Demand for money market funds is still strong, adoption of treasury management systems continues to rise, and more investors are incorporating environmental, social and governance (ESG) criteria to screen investments, even as the market outlook continues to evolve, according to the J.P Morgan Asset Management 2019 Global Liquidity Peerview Survey.
The 2019 Global Liquidity PeerView Survey features responses from 346 CIOs, treasurers and other senior cash investors around the world, representing an approximate combined cash balance of $1 trillion.
“The changing global economic environment presents investors with many new challenges, from slowing growth, rising trade tensions, and falling interest rates,” said Paula Stibbe, Global Head of Liquidity Sales, J.P. Morgan Asset Management.
“This year’s PeerView results suggest that in this environment, demand for money market funds remains strong, and investors with short-term fixed income portfolios are increasingly looking at areas such as ESG screening and treasury management systems when evaluating their cash investment strategy.”
Four key themes were identified in the PeerView survey:
- Demand for money market funds (MMFs) is still strong: MMFs remain the most permissible investment (in 92% of investment policies), followed by bank obligations (62% of policies) and U.S. Treasuries (60%). Most survey respondents (75%) plan to maintain their stable NAV MMFs, based on the market outlook for the coming year.
- ESG investments are on the rise: Investors are increasingly turning to responsible investing, using ESG criteria to screen investments. 19% of respondents globally are doing so now, and an additional 25% are likely to start within the next two years.
- Adoption of treasury management systems is increasing: The percentage of investors surveyed using such systems is now 61%. The features used most are cash management and treasury accounting (98%), investments and debt management (67%) and FX and interest rate risk management (50%). Asia Pacific (APAC) investors are more likely to develop in-house systems (43%) than use third parties; in the U.S., only 12% and in EMEA 11% developed their systems in-house.
- Investors are eyeing rising political risk: Rising political risk tops the list of investment challenges, with 67% of respondents expressing concern about the U.S.-China trade war and Brexit.
Europe and Asia-Pacific
The survey also highlighted several key themes across Europe and Asia-Pacific:
Europe – The search for yield and return Term deposits continue to be the most popular investment solution to avoid negative interest rates in EUR- and GBP-denominated investments (62%), followed by ultra-short duration bond funds (23%).
Asia Pacific: Regulatory change weighing heavily – After political risk, 55% of APAC respondents cite regulatory change their top investment challenge. 22% cite rising credit and default risk in China as a concern—far more than peers in other regions. APAC investors review their investment policies more frequently (66% at least annually) than respondents elsewhere.
J.P. Morgan Asset Management’s PeerViewSM 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.
View the full findings of the report here.