Money market funds in uncertain times: Five takeaways to keep in mind as we enter 2021______

Ed Lopez, Chief Revenue Officer

Treasurers at companies and financial institutions view money market funds as critical tools to help them manage their cash. But from one end of the investment process to the other, the experience of using them falls well short of their expectations. According to Calastone’s survey of global treasury professionals, a rethink could be due:

  • Money market funds are essential – but cumbersome to access

Corporate treasurers and financial institutions use MMFs to achieve a balance of security, liquidity and yield. They are especially important during periods of financial stress, when managing capital and liquidity becomes the key concern. However, the process of investing in MMFs is inefficient and time consuming, with too many manual processes and IT systems that do not talk to each other. At a time when interest rates are already close to zero, this inefficiency ties up resources, pushes up costs and drags down overall returns on MMF investments.

  • What are treasurers looking for from their MMF investments?

Treasures’ main reason for using MMFs is to manage their organisation’s capital better and ensure access to liquidity – more than 70 per cent included this among their top three priorities and nearly 40 per cent put it first. Calastone’s research coincided with a bout of intense market uncertainty, which pushed liquidity management to the top of corporate agendas worldwide. Closely related to this overriding concern are other important objectives in using MMFs, notably treasurers’ desire to manage their financial and operational risks better.

  • The biggest problems with investing in MMFs

Respondents who took part in Calastone’s global survey of 150 treasury professionals highlighted two major problems with the MMF investment process. Too many steps are still manual, from creating reports to sourcing the information they need to select funds. Some 93 per cent of respondents called for more automation. Alongside that finding, more than 70 per cent said a lack of integration between different systems and real-time information made the process of researching, executing and managing their investments harder than it should be.

  • Treasurers see scope for much more automation

The problem that causes most headaches for treasurers is the lack of automation in reporting on MMF investments – 46 per cent of respondents in our survey called for solutions to ease friction caused, for example, by MMF managers providing information in different formats, from PDF attachments to digital dashboards. Pulling all this detail together and making sense of it wastes too much time. However, it is not just reporting that treasurers think should be more automated: they also want the process of researching funds and executing transactions to be quicker and easier.

  • Better returns and lower running costs are the main goals

Corporates and financial institutions say that fixing the complex, disjointed process of investing in MMFs will yield big gains. They see greater automation and integration between different systems allowing them to make better investment decisions and improve the returns they earn on their money market investments. At a time of ultra-low interest rates, this is vital. They also see scope for improvements here to bring their operating costs down and make their day-to-day operations much more efficient. Fixing these processes brings major upside.

These findings are covered in more detail in our recent, independent survey of 150 treasurers in the US, Europe and Asia. Read the full report here –


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