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Are your cash investment practices aligned with your peers?J.P. Morgan Global Liquidity Investment PeerViewSM 2014

FOR INSTITUTIONAL/WHOLESALE OR PROFESSIONAL CLIENT USE ONLY | NOT FOR RETAIL DISTRIBUTION

Introduction 2

Executive summary 3

The respondents 4

Investment policy: Permissible investments 7

Cash investment allocation 9

Likely investment portfolio changes 11

Managed accounts 13

Investment policy: Minimum short-term credit rating 14

Investment policy: Minimum credit rating 15

Investment policy: Maximum maturity 17

Investment policy: Maximum portfolio duration 19

Reduction in earned interest rate 20

Currencies: Primary currency 21

Currencies: Primary currency by Asian Pacific countries 23

Currencies: Primary currency by European countries 24

Investment portfolio responsibility: Team size 25

Conclusion 26

Contents

2 J .P. MORGAN GLOBAL LIQUIDITY INVESTMENT PEERVIEW SM 2014

Introduction

I am very happy to introduce the 2014 J.P. Morgan Global Liquidity Investment PeerViewSM Survey results report. Over 300 CIOs, treasurers and other senior decision-makers around the world participated in this online survey, representing more than 300 unique entities and all sectors of the global economy. Our methodology was carefully constructed to ensure that only true decision-makers took part in the survey, which can serve as an industry benchmark.

As you’ll see from the results, the strong response rate has helped to identify several critical trends.

As liquidity investors look to navigate a shifting interest rate environment and prepare for far-reaching regulatory reforms, the PeerView findings will help them better understand their cash investment decisions in comparison to their peers.

CUSTOMIZED RESULTS

Survey participants will receive customized reports that compare their responses to their peer groups by region, cash balance and industry. These tailored reports provide a unique gauge for firms to evaluate how their cash investment policies and practices compare to those of their peers.

This year, our survey was conducted as liquidity investors anticipated a changing interest rate environment and regulatory arena. In the near term, they await the end of unprecedented quantitative easing by the Federal Reserve, the removal of accommodation by the Bank of England (BoE), and continued monetary stimulus by other central banks. Over the medium and long term, they are preparing for the rollout of significant new regulations. These include Basel III, changes to the Securities and Exchange Commission (SEC) rules governing money market funds (MMFs) and, potentially, European Union (EU) MMF reform.

PARTNERSHIP WITH OUR CLIENTS

We could not have completed the survey report without the generous participation of our clients, and I would like to thank everyone who took the time to participate. Your contributions have helped us produce a report that provides fresh insight into how a firm’s investment decision-making compares to that of its peers. I hope you find the report informative and useful.

If you require further information, please visit our website: www.jpmgloballiquidity.com*

John Donohue

CIO and Group Head J.P. Morgan Global Liquidity

*In Asia Pacific, this website is currently only available to HK Professional Investors and SG Institutional Investors.


Executive summary

SEARCHING FOR YIELD, CONTROLLING RISK, PREPARING FOR NEW REGULATION

This year’s survey took place against a backdrop of a diverging global economy, as U.S. economic data strengthened and Europe faced disappointing growth and the threat of deflation. Though the year began with widespread expectation that interest rates would rise, a surprising rally drove down yields and tightened spreads. Risk assets continued to attract strong investor demand.

While rates still hovered near their historical lows when liquidity investors answered our survey questions, respondents were very much focused on a coming interest rate environment that will likely be globally bifurcated. As the Fed and the BoE were moving to end their stimulus programs, monetary tightening was the inevitable next step. Although the precise timing is very much in question, U.S. and UK rate hikes are expected by mid-2015. A rate hike would be the Fed’s first since 2006 and the BoE’s first since 2007. But tightening in the U.S. and UK should be at least partially offset by continued stimulus by the European Central Bank (ECB) and Bank of Japan. And even as they tighten, the Fed and BoE will be grappling with unusually elevated balance sheets, with $4.5 trillion on the Fed’s balance sheet, vs. less than $1 trillion before the financial crisis. Countervailing forces — pushing some global rates up, but restraining their rise — will make liquidity management especially challenging in the coming year.

