WASHINGTON –– June 20, 2012 –– If money market
mutual funds (MMFs) shift to a floating net asset value (NAV), impose
redemption holdbacks or seek additional reserve capital through fees, corporations
say they would stop investing in these vehicles and would most likely reduce or
fully liquidate their holdings, according to data released today by the
Association for Financial Professionals (AFP).
Preliminary
results from the 2012 AFP Liquidity Survey, found that organizations would be less willing to invest in MMFs
and/or would reduce/eliminate their holdings of MMFs in their short-term
investment portfolio under three regulatory reform proposals, which are reported
to be under consideration by the U.S. Securities and Exchange Commission.
Results
of the full survey, which covers a broad range of liquidity issues that affect
corporate treasurers, will be released in July.
SCENARIOS
WHERE COMPANIES SAY THEY WOULD STOP INVESTING IN MMFs:
·
77
percent of companies would stop investing if the net asset value (NAV) were
allowed to float, with 56 percent immediately liquidating all or some of their
current MMF holdings
·
80
percent of companies would stop investing if MMFs were subject to redemption
holdback provisions, with 73 percent immediately liquidating all or some of
their current MMF holdings
·
66
percent of companies would stop investing if fund companies were required to
raise reserve capital (e.g., through fees), with 55 percent immediately
liquidating all or some of their current MMF holdings
“These
scenarios could have a profound effect on the economy,” said Jim Kaitz, AFP’s
president and CEO. “Treasurers tell us they would trim money fund holdings. Money
funds are a main purchaser of commercial paper. Without a market for commercial
paper, many companies could have a harder time funding operations.”
Recently,
AFP members have offered their views before
Congress to
explain the impact that MMF proposals would have on both their investment
choices and on their sources of funding.
AFP
members are responsible for ensuring that their organizations have enough cash
on hand to fund operations. They are uniquely positioned to observe the cash
flows and investment decisions of their organizations. Since they work in a
wide range of industries and in both public and private organizations of
varying sizes, their opinions reflect a broad corporate perspective that is
both operational and strategic.
ABOUT
THE SURVEY
In
May, AFP received 391 responses to the 2012 AFP Liquidity Survey, the largest
independent survey on this subject to date and a follow-on to a survey of a
smaller sampling of finance pros that AFP released in January 2011. The table
above reflects answers to questions about money market funds. Responses
represent corporations and other organizations, such as academic institutions,
but not banks or financial institutions. AFP will release the complete results
of the 2012 AFP Liquidity Survey.
View
the money market fund highlights of the 2012 AFP Liquidity Survey: www.afponline.org/liquidity
ABOUT
AFP®
The
Association for Financial Professionals (www.afponline.org) serves a network of
more than 16,000 treasury and finance professionals. Headquartered outside
Washington, DC, AFP provides members with news, economic research and data,
treasury certification programs, networking events, financial analytical tools,
training, and public policy representation to legislators and regulators. AFP's
global reach extends to over 150,000 treasury and financial professionals
worldwide, including AFP of Canada; London-based gtnews, an on-line resource
for the treasury and finance community; and bobsguide, a financial IT solutions
network.
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