Spare a thought for corporate treasurers as they mull where to invest their excess cash.
With central banks turning the monetary expansion taps on full blast for the past decade, interest rates in low or negative territory and an inflationary environment on the near horizon, many treasurers are being forced to rethink how they invest their cash.
“The low interest-rate environment has forced everyone to be more creative in how they approach investing and what they want out of it,” says Sebastian Ramos, executive vice president of Global Trading and Products at Institutional Cash Distributors (ICD), a San Francisco–based short-term investment portal that provides treasurers with access to more than 300 investment products.
Ramos says treasurers want additional returns without excessive additional risk while maintaining access to liquidity. In the early stages of the pandemic, government money market funds were the “vehicle of choice,” according to the authors of a November 2020 report by the Investment Company Institute’s Covid-19 Market Impact Working Group. Inflows to government money market funds in March 2020 totaled $834 billion. Some treasurers also investigated higher-yielding alternatives such as short-duration bond funds, he adds.
“Nearly half of the companies we speak to plan to hold elevated cash balances, and some are even considering increasing their liquid cash balances amid the uncertainty of the Delta variant and uncertainty around their supply chain,” says Karen Ly, head of Global Liquidity Solution Specialists, Global Transaction Services at Bank of America (BofA). “We see our clients focused on optimizing their existing structures and identifying opportunities to reduce costs and interest expense.”
Source: Global Finance