Reforms to Europe’s money market fund (MMF) regulations are spurring the majority of treasurers with interests in the region to take a fresh look at their investment strategies, according to JPMorgan Asset Management.
In its 2017 Investment Peerview survey, the institution found that 58% of treasurers are reviewing their investment portfolios in light of Europe’s recent regulatory changes in the MMF field.
The global survey polled treasurers and other key decision-makers in companies with a combined $1.2 trillion in cash assets under management. That included 129 companies based in Europe.
As JPMorgan head of global liquidity sales Jim Fuell told The Wall Street Journal: “Corporate treasurers are re-evaluating their cash decision-making. While firms are still in the process of understanding the regulations, we expect there to be strong future investments in MMFs.”
However, he said, “the short-term investment landscape will become more complex.”
Many treasurers hinted that they will play a cautious hand: 44% of respondents said that they required greater time and/or information before deciding upon their preferred MMF fund structures under the amended rules.
In the segment of corporate treasurers who are thinking of making changes to their investment portfolios, 43% ranked risk of liquidity fees or gating as the most important factors behind their decision-making.
Fuell pointed out: “The new regulations will prompt change, but it’s important to point out that they provide a level of optionality which will ultimately allow MMFs to continue to offer investors the advantages that they currently enjoy.”
He explained: “At this stage the low-volatility net asset value MMF option is expected to be the likely choice for many investors.
“Thus far, this option is being viewed as most akin to the constant net asset value short-term MMF to which many investors are currently allocated.”
Interestingly, the survey also revealed that European corporates are far more likely to have increased credit risk (35%) than their counterparts in either the Asia-Pacific (16%) or Americas (15%).
“As this survey shows,” Fuell told FTSEGlobalMarkets.com, “we continue to observe an evolution in cash segmentation (categorising cash by liquidity need) that corporate treasurers are increasingly undertaking, with 70% of respondents saying they can forecast cash flows out for a month or longer.
“This has led to treasurers becoming more strategic with their non-immediate cash in a continued low-rate environment.”
He noted: “With appropriate segmentation, liquidity investors can benefit from allocating a portion of their cash to a broader investible universe with greater corporate diversity, while maintaining a highly risk-controlled environment.”