The Association for Financial Professionals, an organization of corporate treasurers, published its "2019 AFP Liquidity Survey Report" yesterday. (AFP's Tom Hunt discussed the results at Crane's Money Fund Symposium in Boston, which concludes Wednesday.) Their press release, entitled, "2019 AFP Liquidity Survey, Underwritten by State Street Global Advisors, Reveals How Organizations Prioritize Operating Investments says, "Bank relationships are core to businesses' operating cash investment mix, according to the 2019 Association for Financial Professionals Liquidity Survey, underwritten by State Street Global Advisors. In a survey of nearly 500 corporate treasury and finance professionals conducted in March, 93 percent of respondents consider the overall relationship with their banks to be a determinant when deciding where to place their organizations' cash and short-term investments. The continued dominance of banking relationships highlights the key recurring investment themes of safety, liquidity and yield."

The release explains, "Fully 68 percent of respondents indicate that the credit quality of a bank also is a deciding factor when determining where to invest. Organizations that are privately held, non-investment grade and net debtors are more reliant on their banks than are other companies."

AFP president and CEO Jim Kaitz comments, "Banks are financial professionals' key partners and that relationship is a major determinant in deciding where to place operating cash. However, our research does show that bank deposits have gradually declined year-over-year. It will be interesting to see if practitioners will continue to emphasize bank relationships in an uncertain interest rate environment."

The release also tells us, "Looking forward, as real-time payments take shape, treasury departments will need to consider sourcing liquidity in real time. Fully 39 percent of survey respondents expect the money market industry to provide liquidity 24/7."

It adds, "The 2019 AFP Liquidity Survey also revealed a shift toward yield for money market funds. Although a fixed or floating net asset value (NAV) was still the most popular reason for choosing a money fund at 56 percent, yield ranked second (40 percent), followed by fund ratings (38 percent). This is a shift from last year when yield was ranked third after the 'relationship value from the investment manager.'"

Barry F.X. Smith, COO of State Street Global Advisors Global Institutional Group, says, "We continue to see high cash balances acting as a buffer in the face of market uncertainty," said "Cash management is increasingly being used by investment professionals as part of a broader corporate strategy.

The 2019 AFP Liquidity Survey Report's introduction explains in a note from Yeng Felipe Butler, "State Street Global Advisors is proud of our continuing partnership with the AFP to sponsor the 2019 Liquidity Survey. This year's survey marks the 14th annual examination of trends affecting financial professionals' cash management practices. The end of 2018 left investors reassessing the Federal Reserve's rate expectations heading into 2019, rethinking prime money market funds, and considering the best way to position balance sheet cash."

It continues, "Concerns over global economic slowdown persist with expectations that the Fed will ease monetary policy at some point this year. With regulatory changes amidst a shifting economic environment, managing cash investments has become increasingly challenging. Cash today requires greater flexibility and a clearer understanding of risk-return tradeoffs. Our commitment to client-centric innovation, collaboration and thought leadership has defined our four decades of serving institutional investors' short-term liquidity needs."

The report tells us, "With spreads widening on comparable yields, respondents rank yield higher than fund ratings; when selecting money market funds, fixed or floating NAV is ranked highest. This is a shift from last year when yield was ranked third after the relationship value from the investment manager. It seems the evaluation of money market funds and bank deposits are not equally measured when interest rates have risen, everything else being equal."

Finally, it says, "Only 14 percent of survey respondents consider ESG investment parameters when managing operating cash, 70 percent do not consider ESG and 14 percent are unsure. Net investors (19 percent) and larger organizations with annual revenue of at least $1 billion (17 percent) are more likely to consider ESG as a parameter than are other organizations."

Watch for more coverage of the AFP Liquidity Survey in coming days, and thank to those who attended our 11th annual Money Fund Symposium! (We'll also be quoting from the sessions in coming days and in the July issue of our Money Fund Intelligence newsletter.)

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