Even as they anticipate a new rate environment, liquidity investors must consider upcoming regulatory changes. The SEC will implement a floating net asset value (NAV), as well as gates and fees for many U.S. money market funds. Basel III regulations, which will impact how banks manage their balance sheets, will cause liquidity investors to restructure their cash portfolios. Across a wide range of industries and institutions, survey respondents are recalibrating their cash investment decision-making.

In this survey we divided respondents into two groups, based on their permissible investments. Group A, which represents 22% of survey respondents, primarily invests in bank obligations and money market funds. Group B, which represents 78% of survey respondents, has a broader set of permissible investments which extends well beyond bank obligations and money market funds. Group B respondents were asked a few additional questions based on their broader set of permissible investments.

Whatever their investment policy allows, liquidity investors must grapple with competing forces — a need for yield on the one hand, and a mandate to control risk on the other. Risk control covers both liquidity and preservation of principal.

KEY FINDINGS

• Liquidity is still key – Liquidity is a central concern of survey respondents, as reflected in their choice of investments: half of global cash assets are placed in bank deposits. Usage is most prevalent in Asia, where 68% of assets are held in bank deposits, vs. 48% in Europe and 38% in the Americas. Money market funds account for over one-third of cash assets in the Americas.

• Risk remains a focus – In an effort to control risk, the majority of respondents’ investment policy statements define portfolio duration and credit standards for both longer- and shorter-term securities. Larger firms tend to be less conservative in their definition of permissible credit rating, which allows them to take on additional interest rate and credit risk.

• Regulatory change is a concern – While they are focusing attention on regulatory changes including SEC MMF reform and Basel III, a majority of respondents plan to stay the course with their current cash allocation through 2015.

• Cash balance size and diversification – Firms with larger cash balances have a broader set of investment guidelines (e.g., Group B). A third or more of larger firms permit investment in asset-backed securities or mortgage-backed securities. Firms with relatively smaller cash balances typically have more limited investment options at their disposal (e.g., Group A).

• Search for yield – Separately managed accounts (SMAs), customized portfolios that allow investors to define their own risk, security and liquidity parameters, account for a significant share of cash allocations. In the Americas, 11% of cash assets are invested with SMAs or outside managers. Investor demand for SMAs can be seen as a clear demonstration of the need for yield.

• Manager selection – In selecting an asset manager, the top three criteria in order of importance are performance/risk-adjusted returns, investment expertise and firm relationships.

4 J .P. MORGAN GLOBAL LIQUIDITY INVESTMENT PEERVIEW SM 20144 J .P. MORGAN GLOBAL LIQUIDITY INVESTMENT PEERVIEW SM 2014

41%

The Americas

29%

Asia Pacific

30%

Europe

NUMBER OF RESPONDENTS

Over 300 treasurers, CIOs and senior cash decision-makers across the globe participated in this survey.

GEOGRAPHICAL BREAKDOWN

The 2014 survey was truly global in scope, with decision-makers responding on behalf of organizations in a wide range of regions and markets. There was strong participation in the Americas (41%), followed by Europe (30%) and Asia Pacific (29%).

Please note that regional breakdowns throughout this report are based on the location of the respondents’ company headquarters.

Q. In which geographic region are you most responsible for managing cash investments?

E XHIBIT 1 : G EO G R APHIC SPLIT — A SIA PACIFIC IN CLUDE S JAPAN , CHINA , S IN G AP O RE

AND AUSTR ALIA

The respondents


PARTICIPANT MIX

Respondents were divided into two groups, based on their permissible investments. Group A, which represents 22% of survey respondents, primarily invests in bank obligations and money market funds. Group B, which represents 78% of survey respondents, has a broader set of permissible investments which extend well beyond bank obligations and money market funds as shown in the table below. Group B respondents were asked a few additional questions based on their broader set of permissible investments.

