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J.P. Morgan Asset Management Releases 2015 Global Liquidity Survey Results

  • Identifies Investor Sentiment amid Shifting Market and Regulatory Landscape

New York, NY J.P. Morgan Asset Management released the findings of its 2015 Global Liquidity Investment PeerViewSM survey, which highlights the current sentiment of more than 400 respondents, including CIOs, treasurers and other senior decision-makers, representing more than 400 unique entities from all sectors of the global economy. The survey uncovered widespread industry trends, as the decision-makers confront both a shifting interest rate environment and far-reaching regulatory reforms.

“The evolving market and regulatory landscape presents opportunities, as well as challenges, to liquidity investors as they re-evaluate their cash investment decision-making,” said John Donohue, CEO of Investment Management Americas and Head of Global Liquidity, J.P. Morgan Asset Management. “As they anticipate these changes – including the potential first Fed rate hike in more than nine years, possible tightening by the Bank of England and the impact of  Basel III  –  they are preparing to re-assess their short-term investment portfolios.”

Key findings from the 2015 survey include:

  • Investment in money market funds still strong — Based on the market outlook for next year, 63% of respondents will continue with the same allocation to money market funds, while an additional 20% will increase their allocations. In the U.S., of the respondents who are currently invested in a prime money market fund, 70% intend to still use it when SEC 2a-7 money market rules go into effect next year.
  • Regulatory pressures — Respondents are grappling with a host of regulatory pressures, including SEC Rule 2a-7 reform in the U.S., pending money market fund regulation in Europe and Basel III around the globe. Almost half of respondents report that their banks have encouraged them to move non-operating deposits off the banks’ balance sheet. Also, approximately 40% of participants plan to make changes to their investment policies given the current regulatory landscape.
  • Safety and liquidity remain priorities — As indicated by their choice of investments, survey respondents focus on safety and liquidity: Almost half of global cash assets are still placed in bank deposits. Usage is most prevalent in Asia, where 57% of assets are held in bank deposits, vs. 44% in Europe and 42% in the Americas. Money market funds represent roughly one-third of cash assets in the Americas and Europe.
  • Risk is still a focus — While risk management continues to be critically important, the framework for assessing risk is shifting for many liquidity investors. Negative interest rates in Europe and low rates globally are compelling organizations to re-evaluate their appetite for risk and more precisely calculate their short-term liquidity needs.
  • Search for yield — Separately managed accounts (SMAs), customized portfolios that allow investors to define their own risk, security and liquidity parameters, will continue to account for a significant share of cash allocations. Twenty percent of respondents in the Americas and 16% in Europe plan to increase their allocations to cash assets that are invested with SMAs or outside managers. Investor demand for SMAs can be seen as a clear demonstration of the need for yield.  

J.P. Morgan Asset Management’s PeerView is a program that provides a unique opportunity for firms to compare their cash investment practices to those of their peers globally, allowing clients to evaluate variances and opportunities in cash investment policies and practices. Each respondent receives a customized report that compares their responses to those of their peer groups by region, cash balance and industry.

Please view the full “J.P. Morgan Global Liquidity Investment PeerViewSM 2015” findings here.

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