Clearwater Analytics, a leading provider of SaaS-based investment management accounting, reporting, and analytics solutions, announced the release of its 2023 Corporate Treasurer Market Outlook study. Polling over 150 corporate treasurers across the institutional investing space with $1.5 trillion in collective AUM, the report looks into the key trends, challenges, successes, and market outlook insights among corporate treasurers moving into the second half of 2023.
“After three years of market fluctuations, the first half of 2023 has been anything but a return to normal for corporate treasurers and the corporate liquidity market,” said Scott Erickson, Chief Revenue Officer at Clearwater Analytics. “With that, we launched this study to dig into some of the biggest pain points and strategies among corporate treasurers as the plan for the second half of what has been an incredibly unpredictable market.”
Interest rates to climb by year-end, yield curves to stay the same or worsen
According to the study, more than half of respondents said that federal funds interest rates will increase by year-end, with only 10% saying they expected rates to decrease.In addition, most said that they expect the yield curve to remain the same or become more inverted at year-end.
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“Corporate treasurers are naturally keeping their eyes glued on the Fed as inflation continues to be a foremost challenge,” said Erickson. “And while the battle against inflation has yielded some positive results and tepid optimism in financial circles to date, with inflation uncertainty still swirling, it’s clear that many corporate treasurers expect the Fed to not loosen its grip on controls anytime soon.”
Liquidity portfolios growing
Per the study’s results, two-thirds of respondents are growing or maintaining portfolio levels, as rates now produce meaningful income. Of the 35% that said their portfolios were shrinking, most said that this was due to M&A, which some cited as a buying opportunity in today’s markets.
“Liquidity portfolios are prone to fluctuations,” said Cody Lott, Head of Corporates and REITS at Clearwater Analytics. “Yet, with over two-thirds of respondents saying that they are growing their liquidity portfolios heading into the second half of the year, this could be an indicator that many corporates at least have some faith that the economy could be strengthening.”
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Banking industry challenges result in banking strategy and management shifts
Per the study’s findings, when asked how the uncertainty in the banking sector in the first half of 2023 has impacted their investment strategies, half of respondents said that they had increased the number of banks holding their cash or investments, half said they had changed the banks holding their investments, half said they had reduced their exposure to debt of the financial/banking sector, while 22% said they had shifted to larger counterparties.
“The banking challenges that unfolded during the first half of 2023 are still creating ripples around the financial world,” said Lott. “And with that, many financial teams have been forced to take a long hard look at their banking and investment management strategies and will likely continue to do so for the rest of the year.”
ESG not an investment priority
According to the study, when asked to what extent their organizations are incorporating ESG into their investment programs, only 17% were giving it “meaningful consideration,” with 44% giving it “some consideration,” and 16% saying it is “not a consideration” at all.
“ESG continues to be a significant talking point around the broader business world,” said Erickson.“However, per our findings, many corporates have yet to make ESG a foremost driver in their investment decision-making.That said, as the regulatory landscape around ESG continues to heat up, this is certainly a space that needs to be watched through 2023 and beyond. Clearwater clients and prospects regularly bring up the topic and we have dedicated resources to deliver ESG analytics on our platform.”
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