E XHIBIT 2 : PARTICIPANT G ROUPIN G

Permissible investments Group A Group B

Bank Obligations (Certificates of Deposit, Time Deposits, Earnings Credit Rate, Interest Bearing Bank Accounts, etc.)

79% 79%

Money Market Funds (Stable NAV) 72% 88%

U.S. Treasuries 25% 75%

Money Market Funds (Floating NAV) (EMEA participants only) 15% 43%

U.S. Government Agencies 9% 61%

Commercial Paper — 75%

Repurchase Agreements — 56%

Structured Deposits (APAC participants only) — 54%

Corporate Debt Securities — 49%

Non-U.S. Foreign Agency Securities, Supranationals and Sovereigns — 40%

Wealth Management Products (APAC participants only) — 35%

Municipal Notes — 30%

Asset-backed Commercial Paper — 28%

Floating Rate Notes (APAC participants only) — 25%

Short-term Bond Funds (Floating NAV) — 21%

Asset-backed Securities — 20%

Non-rated Money Market Funds (APAC participants only) — 18%

Variable Rate Demand Notes — 16%

Mortgage-backed Securities — 16%

The respondents (continued)


CASH BALANCE

The survey sought to capture the views of liquidity investors from organizations of all sizes; from small regional players to large multinationals. Around 33% of respondent companies had a cash balance of under USD 500 million, while close to one in five had a cash balance of over USD 5 billion.

Q. As of the most recent quarter when your company reported financial results, which of the following best describes the total value of cash and marketable securities on your company’s balance sheet?

E XHIBIT 3 : C A SH BAL AN CE SPLIT

>$5B

19%$1B – $5B

31%$500M – $999M

17%<$500M

33%

The respondents (continued)

INDUSTRY SPREAD

Respondents represented companies and organizations from all sectors of the economy; from industrials and technology to financial services and health care.

Q. Which of the following best describes the industry in which your company operates?

E XHIBIT 4: SPLIT BY INDUSTRIE S

Industry groups represented

29%

9%

6%7%

18%

9%

8%

7%

5% 3%Industrials, Manufacturing, Agriculture, Mining & Transportation

Asset Managers

Insurance

Financial Services & Real Estate Technology, Media & Telecom

Energy, Power & Utilities

Consumer Goods

Health & Pharmaceuticals

Government, Education & Nonprofit All Other


Bank obligations and money market funds are the most permissible investments, followed by U.S. Treasuries, commercial paper and U.S. government agencies. Firms with larger cash balances tend to have more flexibility in allowing riskier securities to be permissible, as a third or more of larger firms permit asset-backed and mortgage-backed securities.

Q: Which of the following cash investments are permissible under your company’s investment policy?

E XHIBIT 5 : PERMISSIB LE INVE STMENT S ACROSS PEER G ROUP S

Investment type By region By cash balance

64%

Structured Deposits (APAC participants only)

Bank Obligations (Certificatesof Deposit, Time Deposits, Earnings Credit Rate, Interest Bearing Bank Accounts, etc.)

Corporate Debt Securities

Asset-backed Commercial Paper

Commercial Paper

Repurchase Agreements

Non-U.S. Foreign AgencySecurities, Supranationalsand Sovereigns

U.S. Government Agencies

U.S. Treasuries

44%

22%

38%

79%81%

72%84%

43%

47%28%

35%

25%19%

21%

59%75%

46%48%

56%34%

36%

31%33%33%

26%

50%79%

30%27%

93%46%

42%

85%

61%

34%

57%

79%81%

83%75%

42%

43%37%

22%

22%29%

12%

77%64%

67%39%

53%48%

23%

61%32%

25%17%

64%53%

56%35%

67%73%

45%

55%29%

64%

Asia PacificEuropeAmericasTotal <$500M$500M-$999M$1B-$5B>$5B

Investment policy: Permissible investments



Wealth Management Products(APAC participants only)

Short-term Bond Funds (Floating NAV)

Municipal Notes

Mortgage-backed Securities

Asset-backed Securities

Floating Rate Notes(APAC participants only)

