Jeff Weaver, Head of Global Liquidity Solutions at Allspring Global Investments, explains why current market conditions are prompting more investors to take advantage of money market funds, and how Allspring is supporting the next generation of treasury talent.

Jeff Weaver

Head of Global Liquidity Solutions

Could you give me an overview of your career history and experience?

I started my career as an intern at Bankers Trust Company in New York City, which evolved into a full-time position when I graduated from the University of Colorado. After a year, I joined the short-term bond portfolio management team, which taught me a lot about investment management, markets, and paying attention to detail.

In 1994, I had the opportunity to join the asset management division of Wells Fargo (which became formally known as Wells Fargo Asset Management) as a short-duration, fixed income portfolio manager, where I was responsible for managing money market funds (MMFs) and short-duration accounts.

In November of 2021, the division was sold by Wells Fargo and became Allspring Global Investments, a standalone investment management firm. As of 30th June, we have US$547bn in assets under advisement, including US$186bn in MMFs and about US$30bn in short-duration solutions.

How would you describe the current outlook for money market funds?

The Federal Reserve (Fed) has raised the overnight rate by 525 basis points since March 2022 and, while inflation is coming down, it is still significantly higher than the 2% target. So, we don’t expect to see any rate cuts until later next year, particularly if we can avoid a recession. In the meantime, clients are taking advantage of attractive rates in the money fund space with the Fed keeping rates higher for longer.

We’ve seen significant growth in MMFs this year. Our fund balances are up 20% year to date while industry balances are up 14%. We expect this growth to continue given the competitiveness of Allspring fund yields and positive trends in the sector.

Which trends/developments are having the most impact on investor behaviour?

Cash balances grew significantly over the pandemic to meet potential liquidity needs. Corporations were able to take advantage of low rates to issue debt. In many cases, that cash is yet to be deployed for major projects or capital expenditures, and it’s now happily earning interest at over 5%. Likewise, corporations have prepared for a slowdown in the economy, so they want to ensure they have enough liquidity to weather that eventuality.

The other significant trend this year is that following the regional bank crisis back in March, treasurers and other institutional investors began to take a closer look at their counterparties with a renewed focus on diversification. So, we’ve certainly seen money flow out of banks and into MMFs, as investors review their exposures to various counterparties.

Through that process, investors have also realised that bank deposit rates are really quite low compared to MMF rates, as banks tend to be slower to raise rates on deposits. Individual investors are likewise seeing the benefits of MMFs, because they realise that the rates on their bank savings accounts are uncompetitively low.

Another development is that in the U.S., MMF reform passed in July and will be implemented over the next year, which we believe will increase the transparency and resiliency of the MMF industry. Some of the reforms that are particularly welcome include increased liquidity requirements and the removal of temporary redemption gates. The new rule regarding liquidity fees will be a challenge, but otherwise we view the reform as positive.

How can Allspring’s global liquidity capabilities help treasurers navigate the current market?

As interest rates approach their peak in this cycle, our investors can benefit by extending beyond MMFs and locking in higher rates. That can be achieved with Allspring’s ultra short and short-term bond funds, as well as with customised separate accounts.

Allspring investment professionals work closely with our clients to understand their return objectives, risk tolerances, and liquidity needs. We aim to work as an extension of our clients’ staff, which includes helping clients ensure that their investment policies are up-to-date and appropriate for their goals.

At Allspring, our mission is to “Elevate investing to be worth more.” As such, we are very active when it comes to keeping our clients and prospects up to date on current issues in the market. We write white papers and blogs, we hold webinars and, of course, we have direct communication with our clients to help them navigate these issues.

How is Allspring supporting the next generation of treasurers?

We’re very much committed to helping the next generation of corporate treasury talent. In partnership with Treasury Today, we’ve hosted two roundtables as part of our Future Treasurer series, with more coming later this year in Palo Alto, Chicago, and New York City. At these events, we bring together today’s leaders in the corporate treasury space with rising stars, aiming to provide a differentiated forum for enhancing learning.

In addition, we started Allspring University in 2022, which we refer to as Allspring U, to support the future treasury community. This gives our clients, prospects, and partners the opportunity to gain real-world practical knowledge on topics such as cash management, balance sheet investing, portfolio construction, leadership, and other key skills. We’ve had a lot of fun with that, and it’s been a great success.

Finally, we continue to co-architect solutions and work with our partners to play an important role as liquidity asset managers. We’re excited about the future and look forward to continuing to serve our clients in the best possible capacity.