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.

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