Variable Rate Demand Notes

Non-rated Money Market Funds (APAC participants only)

Money Market Funds (Floating NAV) (EMEA participants only)

Money Market Funds (Stable NAV)

89%85%

90%80%

41%24%

36%36%

18%8%

18%16%

21%14%

13%4%

55%33%

18%4%

39%13%13%

5%

33%10%

12%4%

34%30%

25%10%

28%15%

19%10%

45%8%

27%33%

85%94%

86%70%

33%

14%

12%22%

6%3%

20%

16%21%

15%9%

13%17%

12%8%

23%39%

12%13%

17%16%

20%14%

27%


The survey finds that firms with larger cash balances (>USD 5 billion) have a broader range of permissible securities in their investment policies than their peers with smaller balances. The expanded set of investment prospects, including riskier holdings such as asset-backed securities, provides greater opportunities for diversification.

Investment policy: Permissible investments (continued)

E XHIBIT 5 : PERMISSIB LE INVE STMENT S ACROSS PEER G ROUP S (co n t i n u e d )


The different interest rate environments may be a reason for the variance in allocations to bank obligations across regions, with the Americas allocating 38%, Europe at 48% and Asia Pacific at 68%.

Q: Approximately what percentage of your cash is invested in each the following solutions?

E XHIBIT 6: AVER AG E C A SH ALLO C ATIO N ACROSS PEER G ROUP S


Money Market Funds (Floating NAV)(EMEA participants only)



Bank Deposits, Certificates of Deposit, Time Deposits, Earning Credit Rate, Interest Bearing Bank Accounts

50%

9%15%

7%3%

5%

25%34%

26%12%

5%

38%48%

68%

Internally-managed Short-Term Fixed Income Portfolios

31%

4%

22%8%

4%5%

3%2%

9%

19%32%

30%20%

4%

1%8%

46%55%

62%


Cash investment allocation



7%

1%

7%

3%

1%2%

1%

11%7%

2%

3%1%

6%Other (High Yield, Emerging Market Debt, Equities)

Wealth Management Products (APAC participants only)


Outside Asset Manager (Separately Managed Account)

13%

2%

14%4%

7%6%

2%1%1%

8%6%

3%

7%4%

2%


As domestic and international regulatory reforms take effect, and central bank policies continue to evolve, organizations may shift their strategic approach to managing short-term investments. The final SEC rules on MMFs could transform how organizations use the investment vehicle in their portfolios. The ECB’s recent move to a negative deposit rate changes the calculus of short-term investing in an important market. Finally, Basel III regulations, which redefine global standards for bank capital and will change how banks treat deposits, will have a significant impact. For many organizations, bank balance sheets will be less available for cash investment.

Cash investment allocation (continued)

E XHIBIT 6: AVER AG E C A SH ALLO C ATIO N ACROSS PEER G ROUP S (co n t i n u e d )


Likely investment portfolio changes

Overall, most firms plan to stay the course with their allocations to bank deposits and money market funds based on next year’s market outlook.

Q: Based on your market outlook for next year, what changes are you likely to make to your investment portfolio?

E XHIBIT 7A : LIKELIH O O D O F CHAN G E S TO INVE STMENT P O R TFO LIO BA SED O N NE X T YE AR ’S MARKE T OUTLO O K BY REG IO N

TotalAmericas

EuropeAsia Pacific

Asia Pacific

Asia Pacific

TotalAmericas

EuropeAsia Pacific

Europe

TotalAmericas

EuropeAsia Pacific

TotalAmericas

EuropeAsia Pacific

TotalAmericas

EuropeAsia Pacific

TotalAmericas

EuropeAsia Pacific

Bank Deposits, Certificates of Deposit, Time Deposits, Earnings Credit Rate, Interest Bearing Bank Accounts



Internally-managed Short-term Fixed Income Portfolios

Investment type By region




Other (High Yield, Emerging Market Debt, Equities)


