2012 AFP Liquidity Survey
A mixed business outlook continues to shape organizations’ cash and short-term investment decisions, according to the 2012 AFP Liquidity Survey, underwritten by RBS and RBS Citizens. About 41 percent of organizations held greater cash and short-term investment balances during the first quarter of 2012 than in the first quarter of 2011. Fewer than three in ten indicate their organizations reduced balances during that same period.
Safety of principal continues to be the primary concern for corporate treasurers, the survey found, with 74 percent of organizations’ short-term balances held in one of three traditional investment vehicles: bank deposits, money market funds and U.S. Treasury securities. Bank deposits have become the primary short-term investment vehicle for organizations, accounting for 51 percent of short-term investment balances -- the highest allocation to bank deposits in the survey’s seven-year lifespan and nine percentage points above last year’s findings.
Concern about regulations related to money market funds is causing many organizations to rethink their short-term investment mix, with one potential outcome being even greater flows to banks. If money market mutual funds (MMFs) shift to a floating net asset value (NAV), impose redemption holdbacks or raise capital requirements, many financial professionals say their organizations would stop investing in MMFs and reduce or fully liquidate holdings.
Previous AFP Liquidity Surveys: