Credit concerns have once again taken center stage as the treasury community closely monitors its cash investments. These fresh concerns are relevant to U.S. cash and short-duration investors because prime money market funds are major investors in European financial debt. Approximately two-thirds of commercial paper and one half of jumbo bank deposits available to U.S. investors are obligations of non-U.S. financial institutions. We estimate that 44% of a typical U.S. prime fund is exposed to non-U.S. financial debt. For large prime funds, 69% of assets are estimated to be non-U.S financial debt, of which 55% is European, 16% eurozone, and 4.6% southern European. No direct exposure to Greece or Portugal was found but the significant dispersion of exposure among large prime funds should continue to be a reminder of the importance of credit monitoring in prime funds.

As we enter the second decade of the new century, the world financial system has just emerged from a near death experience and embarked on a new journey of redefining itself. Having witnessed the subprime meltdown, the bankruptcy of Lehman Brothers, and the collapse of the Reserve Primary money market fund, corporate cash investment professionals are faced with the same task of redefining their investment choices, strategies and expectations. This paper attempts to point out several recent developments that will likely shape the new cash investment landscape for years to come.