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SunGard’s fifth annual corporate cash investment report reveals significant challenges for treasurers due to regulatory reforms

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SunGard has released its fifth annual Corporate Cash Investment Report, which reveals that regulatory change is creating significant challenges in the way treasurers invest surplus cash and manage their investment policies and processes. The study examines treasurers’ changing attitudes toward cash investment over the last 12 months — including strategic cash holdings, asset allocation, investment policies and transaction execution — as well as identifies trends and developments over the last five years.

Survey participants represented a cross-section of geographic regions and industries, with 46 percent located in North America and 37 percent in Europe. Key findings include the following:

  • The proportion of companies holding cash to finance capital investment or mergers and acquisitions continues to rise, from 27 percent in 2013 to 35 percent in 2015
  • Despite high cash balances, the number of companies holding cash as a buffer against dips in revenue is declining, from 17 percent in 2012 to eight percent in 2015
  • Although finding suitable repositories for corporate cash remains the top priority for 46 percent of respondents, Basel III is now a key priority for 43 percent as compared to about 20 percent in 2014
  • Thirty-nine percent of treasurers said the SEC’s money market funds (MMFs) reform, which requires a floating net asset value (NAV) for prime MMFs, was one of their top three challenges
  • Although 60 percent of treasurers in the U.S. expect to continue to invest in prime MMFs at a similar level once SEC reforms are implemented in 2016, 37 percent expect to decrease their level of investment
  • For the first time since the study was launched in 2011, the use of independent electronic dealing portals has become the most popular method for dealing short-term cash investments, now at 41 percent

Vince Tolve, executive vice president, SunGard’s global trading business, said: “Cash investment challenges have evolved significantly over the past five years, with a shift from operational to more strategic concerns as interest rates remain low and regulatory reform takes center stage. As banks encourage investors to move depositors off their balance sheets as a result of Basel III, turning to an alternative bank is becoming increasingly difficult as credit rating downgrades have reduced their choices of counterparty banks. In addition, MMF reform in the U.S. means that investors will need to consider the impact of constant NAV instruments on their investment policy, reporting and accounting processes. Going forward, treasurers should take three key steps: (1) understand the implications of regulatory change on their business, (2) review their policies and processes for consistency with regulations and consider revising them to permit investment in a wider range of instruments, and (3) make sure their systems and processes support the full range of instruments permitted within their policy.”

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