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Spotlight on Corporate Cash Investment Priorities SunGard report some fascinating conclusions from their recent online survey regarding investment trends and corporate treasurers' priorities.

Spotlight on Corporate Cash Investment Priorities

by Michael F. Vogel, senior vice president, SunGard's wealth management business, and Vince A Tolve, vice president, SunGard’s wealth management business

Since the financial crisis of September 2008 in particular, treasurers have increasingly recognised the importance of defining and delivering on the right investment policies. The current economic and regulatory challenges have resulted in a complex cash management environment for corporations globally. One element of this is the need to define and deliver on the right investment policies. Counterparty risk has become a particular priority but with a number of credit rating downgrades, and a growing awareness that no organisation is ‘too big to fail’, companies that have developed large cash balances often struggle to find a sufficient number of counterparty banks and issuers that meet their credit requirements.

The problem of finding appropriate repositories for cash is compounded by the need to maintain access to liquidity in an environment where borrowing is more difficult and expensive. Furthermore, with interest rates remaining at a historic low, treasurers and cash managers are tasked to generate a return on cash to prevent value erosion through inflation and rising prices.

To help understand investment trends and corporate treasurers’ priorities, SunGard conducted an online survey amongst treasurers globally, which attracted responses from 215 corporations. This included respondents from all regions and industries. Fifty per cent of companies were headquartered in the United States with a significant proportion of responses from other regions such as Europe and Asia. The survey aimed to understand corporates’ cash investment policies, their attitude to risk and return and consequently, their preferred cash investment instruments, both now and in the future. It also sought to explore how companies transact their investments in practice, such as using web-based portals.

Investment asset allocation

The most popular investment type is bank deposits, used by 67.9%, followed by money market funds, used by 48.37% of respondents. In addition, a significant proportion of companies are attracted to government securities, such as US treasuries, with 29.3% of respondents indicating that they use these instruments.

From this survey, it appears that the general inclination among corporates is to continue with their existing investment strategy, but there are some noteworthy changes. Bank deposits continue to form the mainstay of corporate investment policy, with 61.69% of respondents indicating that deposits would be extremely important in the future. However, when compared with 67.91% using them today, this is a decrease of 6.22%.

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