“Cash is the lifeblood of any organisation, and managing it prudently is crucial.” 

Tony Callcot, Global Head of Liquidity Client Solutions, Aviva Investors

Let’s start with the basics: in your experience, what are the key factors treasurers think about when it comes to liquidity management?

Cash is the lifeblood of any organisation, and managing it prudently is crucial. The Covid-19 pandemic in 2020 was a stark reminder of this. For treasurers in the hospitality industry, cash receipts dropped to near zero overnight(1). Outlays, however, continued. A scenario few, if any, predicted. With prudent levels of cash reserves, deft redeployment of company resource and, in some cases, refinancing arrangements, skilled treasurers were able to navigate this real-life stress test successfully.  Others were less fortunate.

Refinancings are complex and costly. Cash resources can be less fungible than desired, particularly for global businesses with activity in countries or territories with restrictions on international cash transfer. A readily accessible pool of cash, on the other hand, is a significant asset when the unexpected happens.

Access to cash is therefore one of treasurers’ top concerns when it comes to managing liquidity. So too is stability. Any loss of cash can be highly damaging. Depositors at Silicon Valley Bank faced considerable uncertainty over both access to cash and the amount of cash they could recover when it failed in 2023(2). Fortunately, federal authorities stepped in promptly to guarantee depositors and ensure payment flows continued. A relevant reminder of the importance of factoring credit risk into liquidity management practices and the perils of putting all your eggs in one basket.

Fortunately, treasurers have cash and liquidity management options available to them. The key factors in selecting treasury tools are access to cash, security of cash – and, albeit usually a distant third in terms of priorities, the yield available. Bank deposits can satisfy these requirements. On the other hand, managing a portfolio of multiple banking relationships can be complex. Money market funds – which also provide ready access to cash – can help in providing diversification in an operationally efficient manner.

Tarek Smili Sales Director – Liquidity Solutions – EU Corporates, Aviva Investors

“Whether granular or principles-based, treasury policies can be slow to change. While they don’t need frequent updates, infrequent changes may miss opportunities.”

The treasury investment policy is a key document, what are your observations of treasury policies?

Treasury investment policies outline the cash and cash equivalents treasurers can use for liquidity management. We observe a wide range of these policies among our clients. Often, these policies are static, listing eligible instruments. While simple and effective, some policies are more sophisticated, detailing limits for different instruments and including risk indicators, such as limits per entity at a given rating level.

Whether granular or principles-based, treasury policies can be slow to change. While they don’t need frequent updates, infrequent changes may miss opportunities. Best practice is to confirm policies annually with a light review and conduct a deep dive every three years. Major market developments may warrant an accelerated review.

Tony Callcot, Global Head of Liquidity Client Solutions, Aviva Investors

“Accurate cash flow forecasting is crucial for liquidity investment. Businesses confident in their forecasts can diversify their cash and cash equivalents.”

To what extent are treasurers able to forecast cash needs?

If the proliferation of technology vendors providing cashflow forecasting tools at conferences and industry events is anything to go by, then cash forecasting is, and remains, a top topic for treasurers. And for good reason, cash forecasting is hard. The future is uncertain.

For instance, few treasurers in the hospitality sector could have predicted the Covid-19 shock. Conversely, an infrastructure project’s treasury department we worked with could forecast cashflows accurately, thanks to well-defined disbursements and funding cadence. This allowed them to maintain low operating cash buffers and invest in a broader range of cash equivalents.

Accurate cash flow forecasting is crucial for liquidity investment. Businesses confident in their forecasts can diversify their cash and cash equivalents. While bank deposits and money market funds offer same-day liquidity, other options with non-same day liquidity can provide diversification and potentially higher yields.

“Treasurers should continue to benefit from healthy income levels on their cash — but in a declining rate environment, how that cash is allocated becomes crucial.

Alastair Sewell, Liquidity Investment, Aviva Investors

What are the key trends you see in liquidity investment?

We see two clear trends in liquidity management. The first is that many corporates are cash rich, reflecting current market uncertainty due to global conflicts and a shifting geopolitical landscape. This situation can change rapidly, bringing both opportunities and challenges that impact cash.

Second, interest rates are falling. The latest forecasts suggest the ECB is nearing the end of its rate-cutting path, while the Fed and the Bank of England may still have some way to go:

Latest and future swap implied policy rates

Policy Rate

US Fed

UK BoE

EZ ECB

Latest 4.50% 4.25% 2.00%
YE 2025 4.00% 3.75% 1.75%
YE 2026 3.25% 3.50% 1.75%
YE 2027 3.25-3.50% 3.50-3.75% 2.00%

*Source: Bloomberg swap implied as at 23 June 2025. Rounded to nearest 25bps.

Reassuringly, the consensus is that interest rates won’t fall back to the lows of the 2000s, meaning treasurers should continue to benefit from healthy income levels on their cash. However, it’s crucial to consider how cash is allocated in a declining rate environment. Bank deposits may not offer the best interest rates, whereas money market funds usually target rates available in the interbank market, such as ESTR.

Tarek Smili Sales Director – Liquidity Solutions – EU Corporates, Aviva Investors

“If yield is a priority, there are other options.”

What are your current weightings in money market funds versus bank deposits, and have they changed in the last year?

Many treasurers have increased their use of fixed deposits recently. These deposits offer a fixed interest rate for a set period but are typically not breakable, meaning the cash is not available on demand. Due to the importance of cash access, prudent treasurers limit their use of fixed deposits. If yield is a priority, there are other options. “Standard” money market funds can provide higher yields than “regular” money market funds or overnight bank deposits. Ultra-short duration bond funds are another option, offering access to cash with one- or two-days’ notice while potentially providing higher returns and diversification.

“Today’s money market funds are vastly different from those in 2008 and can be a crucial part of any treasurer’s liquidity management strategy”

Tony Callcot, Global Head of Liquidity Client Solutions, Aviva Investors

What are some misconceptions treasurers might have about the role or risk profile of MMFs in a cash portfolio?

Many treasurers already use money market funds, which had over $11 trillion in assets under management by March 2025. Despite past issues, including the 2008 financial crisis, regulatory reforms have made these funds safer and more resilient. Modern money market funds proved their stability during the 2020 Covid-19 market stress and the UK’s 2022 gilt crisis. Today’s money market funds are vastly different from those in 2008 and can be a crucial part of any treasurer’s liquidity management strategy.

Grab the free whitepaper: Money Market Funds: An overview for corporate treasurers and investors

“Tailor your treasury investment policy to your business needs and keep it nimble”

Tony Callcot, Global Head of Liquidity Client Solutions, Aviva Investors

Finally, if you could give one piece of advice to a treasurer – both working to refine their liquidity strategy for the next three years – what would that be?

Focus on your treasury investment policy. Tailor it to your business needs and keep it nimble. A well-thought-out, flexible policy helps you navigate uncertainty and seize opportunities. There are tools to enhance liquidity management; don’t hesitate to use them.

Key risks to consider

The value of an investment and any income from it can go down as well as up. Investors may not get back the original amount invested. The strategy invests in money market instruments such as short-term bank debt the market prices/value of which can rise as well as fall on a daily basis. Their values are affected by changes in interest rates, inflation and any decline in creditworthiness of the issuer. This is not a guaranteed investment, an investment in a Money Market Fund is different from an investment in deposits and can fluctuate in price meaning you may not get back the original amount you invested. This investment does not rely on external support for guaranteeing liquidity or stabilising the NAV per unit or share. The risk of loss of the principal is to be borne by the investor.

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