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Money Market Fund Demand Remains Strong: J.P. Morgan

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As the financial market continues to evolve, money market fund demand remains strong, while an increasing number of investors are incorporating environmental, social and governance criteria to screen investments, according to J.P. Morgan Asset Management.

MMFs remain the most permissible investment to make based on company policies and are included in 92% of investment policies, according to the firm’s 2019 Global Liquidity PeerView Survey of 346 chief investment officers, treasurers and other senior cash investment decision-makers around the world, the firm said.

The respondents, who account for a total of about $1 trillion, participated in an online survey between May and July, J.P. Morgan noted, adding 153 of them were from the Americas, while 116 were from Europe and 77 from the Asia-Pacific region.

A whopping 75% of survey respondents said they planned to maintain their stable NAV MMFs, based on the market outlook for the coming year, the firm said. That’s up from 64% in J.P. Morgan’s 2017 edition of the survey, which it releases every two years.

MMFs were followed in popularity by bank obligations (62% of policies) and U.S. treasuries (60% of national popularity).

The continued popularity of MMFs was one of four key themes that were identified in J.P. Morgan’s latest PeerView survey, it noted.

Another main theme was that investors are “increasingly turning to responsible investing, using ESG criteria to screen investments,” the firm said. Nineteen percent of respondents globally are doing that now and an additional 25% are “likely to start within the next two years,” J.P. Morgan said.

Adoption of treasury management systems, meanwhile, is growing also, the firm said, noting the percentage of investors surveyed using such systems is now 61%.

The features they’re using most are cash management and treasury accounting (98%), investments and debt management (67%) and FX and interest rate risk management (50%). Asia-Pacific investors are more likely to develop in-house systems (43%) than use third parties. However, in stark comparison, in the U.S., only 12% developed their systems in-house and only 11% did so in Europe, the Middle East and Africa, according to the survey.

Last, “rising political risk tops the list of investment challenges, with 67% of respondents expressing concern about the U.S.-China trade war and Brexit,” J.P. Morgan said.

“The changing global economic environment presents investors with many new challenges, from slowing growth, rising trade tensions and falling interest rates,” according to Paula Stibbe, global head of Liquidity Sales at J.P. Morgan Asset Management.

“This year’s PeerView results suggest that in this environment, demand for money market funds remains strong, and investors with short-term fixed income portfolios are increasingly looking at areas such as ESG screening and treasury management systems when evaluating their cash investment strategy,” she said in a statement.

— Check out Fed Cuts Rates by Quarter Point While Hinting at a Policy Pause on ThinkAdvisor.


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