Ready for Changes in Short-Term Investments

Possible changes in money fund regulations and FDIC coverage could cause big shifts in where treasuries invest their cash.

Corporate treasury executives say they will decrease their company’s investments in money-market funds if the Securities and Exchange Commission implements proposed changes to the regulation of such funds. But they plan to invest more in money funds if the Federal Deposit Insurance Corp.’s unlimited coverage for business demand deposit accounts ends, as it is scheduled to do on Dec. 31, according to a survey of 242 treasury professionals conducted by Strategic Treasurer, an Atlanta-based consulting company, and Capital Advisors Group, an investment advisor in Red Bank, N.J.

“There is certainly terrific uncertainty with the FDIC and the money-market funds regulations, but it appears the treasury community is ready and able to swap investment channels in either one of those instances,” says Ben Campbell, president and CEO of Capital Advisors.

On the other hand, companies might look more favorably on money funds if the unlimited FDIC coverage on bank accounts disappears. Nineteen percent of companies that invest directly in money funds, 8% of those that invest via independent portals and 14% of those using bank portals say they would increase their assets in money funds in that case.

If both changes occur—the SEC re-regulates money funds and unlimited FDIC coverage ends—Campbell says companies would probably turn to such short-term investments as government securities, direct purchases of corporate securities and repurchase agreements.

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