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J.P. Morgan Global Liquidity PeerViewSM Survey Finds Liquidity and Risk Management Still a Focus for Cash Investors

Published 

— Participants’ cash investment allocations remain largely unchanged from last year, with approximately 50% of short-term investment balances being maintained in bank obligations,  and 25% of balances invested in money market funds–  

New York, NY – J.P. Morgan Asset Management has released the findings of its Global Liquidity Investment PeerViewSM 2014 survey. Over 300 CIOs, treasurers and other senior decision makers around the world participated in the survey, representing more than 300 unique entities and 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. Survey participants will receive customized reports that compare their responses to their peer groups by region, cash balance and industry.

Key findings

Liquidity is still key – Liquidity is a central concern of survey respondents, as reflected in their choice of investments: half of global cash assets are placed in bank deposits. Usage is most prevalent in Asia, where 68% of assets are held in bank deposits, vs. 48% in Europe and 38% in the Americas. Money market funds account for over one-third of cash assets in the Americas.

Risk remains a focus – In an effort to control risk, the majority of respondents’ investment policy statements define portfolio duration and credit standards for both longer- and shorter-term securities. Larger firms tend to be less conservative in their definition of permissible credit rating, which allows them to take on additional interest rate and credit risk.

Cash allocation remains steady – A majority of respondents plan to stay the course with their current cash allocation through 2015 even in the face of low interest rates and regulatory concerns.

Cash balance size and diversification – Firms with larger cash balances have a broader set of investment guidelines. A third or more of larger firms permit investment in asset-backed securities or mortgage-backed securities. Firms with relatively smaller cash balances typically have more limited investment options at their disposal.

Search for yield – Separately managed accounts (SMAs), customized portfolios that allow investors to define their own risk, security and liquidity parameters, account for a significant share of cash allocations. In the Americas, 11% of cash assets are invested with SMAs or outside managers. Investor demand for SMAs can be seen as a clear demonstration of the need for yield.

Manager selection – In selecting an asset manager, the top three criteria in order of importance are performance/risk-adjusted returns, investment expertise and firm relationships.

“As investors anticipate a changing interest rate and regulatory environment, they are recalibrating their cash investment decision-making,” said John Donohue, Head of Global Liquidity for J.P. Morgan Asset Management. “This process — always important, never simple –can greatly benefit from a peer comparison. We believe our PeerView survey can serve as a useful industry benchmark.”

 

About J.P. Morgan Global Liquidity

J.P. Morgan Asset Management – Global Liquidity, is the largest global provider of institutional money market funds and the largest global money market fund complex, with $517 billion* in assets under management (as of September 30, 2014). 

*Above numbers are total global short-term assets (inclusive of all currencies).  Above numbers do not include separately managed portfolios of the Private Bank.

J.P. Morgan Asset Management, with assets under management of $1.6 trillion (as of September 30, 2014), is a global leader in investment management. J.P. Morgan Asset Management’s clients include institutions, retail investors and high-net worth individuals in every major market throughout the world.  J.P. Morgan Asset Management offers global investment management in equities, fixed income, real estate, hedge funds, private equity and liquidity.  JPMorgan Chase & Co. (NYSE: JPM), the parent company of J.P. Morgan Asset Management, is a leading global financial services firm with assets of approximately $2.4 trillion (as of March 31, 2014) and operations in more than 60 countries.  Information about JPMorgan Chase & Co. is available at www.jpmorganchase.com.

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