North America are most likely to use general cash management portals, followed by those in Asia. Treasurers in EMEA remain the least likely. However, the uptake for foreign exchange portals is the highest in EMEA, where multi-bank platforms are used by 52% of treasurers. This year, for the first time, we asked why treasurers use online portals. The vast majority (83%) like the flexibility/ease of use, and almost half (46%) said portals provide better reporting."

The Survey also comments, "There remains a high degree of regional disparity in surplus cash allocations – unsurprisingly, given the adherence among cash investors to the investment management tools traditionally used in their regions. North American treasurers allocate a greater proportion of their surplus cash to money market funds than treasurers in any other region, and also allocate a much smaller proportion to bank deposits. In contrast, Asian and European treasurers favour bank deposits, which make up 64% of surplus cash portfolios in both regions." A table in the survey shows North America respondents with a 33% allocation to bank deposits, a 32% allocation to money market funds, a 15% allocation to direct securities -- repos, CDs, CP, bonds, and a 13% allocation to offset to bank costs.

It continues, "Among treasurers who are using or considering pooled instruments for their investment management, an emphasis on liquidity and credit quality remains evident. Prime/AAA-rated stable NAV money market funds are the most popular pooled vehicle, with 65% of treasurers either using them or considering doing so. Over 50% of treasurers either use or are considering using Treasury/government money market funds (AAA-rated stable NAV funds that invest only in government securities)."

Finally, the study adds, "Given the continuing discussions among regulatory bodies around the possibility of requiring money market funds to float their NAVs, treasurers were asked if they would use fluctuating NAV funds if stable NAV funds were not available. Two thirds of treasurers said they would not use fluctuating NAV funds, while 22% said they would and 11% said they already do so. The results were directionally consistent by region, but because of regional differences in fund availability, EMEA and Asia have a higher proportion of treasurers that already invest in fluctuating NAV money market funds." For the full study, visit J.P. Morgan Asset Management's "Surveys" page.

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