In a year marked by economic friction, cautious investment still leads treasury strategy in 2025. According to the 2025 Association for Financial Professionals (AFP) Liquidity Survey, underwritten by Invesco, safety continues to dominate short-term investment strategies. This is highlighted by the fact that 61% of treasury and finance professionals citing safety as their top priority, far outpacing liquidity and yield.

While liquidity edged up five points to 35% compared to last year, yield was cited by just 5% of respondents, holding steady from 2024. The rankings confirm that treasury teams remain firmly risk-averse, shaped by volatile rates, tighter financial conditions and broader macro uncertainty.

The findings, based on responses from 254 US-based treasury professionals in March 2025, suggest a preference for reliable, low-risk instruments. This is particularly true in an environment where interest rate trajectories remain unpredictable and geopolitical disruptions continue to shape funding access and planning horizons.

Capital preservation tops investment priorities

Bank products such as certificates of deposit (CDs), demand deposits, time deposits and sweep accounts remain the primary vehicle for short-term cash, used by 46% of respondents. Government money market funds (MMFs) were the next most popular choice, cited by 20%.

This preference for bank products reflects a broader conservatism in treasury portfolios. Even with interest rates elevated, most organisations are not chasing yield but rather are prioritising capital preservation and immediate access to funds. In the current environment, security outweighs the appeal of incremental returns.

This conservative stance is also visible in organisations’ investment policy intentions. Nearly 30% of treasury teams are considering changes to their policies within the next 12 months, though those shifts appear more evolutionary than revolutionary.

Of note, both private (9%) and publicly held (12%) companies are exploring the addition of exchange-traded funds (ETFs) backed by money market instruments. While still a minority, this development hints at a gradual broadening of accepted tools within the treasury toolkit, just as long as they meet risk and liquidity thresholds.

“Money market funds remain a critical asset class among institutional investors seeking safety, liquidity and diversification of their balance sheet cash and we expect that to continue,” said Laurie Brignac, CIO and Head of Global Liquidity, Invesco.

Meanwhile, enthusiasm for environmental, social and governance (ESG) overlays has faded sharply. Just 3% of organisations are applying ESG parameters to MMF investments in 2025, down from 25% a year ago. This reflects both a shift in priorities, with financial resilience the primary goal in a year of market disruption, and the anti-ESG movement that exists to a far greater extent in the US compared to European counterparts.

Navigating policy constraints and borrower risks

One technical shift worth noting is the effect of liquidity fees on prime fund allocations. Despite the implementation of liquidity fees designed by regulators to prevent run risks during stress periods, allocations to prime funds increased slightly, up 1% from 2024. This modest uptick may reflect selective re-engagement with instruments that offer slightly higher yield potential, though it also suggests that regulatory friction hasn’t wholly deterred usage.

However, the most vulnerable segment flagged in the AFP data is organisations that are net borrowers. Within this group, 26% predict their cash balances will decline over the next two quarters, as economic uncertainty weighs on operating flexibility and reserve strength. This aligns with broader signals that credit conditions are tightening, particularly for companies reliant on refinancing or short-term borrowing.

Crucially, the data from this survey was collected in early March 2025, prior to a major policy shift that reshaped treasury sentiment. The so-called “Liberation Day” tariff announcements, made in early April, introduced a fresh wave of volatility and forced companies to reassess their liquidity plans. In response, AFP ran a follow-up study: the 2025 Corporate Cash Planning Survey, conducted from late May to early June. That second report offers a closer look at how treasurers have been adapting in real time.

A defensive mindset takes hold

The follow-up survey, covering 130 US-based organisations, found that most corporates are taking a wait-and-see approach when it comes to cash reserves. In the first quarter of 2025, 24% of respondents increased cash balances, while 58% held steady and 18% reduced holdings. By Q2, the proportion increasing cash dipped slightly to 22%. For the second half of the year, 25% expect to boost reserves, but the majority (63%) plan to maintain current levels.

The top reason for raising cash was a straightforward one: rising operating cash flow. This driver received a weighted impact score of 3.65 out of 5 in the outlook for Q3 and Q4, the highest score in the survey. Improved business performance was another strong contributor (3.47), followed by strategic accumulation of cash as a defensive measure (2.47).

The emphasis on caution is especially evident in how treasurers are reacting to external threats. Inflationary pressure is gaining ground as a concern, rising from an impact score of 2.00 in Q2 to 2.85 in the second-half outlook. Deteriorating business performance and tariffs are also looming larger as reasons for potential cash drawdowns, with impact scores of 2.93 and 2.43, respectively.

Interestingly, capital expenditure, which is usually a signal of confidence, has played both sides of the ledger. Increased capex contributed to cash reductions in the first half of the year (impact scores of 2.76 in Q1 and 2.65 in Q2), while a pullback in spending helped shore up reserves in some cases (2.07 in Q3/Q4). This suggests that investment plans are being recalibrated mid-year in light of evolving market conditions.

Overall, 60% of corporates surveyed are maintaining their current cash positions, while only 22% plan to reallocate investments in the next three to six months. The message is one of strategic patience, not paralysis.

Linking liquidity strategy with broader treasury planning

Taken as a piece, the two AFP surveys highlight a consistent message: treasury leaders are prioritising resilience. While some are gradually exploring new instruments such as MMF ETFs, few are departing from the core philosophy of safety-first. This conservative positioning may limit upside yield, but it offers a degree of protection in a landscape still vulnerable to rate shocks, political risk and funding strain.

The AFP’s Liquidity Survey shows how this mindset is shaping short-term investment decisions. The Cash Planning Survey adds context around how those choices play out in broader treasury operations, from capital allocation to response mechanisms in the face of unexpected events like tariffs or supply chain disruption.

“The results of the 2025 AFP Liquidity Survey signal a strong sense of caution among treasury leaders as organisations react to elevated levels of risk and uncertainty,” said Jim Kaitz, President and CEO of AFP. “Maintaining strong relationships with banking and money fund partners will be critical for organisations to remain adaptable.”