A press release entitled, "J.P. Morgan 2019 Global Liquidity PeerView Survey Reveals Demand for Money Market Funds Remains Strong in Late-Cycle, as Focus on ESG Increases." It explains, "J.P. Morgan Asset Management released the 2019 Global Liquidity PeerView Survey, revealing that even as the market outlook continues to evolve, demand for money market funds is still strong, adoption of treasury management systems continues to rise, and more investors are incorporating ESG criteria to screen investments. The 2019 Global Liquidity PeerView Survey features responses from 346 CIOs, treasurers and other senior cash investors around the world, representing an approximate combined cash balance of USD $1 trillion."
Paula Stibbe, Global Head of Liquidity Sales for J.P. Morgan A.M., comments, "The changing global economic environment presents investors with many new challenges, from slowing growth, rising trade tensions, and falling interest rates. This year's PeerView results suggest that in this environment, demand for money market funds remains strong, and investors with short-term fixed income portfolios are increasingly looking at areas such as ESG screening and treasury management systems when evaluating their cash investment strategy."
The release tells us, "MMFs remain the most permissible investment (in 92% of investment policies), followed by bank obligations (62% of policies) and U.S. Treasuries (60%). Most survey respondents (75%) plan to maintain their stable NAV MMFs, based on the market outlook for the coming year.... Investors are increasingly…using ESG criteria to screen investments. 19% of respondents globally are doing so now, and an additional 25% are likely to start within the next two years."
It also says, "The percentage of investors surveyed using such systems [treasury management systems] is now 61%. The features used most are cash management and treasury accounting (98%), investments and debt management (67%) and FX and interest rate risk management (50%). Asia Pacific (APAC) investors are more likely to develop in-house systems (43%) than use third parties; in the U.S., only 12% and in EMEA 11% developed their systems in-house.... Term deposits continue to be the most popular investment solution to avoid negative interest rates in EUR- and GBP-denominated investments (62%), followed by ultra-short duration bond funds (23%)."
The full 2019 J.P. Morgan Global Liquidity Investment Peerview survey's intro explains, "As our survey reports, demand for money market funds is strong, and investors with short-term fixed income portfolios continue to seek out the strategies and solutions that can best help them navigate a changing environment.... Also on liquidity investors' minds in the first few months of the year: the final phase of European Money Market Fund Reform. The transition to new fund structures and new rules went smoothly, since most investors were already familiar with these features."
It continues, "Amid these shifting pressures, investors will be looking for strong investment partners who can help them understand the implications of the latest macroeconomic and geopolitical developments, offer guidance on cash segmentation and provide insights into the global interest rate outlook. The most effective partner can align innovative products and solutions that best meet an investor's liquidity requirements, risk tolerance and return objectives. As investors re-evaluate their cash investment decision making -- an often demanding but always critical process -- they will greatly benefit from a peer comparison. It can reveal how their policies and practices resemble, and differ from, those of their peers. In this regard, the J.P. Morgan Global Liquidity Investment PeerViewSM survey can serve as an indispensable industry benchmark."
The survey finds, "Around 41% of respondents had a cash balance of less than USD 500 million, while 19% had a cash balance of more than USD 5 billion," adding, "Stable NAV money market funds and bank obligations are the most permissible investments, followed by U.S. Treasuries, floating NAV money market funds and (among Asia Pacific participants only) structured deposits/wealth management products."
JPMAM writes, "Firms in the Americas are significantly more likely to permit more investment instruments than European and Asia Pacific companies. These include stable/constant/low volatility NAV money market funds, commercial paper, asset-backed commercial paper, traditional repurchase agreements, corporate debt securities, variable-rate demand notes, asset backed securities, mortgage-backed securities and municipal notes."
They tell us, "The percentage of cash allocated to stable/constant/low volatility NAV money market funds is highest in Europe (57%) and lowest in Asia Pacific (30%). However, many clients in Asia Pacific (30%) indicated in 2019 that they will be adding stable/constant/low volatility/ floating MMFs to their portfolios. Investment in structured deposits is also expected to increase in Asia Pacific."
According to the results, total cash allocation breaks down as follows: Stable/constant/low volatility NAV money market funds (45%); Floating NAV money market funds (7%); Wealth management products (Asia Pacific participants only) (2%); U.S. Treasuries (6%); U.S. government agencies (2%); Bank obligations (22%); Commercial paper (3%); Corporate debt securities (4%); Structured deposits (5%) and; All others (4%). The survey also found, "Treasury management systems (TMS) are used by 61% of respondents, with 19% using in-house resources.... Of the 209 using a TMS solution, 68% found the benefit of integrating MMF investments into it medium to high."
The survey adds, "Nearly a fifth of all respondents currently factor ESG into their investment decisions, with another 25% planning to do so within two-years.... Few firms are currently investing in ultra-short fixed income ETFs, mainly due to restrictive investment policy statements; more than 80% of those surveyed said they were unlikely to consider, or were not considering, doing so.... Performance/risk-adjusted returns, investment expertise and insights and firm relationships remain the top factors influencing the choice of an asset manager, consistent with results in previous years across regions and cash balances."
Finally, it concludes, "As our survey reveals, rising political risk tops the list of investment challenges, with respondents grappling with U.S.-China trade tension and concerned about Brexit. They are increasingly turning toward sustainable, socially responsible investing using ESG criteria to select investments. At a time of global change and evolving macroeconomics and financial markets, the demand for money market funds remains strong -- MMFs remain the most permissible security within investment policies."
