The U.K.-based Euromoney writes "Corporate treasurers seek alternatives to money-market funds". The article comments, "Corporate treasurers are diversifying away from using money-market funds (MMFs) to manage short-term liquidity in response to low rates and proposed regulatory changes that are threatening to impair the MMF industry.... Corporate treasurers have long viewed MMFs as one of the most effective means of managing short-term intra-day liquidity and diversifying counterparty risk, but they are now being forced to adjust this strategy and seek alternatives." The piece quotes Andy Nash, senior vice-president and group treasurer of Netherlands-based retail group Ahold, "Money-market funds have traditionally been attractive to corporates because they are liquid, have a credit rating, give diversity of investment -- we are effectively outsourcing our credit research -- and most importantly they were attractive for capital preservation.... We have already made key changes in managing our investments: our counterparty policy has been updated and the total amount of counterparty risk for financial institutions increased to cope with the possibility that we come out of MMFs. We are using alternatives from the treasurer's investment instrument toolbox, such as repos/sticky deposits and other funds offering security; with more use of good old-fashioned term deposits again." The article adds, "Nash says Ahold has changed the way in which it uses MMFs, due to the low-rate environment as well as questions relating to capital preservation.... A similar shift in strategy could be expected among other companies, but changing investment policy can be a laborious process, and one often requiring board-level approval."
