The biggest U.S. asset managers are going head-to-head to win a piece of a $1.5 trillion corporate cash comeback.
That’s the sum companies are expected to bring onshore under the U.S. tax overhaul passed last year, according to Invesco estimates. About $400 billion has already been repatriated, according to the firm.
Overseas, at least one major asset manager is losing out as a result of the changes. Cisco Systems Inc. yanked 5 billion euros ($5.7 billion) from Deutsche Bank AG’s asset management arm, DWS Group, in recent quarters as it repatriated profits, Bloomberg News reported on Thursday. The loss amounted to 40 percent of Deutsche Bank’s outflows in the first half of the year.
Cisco’s decision underscores the fierce competition among asset managers seeking to capitalize on President Donald Trump’s successful push to upend corporate tax rates — an effort that’s been criticized as a boondoggle to benefit companies already sitting on piles of cash.
The new law sets a one-time repatriation rate for untaxed cash held abroad — a 15.5 percent charge on cash and liquid assets, and 8 percent on non-cash or illiquid assets. Payments can be made over eight years. Previously, such funds were hit with the 35 percent corporate tax.
Halfway into the year companies are still only beginning to respond to the changes. Companies face an array of choices ranging from where to invest the money short-term and how to spend it.
“They have a significant amount of cash abroad and there is this window where they can capitalize on repatriating it,” said Jean-Yves Fillion, the chief executive of BNP Paribas SA’s U.S. holding company.
BNP Paribas recently reinforced its transatlantic task force that helps international companies with capital raising and financial strategy, including managing the flow of cash held overseas back to the U.S., Fillion said.
Here’s what some of the top firms are doing:
Michael Morin, head of liquidity management solutions at Boston-based Fidelity, said the firm is helping clients assess alternatives as they repatriate cash to spend on projects, pay off debt, repurchase shares and meet dividend payments.
Fidelity is helping clients determine where to park their money, whether in government or prime market funds.
“Some of our clients have already completed those transactions, but the majority of our clients are still in the process,” Morin said.
The timing for the decision is key in determining what the right investment vehicles are, according to Morin. Fidelity has hundreds of cash management clients, with more than $500 billion in money market funds, according to a company representative.