U.S. companies are prepared to settle for lower investment returns in exchange for reduced risk on short-term investments, according to a recent survey of 293 global CFOs, treasurers and assistant treasurers by Greenwich Associates. The respondents said their corporations have reduced return targets on their 2008 cash investments to 3.7% from the 4.9% they reported last May.

The reduction in target returns represents a general flight to quality, says Chris McDonnell, a Greenwich Associates vice president. “We're clearly seeing a shift that favors high quality investments,” he says. U.S. companies were allocating 78% for AAA-rated vehicles when the survey was conducted in February, up from 71% at the time of Greenwich's last survey in May 2007. At the same time, allocations to AA-rated vehicles dropped to 16% from 17.1% in the same period, and single-A rated allocations fell to 5.0% from 7.5%, according to McDonnell. Moreover, none of the respondents reported buying investment grade or unrated instruments.

Greenwich rushed out the February “special credit crisis” survey in February to take the pulse of financial executives at a time of great market turbulence. “We anticipated seeing people being more conservative in light of current environments,” says McDonnell. “But we wanted to get a reading then, rather than wait for our next survey this summer.”