Hong Kong: J.P. Morgan Asset Management (JPMAM) has released the findings of its 2017 Global Liquidity Investment PeerView℠ Survey (PeerView℠). Nearly 400 CIOs, treasurers and other senior decision makers around the world – including 115 companies across Asia – participated in the survey, representing all sectors of the global economy and more than US$1.2 trillion in cash assets under management. The survey uncovered widespread industry trends and the global money in motion in the face of rate and regulatory change.
“Yield is one of the key factors in asset manager selection decision making process,” said Kheng Leong Cheah, Head of Global Liquidity Sales, Asia Pacific. “It is found that Asia Pacific respondents rated Performance/Risk-Adjusted returns as the most important reason when selecting an asset manager, compared with respondents in US who cited firm relationship as the most important consideration.”
“In addition, changes in cash allocation have been observed among Asia Pacific respondents,” continued Cheah. “Asia Pacific respondents, primarily China based entities, reduced their allocation to wealth management products (5% in 2017 vs. 12% in 2015) while increasing their allocation to structured deposits (20% in 2017 vs. 9% in 2015). Allocation to stable NAV money market funds also increased (37% in 2017 vs. 11% in 2015).”
The PeerViewSM survey data also shows that, the percentage of firms allowing investment in wealth management products (WMP) has fallen significantly for Asia Pacific respondents, from 40% in 2015 to 18% in 2017. This can be attributed to China’s recent tightened regulations on its burgeoning wealth management products industry in a bid to curb financial risk, with policy makers drafting rules that will make it clear that there are no state guarantees on WMPs. It also reflects the increased explicit awareness of investment risks in China among the respondents.
Amongst other key findings of the survey for Asia Pacific respondents:
- Growing appeal of money market funds in Asia – In Asia Pacific, firms have traditionally used bank deposits. Notably, though, a larger proportion of Asia Pacific firms intend to add stable NAV money market funds to their existing investment policy (53% in 2017 vs. 21% in 2015); this is a higher percentage than their Americas and Europe counterparts. This could be a sign of corporate and institutional investors in Asia becoming more familiar with off-balance sheet liquidity solution options as an option to traditional bank deposits.
- Entering into a sustained rising rates period – In December 2015, with labour and inflation indicators moving towards targets in the US, the Federal Reserve initiated the process of normalizing monetary policy, raising interest rates for the first time in almost 10 years. Since then it has hiked interest rates twice more, most recently in March 2017 – potentially allowing money market funds to offer more attractive yields than traditional bank deposits, as money market fund yields tend to increase in tandem with rising interest rates.
“As the PeerView℠ survey shows, we continue to observe an evolution in cash segmentation — with 70% of respondents globally saying they are able to forecast cash flows out for a month or longer — which allows the flexibility for treasurers to become more strategic with their liquid cash placement. With appropriate segmentation, liquidity investors can benefit from tactical asset allocations of their cash to a broader investible universe, whilst adapting a prudent risk-control approach,” concluded Cheah.
J.P. Morgan Asset Management’s PeerViewSM is a program that provides a unique opportunity for firms to compare their cash investment practices to those of their peers globally, allowing clients to evaluate variances and opportunities in cash investment policies and practices. Each respondent receives a customized report that compares their responses to those of their peer groups by region, cash balance and industry.
Please view the full J.P. Morgan Global Liquidity Investment PeerViewSM 2017 findings here.