A combination of low yields and regulatory pressures are forcing corporate treasurers to be more inventive about how they invest excess cash.
Bank balance sheets can no longer support it and, in any case, yields would be pitiful if they did.
Money market funds (MMFs) are one area that is attracting more attention, but opinion is split on whether they are more or less attractive after US reforms in late 2016.
State Street’s Money Market Funds survey in February showed that 27% of investors saw them as more attractive, 26% as less.
The change required institutional prime MMFs to adopt a floating net asset value (NAV), to reflect the market-based value of fund assets. After implementation, there has been some move away from floating NAV funds to government funds, which can only invest in government securities.
The European Union is also implementing similar reforms by January 2019.
It might be that the accompanying introduction of redemption fees at times of low liquidity might have contributed more to the move away from prime funds.
However, whether such funds are seen as more or less attractive in the long term, investors also reckon that the actions of banks are likely to force a change in behaviour, with 73% saying that the post Basel-III push for non-operating cash to be taken off balance sheet will mean more investment in MMFs.