The U.S. economy continues to grow, but the global landscape looks far more bleak. In such an environment, where are U.S.-based multinationals parking their cash?
The 11th annual Liquidity Survey from the Association for Financial Professionals (AFP) offers some answers. In May, the AFP surveyed 787 treasury and finance professionals. Most of these corporate practitioners (55 percent) expect their cash balances to remain constant for the next 12 months, while a fourth expect cash and short-term investment balances to increase.
On average, respondents' companies store 55 percent of their short-term cash in bank deposits and invest another 22 percent in money market funds and Treasuries. The average organization uses 2.4 different investment vehicles. (See Figure 1, below.)
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Survey respondents keep more than two-thirds (69 percent) of their operating cash in investment vehicles with maturities of 30 days or less; another 13 percent is in assets with maturities of 31 to 90 days. And only two in 10 expect to change the average maturity of their holdings over the next year—13 percent to lengthen the maturity and 9 percent to shorten it.
The survey also asked finance professionals how their company's short-term investments would be affected by negative interest rates. One-third (34 percent) said their investment policy doesn't allow for negative yields, so they would divest any securities with a negative interest rate. A quarter (24 percent) would reinvest their cash internally—in capital expenditures, share repurchase, dividends, and the like—if their cash began earning negative interest. Four in ten (42 percent) would consider other money-fund alternatives, and 38 percent would put their money in banks that do not charge for short-term investments.
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