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Attitudes toward cash investments shifting.

The attitudes treasury professionals hold toward cash investments are changing due to economic, regulatory and risk concerns. A recent study by software and technology services provider SunGuard examined outlooks on strategic cash holdings, asset allocation, investment policies and transaction execution.

Results of the study identify trends and developments over the last 12 months, such as an increased surplus of cash and a greater proportion of cash invested in money market funds (MMFs) by some companies as compared to 2011 survey results.

In addition, an intensified focus on market issues, such as the eurozone crisis, regulatory changes and counterparty risk, are rising to the top of treasurers' list of priorities compared to the previous year.

Responses were collected from more than 200 global corporations across a wide range of industries, and about 20 percent from financial institutions; more than 50 percent of respondent companies are headquartered in North America, 32 percent in Europe and others in the Asia-Pacific region. More than 70 percent had annual revenues exceeding $1 billion. Among the key findings:

* Some companies are growing their cash reserves, with 37 percent of companies increasing the amount of surplus cash over the past 12 months;

* Some companies are increasing their shares of cash investments in MMFs. Those using short-term MMFs hold an average of 50 percent of their cash in these funds--representing an increase of more than 11 percent from 2011;

* Although just 9 percent of companies surveyed invest in MMFs that have a variable net asset value (NAV), these companies hold an average of 36 percent of their cash in these instruments, compared to only 4.5 percent in 2011--reflecting a change to an investment strategy more in line with regulatory preference for variable funds; and

* 43 percent of respondents said they use an online trading portal for cash investments--an increase of 6 percent over 2011.

Vince Tolye, vice president of SunGard's brokerage business, said, "Although concerns regarding credit risk and liquidity remain important factors, regulation in the U.S. and Europe has emerged strongly as a concern as lawmakers focus on enhancing the resilience of funds to extreme market shocks."

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Title Annotation:TREASURY; SunGard Data Systems Inc
Publication:Financial Executive
Date:Jan 1, 2013
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