Stay the SameDecreaseIncrease


Stay the SameDecreaseIncrease

>$5B$1-5B

$500-999M<$500M

>$5B$1-5B

$500-999M<$500M

>$5B$1-5B

$500-999M<$500M

>$5B$1-5B

$500-999M<$500M

>$5B$1-5B

$500-999M<$500M

>$5B$1-5B

$500-999M<$500M

>$5B$1-5B

$500-999M<$500M

>$5B$1-5B

$500-999M<$500M

>$5B$1-5B

$500-999M<$500M

Bank Deposits, Certificates of Deposit, Time Deposits, Earnings Credit Rate, Interest Bearing Bank Accounts



Internally-managed Short-term Fixed Income Portfolios

Investment type By cash balance




Other (High Yield, Emerging Market Debt, Equities)


Facing the possibility of volatility in the fixed income markets due to interest rate moves, clients are asking many questions: When will rates rise? By how much and how fast? As a result, firms are reluctant to make significant increases to their interest rate exposure. When they have greater clarity about the course of the next rate cycle, liquidity investors may choose a different mix of short-term investments.

Likely investment portfolio changes (continued)

E XHIBIT 7B: LIKELIH O O D O F CHAN G E S TO INVE STMENT P O R TFO LIO BA SED O N NE X T YE AR ’S MARKE T OUTLO O K BY C A SH BAL AN CE


Organizations look for a variety of skills and capabilities in choosing an asset manager, but two are widely seen as the most important: performance/risk-adjusted returns and investment expertise. Firm relationships rank third on the roster.

Performance/risk-adjusted returns and investment expertise are at the top of the list when selecting an asset manager.

Q: Please rank the top 5 reasons considered, in order of importance, when selecting an asset manager.

E XHIBIT 8: MOST IMPORTANT RE A SONS WHEN SELEC TING AN A SSET MANAGER*

Reasons By region By cash balance

Manager reputation

Management fees

Investment expertise

50%

20%

12%

9%

7%3%3%

15%

12%7%7%

14%7%

14%

19%19%

13%25%

20%23%

18%

34%43%

32%21%

48%49%

55%42%

39%60%

58%

Performance/risk-adjusted returns

Firm relationships

Client service

Access to investment resources

Investment reporting

54%

10%

14%

5%

8%5%5%

8%

14%9%

6%

9%12%

15%

22%13%14%

27%

29%19%

21%

22%42%

47%27%

64%48%

42%38%

40%53%

55%


Managed accounts

*This question was only asked of those participants classified as Group B (those firms that have a broader set of permissible investments).


The minimum permissible credit ratings tend to be consistently conservative at A-1 or higher for most short-term securities.

Q: For each of these cash investments, what is the minimum short-term credit rating permissible under your investment policy?

E XHIBIT 9 : MEDIAN MINIMUM SH O RT-TERM CREDIT R ATIN G ACROSS PEER G ROUP S*


A-1+/P-1 A-1 A-2/P-2 Less than A-3/P-3

Not rated A-1+/P-1 A-1 A-2/P-2 Less than A-3/P-3

Not rated

Commercial Paper •••• • •••

Bank Obligations (Certificates of Deposit, Time Deposits, Earnings Credit Rate, Interest Bearing Bank Accounts, etc.)

•••• ••••


• • •••

Variable Rate Demand Notes •••• ••••

Floating Rate Notes (APAC participants only)

• • •• •

• Total •Americas • Europe •Asia Pacific • >$5B • $1B – $5B • $500M – $999M • <$500M

* Please note that not all firms are using each type of investment. As such, the credit rating shown for each investment represents the median credit rating among companies that are using that investment.

Investment policy: Minimum short-term credit rating


Money market funds have the highest minimum permissible credit rating, while asset-backed commercial paper and mortgage-backed securities have lower permissible credit ratings. Corporate debt securities, municipal notes and short-term bond funds also have the lowest threshold for minimum permissible credit rating among other, longer-term securities.

Q: For each of these cash investments, what is the minimum credit rating permissible under your investment policy?

