June 14, 2022 — Bethesda, Md. — Results of the 2022 AFP Liquidity Survey from the Association for Financial Professionals (AFP), underwritten by Invesco, reports that the typical organization currently maintains 55% of its short-term investments in bank deposits. This is the highest figure since 2016, when it was also reported that 55% of organizations were holding their short-term investments in banks. This is only a slight increase from 2021 and 2020 figures, which were 52% and 51% respectively. The largest increase occurred from 2019 to 2020 when it jumped 9%. Similar trends are also being observed for short-term investments outside the U.S. (69%).

The survey also found that 57% of organizations are preparing their portfolios ahead of anticipated federal funds target rate increases, with 34% doing so by managing the duration of their portfolios. Others are considering investing in floating rate notes, creating bond maturity ladders or using a barbell approach with select securities.

Findings suggests companies are being cautiously optimistic while shoring up liquidity to ease uncertainty as the share of organizations that plan on increasing their cash holdings in the U.S. has decreased by 10 percentage points to 37% as compared to 47% who reported the same last year.  

Additional findings include:

• –Safety continues to be the most valued short-term investment objective for 63% of organizations. This can be expected, given the economic uncertainty due to high inflation rates, anticipated actions by the Federal Reserve and the tense geopolitical environment.
• –Twenty-five percent of organizations are considering Environmental, Social and Governance (ESG) investment parameters, which is materially higher than the 17% reported in last year’s survey report.
• –Just over a quarter (26%) of respondents report that their organizations have plans to prepare operating cash and investment portfolios for the LIBOR end date of June 30, 2023. This is a 11 percentage point increase over last year.

AFP’s Liquidity Survey was conducted in March 2022 and received responses from 284 corporate practitioners.

“In the past year, the economic environment has been fraught with uncertainty. Therefore, it is not at all surprising that the majority of organizations are prioritizing safety as their primary investment objective,” said Jim Kaitz, AFP president and CEO. “That said, we are hopeful as a smaller percentage of respondents report an increase in cash and short-term balances at their organizations over the past year compared to a year earlier, suggesting that companies are less constrained than they were in 2021.”

“It’s been a remarkable period in liquidity markets, from the early pandemic days in 2020 to the sharp inflation acceleration and aggressive shift by the Federal Reserve to tightening monetary policy in 2022,” continued Laurie Brignac, CIO, Global Liquidity, Invesco. “As companies prepare to put cash to work, investors need to be strategic in their approach to uncover opportunities in the higher interest rate environment while managing through a very aggressive hiking cycle.”

Survey results are available at: 2022 AFP Liquidity Survey . Press inquiries may be directed to Melissa Rawak, managing director, at [email protected].

About AFP^®
Headquartered outside of Washington, D.C., and located regionally in Singapore, the Association for Financial Professionals (AFP) is the professional society committed to advancing the success of treasury and finance members and their organizations. Established and administered by AFP, the Certified Treasury Professional and Certified Corporate FP&A Professional credentials set standards of excellence in treasury and finance.