ICD, an independent portal provider of money market funds (MMFs) and other short-term investments, released the findings of its annual client survey today. The 2021 ICD Client Survey, conducted in January, reveals this year’s plans and preferences for cash investments and technology from over 150 treasury professionals in the US, Canada, UK and Europe

“This year’s survey respondents indicated cash levels would remain elevated into 2021, but they are also opportunistic, looking to go out further on the curve to find yield," commented Tory Hazard, CEO of ICD. "Treasury workflow optimisation is also a major theme this year as investors look to technology to drive efficiency.”

Investment profiles

In the Americas, US government/treasury MMFs are the most popular investment instrument, used by 76% of respondents. A further 13% of treasurers say they will be investing in these this year. The next most popular investment instruments currently are demand/bank deposits (41%), time deposits (33%), and US prime MMFs (27%). In terms of the most popular instruments to start investing in for 2021 among treasurers in the Americas, US prime MMFs (21%), US commercial paper (21%), and short duration bond funds (19%) were identified by respondents. Seven in every 10 Americas treasurers (70%) are currently invested in or are planning on investing in alternative investment products (short duration bond funds, FICA, federally insured brokered CDs and US commercial paper) in 2021.

Over in Europe, short term non-government CNAV MMFs are currently the most popular investment instrument, being used by more than half of respondents (53%). The next most popular instruments that treasurers are currently invested in are short term VNAV MMFs (43%) and standard VNAV MMFs (40%). Some 15% of those not already investing in short term VNAV MMFs said that they plan to do so in 2021, while 13% plan to start investing in short term government CNAV MMFs this year. A similar number (13%) say they will begin investing in short duration bond funds. Overall, the 62% that already are or are planning to invest in short term non-government CNAV MMFs is up from 2020, when this figure stood at 56%.

Cash balances in 2020 were at all time highs, and this looks set to continue in 2021. Overall, 61% of respondents said they expect to maintain or increase their cash balances in the first half of the year. Around two-thirds (66%) plan on maintaining their current level of investment in MMFs, while one in five (20%) say they expect their organisation to increase their investments in MMFs this year.

The theme of environmental, social, and governance (ESG) appears to be creeping up the investment agenda slowly but surely. Last year, some 32% of respondents said that they were either currently or were planning to invest in ESG and other socially responsible investing products - this year that number had moved up to 41%, with 15% currently investing in such products and 26% planning to do so in 2021. Interest in ESG is even higher with European treasurers, with almost half (49%) investing or planning to invest in ESG instruments. However, overall, those not currently invested or planning to invest in ESG products still stands at 58%.

Treasury challenges

In the past year, respondents to the ICD survey highlighted how the issue of having to do more with less is still a major issue for corporate treasurers. While 86% of treasurers saw their treasury teams shrink or remain the same in terms of number of personnel, more than half (54%) said that they expect the roles and responsibilities of the treasury function to increase. With expectations on treasury increasing while staffing levels are remaining flat or even declining, the emphasis is on smart treasury technology to pick up the slack.

There are some differences between US and European treasurers on the challenges they expect to face in 2021. Some challenges are shared by both, including automation, COVID liquidity or business challenges, lack of resources/stretched treasury team, special dividend, working from home, and yield as a result of low or negative interest rates.

Aside from those common worries, the survey shows that US treasurers have far more concerns for the coming year than their European counterparts. US-specific challenges include cash pooling/consolidation of entities, IPO, the end of LIBOR, liquidity management, managing growth, new leadership, and treasury transformation/TMS implementation. European treasurers did note cite any of these issues as challenges for the coming year. However, in Europe they are concerned about currency exposures, something that was not seen as a challenge by US treasurers. 

Treasury transformation projects - such as implementation or overhaul of technologies, workflows, processes or system infrastructure - are on the agenda for approximately two-thirds of treasurers (66%). Some 46% of respondents to the ICD survey say that they are already in progress with such a project, while 8% will be beginning a treasury transformation project in 2021. Long term planning is the key for 12% of treasurers who say they will be starting a treasury transformation project in more than 12 months from now. Meanwhile, 34% of treasurers say that they have no transformation project planned.

Thinking specifically about treasury management systems, 15% of respondents say they plan on either implementing or changing a TMS in 2021, down from 25% in 2020. Looking at this data in light of the 66% indicating they are or will be engaging in treasury transformation, ICD notes in the survey report that corporates seem to be taking a holistic approach to an integrated treasury technology stack.

Methodology

The 2021 ICD Client Survey was conducted in January, with insights from over 150 treasury professionals across Europe and the Americas, various industries and company sizes. Approximately US$5 trillion in trades annually run through ICD Portal from over 400 clients across 65 industries and 43 countries.