Investment policy: Minimum credit rating

*Please note that not all firms are using each type of investment. As such, the credit rating shown for each investment represents the median credit rating among companies that are using that investment.

E XHIBIT 10A : MEDIAN MINIMUM PERMISSIB LE CREDIT R ATIN G ACROSS PEER G ROUP S BY REG IO N*


AAA AA+ AA AA- A+ A A- BBB+/ BBB/ BBB-

Less than BBB-

Not rated

Non-U.S. Foreign Agency Securities, Supranationals and Sovereigns •• • •

Money Market Funds (Stable NAV) ••• •

Money Market Funds (Floating NAV) (EMEA participants only) •

Asset-backed Commercial Paper • • ••

Mortgage-backed Securities • • • •

Asset-backed Securities • •• •

Corporate Debt Securities ••••

Municipal Notes ••••

Short-term Bond Funds (Floating NAV) • •••

Wealth Management Products (APAC participants only) •

• Total •Americas • Europe •Asia Pacific


Firms with larger cash balances, especially those with more than USD 5 billion in assets, tend to be more comfortable with increased credit risk.

*Please note that not all firms are using each type of investment. As such, the credit rating shown for each investment represents the median credit rating among companies that are using that investment.

E XHIBIT 10 B: MEDIAN MINIMUM PERMISSIB LE CREDIT R ATIN G ACROSS PEER G ROUP S BY C A SH BAL AN CE*


AAA AA+ AA AA- A+ A A- BBB+/ BBB/ BBB-

Less than BBB-

Not rated

Non-U.S. Foreign Agency Securities, Supranationals and Sovereigns ••• •

Money Market Funds (Stable NAV) ••• •

Money Market Funds (Floating NAV) (EMEA participants only) ••• •

Asset-backed Commercial Paper • •••

Mortgage-backed Securities • •• •

Asset-backed Securities •• • •

Corporate Debt Securities • •••

Municipal Notes • •••

Short-term Bond Funds (Floating NAV) • • ••

Wealth Management Products (APAC participants only) • • • •

• >$5B • $1B – $5B • $500M – $999M • <$500M

Investment policy: Minimum credit rating (continued)


E XHIBIT 11 A: MEDIAN MA XIMUM FINAL PERMISSIBLE MATURIT Y ACROSS PEER GROUPS BY REGION*


<1 Year 1-2 Years

2-3 Years

4-5 Years

>5 Years No limit

U.S. Treasuries • •• •U.S. Government Agencies • • ••

Non-U.S. Foreign Agency Securities, Supranationals and Sovereigns ••• •

Repurchase Agreements ••••Commercial Paper ••• •Asset-backed Commercial Paper ••• •Corporate Debt Securities ••• •Bank Obligations (Certificates of Deposit, Time Deposits, Earnings Credit Rate, Interest Bearing Bank Accounts, etc.)

• •••

Structured Deposits (APAC participants only) •

Variable Rate Demand Notes •• ••Floating Rate Notes (APAC participants only) •

Asset-backed Securities ••• •

Mortgage-backed Securities ••• •

Municipal Notes •• ••Wealth Management Products (APAC participants only) •

• Total •Americas • Europe •Asia Pacific

Investment policy: Maximum maturity

*Please note that not all firms are using each type of investment. As such, the maximum portfolio duration shown for each investment represents the median among companies that are using that investment. In addition, this question was only asked of those participants classified as Group B (those firms that have a broader set of permissible investments).

Asia Pacific firms tend to have the highest maximum permissible maturity for many securities. Europe and Asia Pacific also have the highest maximum permissible maturity for variable rate demand notes, asset-backed securities and mortgage-backed securities.

Q: For each of these cash investments, what is the maximum final maturity permissible under your investment policy?


E XHIBIT 11B: MEDIAN MA XIMUM FINAL PERMISSIBLE MATURIT Y ACROSS PEER GROUPS BY C ASH BAL ANCE*


<1 Year 1-2 Years

2-3 Years

4-5 Years

>5 Years No limit

U.S. Treasuries ••• •U.S. Government Agencies •• • •

Non-U.S. Foreign Agency Securities, Supranationals and Sovereigns • • ••

Repurchase Agreements ••• •Commercial Paper •• ••Asset-backed Commercial Paper • •• •Corporate Debt Securities ••• •Bank Obligations (Certificates of Deposit, Time Deposits, Earnings Credit Rate, Interest Bearing Bank Accounts, etc.)

