2014 AFP Liquidity Survey
Companies face a number of challenges when deciding how to manage their cash holdings. The business and regulatory climate remains one of middling economic growth and uncertainty. At the same time, the historic ultra-low interest rate environment greatly reduces the opportunity to generate yield. Consequently, organizations’ Treasury functions remain focused on ensuring the safety of their companies’ historically large cash and short-term investment holdings and maintaining corporate liquidity.
The 2014 AFP Liquidity Survey allows financial professionals to benchmark their organizations cash and short-term investment holdings, investment policies and strategies with their peers.
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Companies are sticking with ultra-conservative investment strategies with their short-term holdings, with 75 percent of all short-term investments maintained within three vehicles: bank deposits, money market funds, and Treasury securities. A full 52 percent of corporate cash holdings are maintained in bank deposits, the largest percentage reported since AFP began its Liquidity Survey series in 2006.
The report explores the number of factors that explain why is so much cash placed in banks--this includes the ability to generate earned credit rates (ECRs) from bank deposits that help defray bank fees and the continued regulatory uncertainty surrounding money market funds (MMFs). The report also describes the nature of corporate investment policies, including the frequency that they are updated.
Previous AFP Liquidity Surveys: