Treasurers face multiple challenges when it comes to short-term investments. Large corporates have oodles of cash, but the returns they’re earning at the short end are minimal. And money market funds, typically one of the main repositories for companies’ short-term cash, could become less attractive for corporates if the Securities and Exchange Commission (SEC) goes through with some of the regulatory changes it has proposed.
A recent survey by PwC suggests that while corporate treasurers are exploring ways to achieve higher returns and prepare for possible regulatory changes, for the most part they continue to take a traditional approach to short-term investing.
Two triggers that could lead to changes in companies’ short-term investing would be changes in money fund regulations and a change in companies’ tolerance for investment risk, said Frank, pictured at left.
If regulatory changes make money market funds less attractive, “that would force companies into a mode of operation where they would need to be investing more directly on their own behalf in individual securities rather than through a fund,” Frank said, but he noted that he doesn’t see this as a likely scenario.