• •••

Structured Deposits (APAC participants only) •• ••

Variable Rate Demand Notes • •• •Floating Rate Notes (APAC participants only) • •• •

Asset-backed Securities • •••

Mortgage-backed Securities • •••

Municipal Notes ••• •Wealth Management Products (APAC participants only) • • • •

• >$5B • $1B – $5B • $500M – $999M • <$500M

Investment policies often set maximum maturities for U.S. government securities, including agencies, and corporate debt that are longer (four to five years) relative to other investment types. Repurchase agreements, commercial paper and bank obligations are often restricted to shorter-term maximum maturities (typically under one year).


Investment policy: Maximum maturity (continued)


Most firms have a maximum permissible portfolio duration of six months to one year.

Q: What is the maximum average portfolio duration permissible under your investment policy?

E XHIBIT 1 2: MEDIAN MA XIMUM PERMISSIB LE P O R TFO LIO DUR ATIO N*

The survey found that the size of a firm’s cash balance is a key indicator of the maximum portfolio duration allowable under the firm’s investment policy. Larger firms tend to have a maximum duration of one to two years.

Investment policy: Maximum portfolio duration

By region By cash balance

6 Months or Less

>6 Months – 1 Year

1-2 Years 2-3 Years >3 Years 6 Months or Less

>6 Months – 1 Year

1-2 Years 2-3 Years >3 Years

•••• • •• •

• Total •Americas • Europe •Asia Pacific • >$5B • $1B – $5B • $500M – $999M • <$500M



Over half of the firms are experiencing a reduction in the earned interest rate from bank obligation products, with Europe leading the way at 67% of firms.

Q: Are you experiencing a reduction in the interest rate you earn from bank obligation products (certificates of deposit, time deposits, earnings credit rate, interest bearing bank accounts, etc.)?

E XHIBIT 1 3 : PERCENTAG E E XPERIEN CIN G A REDU C TIO N IN THE E ARNED INTERE ST R ATE FRO M BANK O B LIG ATIO N PRO DU C T S

Reduction in earned interest rate

By region By cash balance

67%

46%Asia Pacific

Europe

Americas

Total

55%

56%

62%

55%

55%

54%

<$500M

$500M-$999M

$1B-$5B

>$5B


In the Americas, primary cash currency is held mainly in US Dollars. In Europe, primary cash currency is held in (1) EUR, (2) USD, (3) GBP, in order of ranking. Asia Pacific is mixed depending on country.

Q: Rank each of the currencies below by size of cash balance invested in them.

E XHIBIT 14A : PRIMARY CURREN C Y BY SIZE O F C A SH BAL AN CE*

Currencies: Primary currency

Currency By region

23%

33%

23%

AUD (Australian Dollar)

GBP (British Pound Sterling)

YEN (Japanese Yen)

RMB (Chinese Yuan)

EUR (Euro)

USD (US Dollar)

7%

7%

5%

16%

23%

25%

90%

54%

33%

23%

4%

14%

40%

1%

2%

9%

2%

25%

Asia PacificEuropeAmericasTotal

*Only those currencies ranked first by 2% or more of total survey participants are shown.


As firms continue to expand and globalize, cash balances will continue to grow in new markets outside of the firm’s headquarters location. The survey found that most firms are fairly diversified in the currencies they hold.

Currency By cash balance

11%

5%

0%

5%

7%

7% 11%

3%

2%

3%

23% 11%

8%

8%



YEN (Japanese Yen)

RMB (Chinese Yuan)

EUR (Euro)

USD (US Dollar)60%

62%

58%

41%

15%

10%

8%

17%

2%

5%

8%

17%

<$500M$500M-$999M$1B-$5B>$5B

*Only those currencies ranked first by 2% or more of total survey participants are shown.

Currencies: Primary currency (continued)

E XHIBIT 14B: PRIMARY CURREN C Y BY SIZE O F C A SH BAL AN CE*


Most Asia Pacific companies primarily use their country’s currency in their cash portfolio. 67% of firms in Singapore use the US Dollar as their primary currency.


E XHIBIT 1 5 : PRIMARY CURREN C Y BY A SIA PACIFIC COUNTRIE S

Currencies: Primary currency by Asia Pacific countries

Currency By country

92%

27%

SGD (Singapore Dollar)

YEN (Japanese Yen)

RMB (Chinese Yuan)


USD (US Dollar)12%

10%

8%

67%

75%

81%

10%

SingaporeJapanChinaAustralia


Half of the firms in the UK use the US Dollar as their primary cash balance currency.


E XHIBIT 16: PRIMARY CURREN C Y BY EURO PE AN COUNTRIE S

Currencies: Primary currency by European countries

Currency By country

39%

7%RMB (Chinese Yuan)

USD (US Dollar)

EUR (Euro)81%

7%

7%

51%

4%

United KingdomGermany



61% of firms have three or fewer individuals responsible for their investment portfolio, while 61% of firms with greater than $5 billion in cash balance have four or more individuals responsible for the portfolio.

Q: How many full-time equivalent people are responsible for your investment portfolio?

E XHIBIT 17: INVE STMENT P O RTFO LIO TE AM SIZE

Investment portfolio responsibility: Team size

Ranges of team size By region By cash balance

0%

0%

16%

15%

10%

15%

27%

18%

38%

39%

40%

31%

35%

36%

29%

8%

21%

23%

>5

4-5

2-3

0-1

24%

19%

20%

19%

26%

19%

19%

12%

34%

37%

36%

38%

15%

25%

25%

31%



The J.P. Morgan Global Liquidity Investment PeerView Survey has once again examined the investment decisions of liquidity investors around the world. The 2014 edition surveyed over 300 people — each and every one a senior decision-maker — representing more than 300 unique entities. They responded to our survey at an interesting juncture, anticipating significant changes in both the interest rate and regulatory arenas. Even as global fixed income yields unexpectedly fell, respondents are looking ahead and preparing for the next interest rate cycle.

They do so at a time when global central banks are heading in different directions. The Fed has begun to taper its historic asset purchases. The next hike in the fed funds rate, expected by mid-2015, will be the first since 2006. The BoE is approaching its own rate hike. On the other hand, the ECB has introduced negative deposit rates and other extraordinary measures to counter the threat of deflation; it is expected to continue its stimulus for some time. In Asia Pacific, the Bank of Japan is likely to further pursue its monetary easing, while China moves further on its path to interest rate liberalization.

On the critical regulatory front, Basel III global rules will dramatically change the way banks view their deposits, and many large banks are choosing to follow the rules sooner than required. New SEC rules governing U.S. money market funds and, possibly, new EU MMF reform, will have a significant impact as well. Both Basel III and SEC rules will compel liquidity investors to restructure and reposition their short-term investment portfolios.

These market and regulatory forces will present challenges, as well as opportunities, to liquidity investors as they re-evaluate their cash investment decision-making. This process — always important, never simple — will greatly benefit from a peer comparison as firms consider how their policies and practices resemble, and differ from, their peers. In this regard, the J.P. Morgan Global Liquidity Investment PeerView Survey can serve as a valuable industry benchmark.

If you have any questions about the survey or would like additional information, please contact your J.P. Morgan Global Liquidity client advisor.

Conclusion

CONTACTGlobal Liquidity – Asia PacificPaula StibbeChater House8 Connaught Road CentralHong Kong+852-2800-2688 Global Liquidity – EMEAJames Fuell60 Victoria embankmentLondonEC4Y 0JP+44-20-7742-3620 Global Liquidity – AmericasRobert White270 Park AvenueNew York, NY10017+1-212-648-2552

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