January 26, 2026
By Matthew Vegari, Head of Research
After cutting in each of its final three FOMC meetings last year, the Federal Reserve is poised to press the pause button this week. Markets are pricing no changes to the policy rate on Wednesday and just two additional cuts for the whole of 2026. As policymakers digest mixed messages in the economy—gangbusters growth but a tepid labor market—the Research Desk is tackling a simple question to start the year: What’s happening with cash holdings?
CWAN’s client base runs the gamut of institutional investors, from corporates to insurers to governments. The needs of investor profiles differ, but allocations often move cyclically, with cash (and equivalents) leading the charge. In this brief, we collect and contextualize cash holdings across the institutional spectrum, leveraging our proprietary database.
Corporates
Given investment mandates for high liquidity and low risk, corporates pay very close attention to the Fed’s policy rate. Despite a fed funds rate of 3.6% (well above the dismal yields of the 2010s), cash holdings comprise the lowest share of corporate portfolios in at least seven years. For American firms, cash has been trash for a while. Why?
Corporates have few levers to pull to deliver better returns. Their relevant yield curve spans little longer than a year, and bylaws often forbid them from investing in more volatile asset classes, e.g., equities. As a result, treasurers have been inching farther down the yield curve and embracing fixed income for the past two years. Cash loses its appeal when the next best thing offers 25-50 basis points in additional returns. There’s probably a floor to how low these allocations can fall, but there’s no reason to think we’e there yet.
Insurers
Allocations also move cyclically, but insurers generally maintain far less exposure to cash than corporates. Their investment mandates are longer and prioritize liability matching not operational needs.
Consequently, insurers’ cash allocations move within the narrow band of a few percentage points. Today, allocations sit on the upper end of that band despite a Fed that has been easing since 2024. With policymakers unlikely to cut much more this year amid the economy’s resilience (access our 2026 outlook here), insurer cash exposure should remain elevated, but pointing down.
Nonprofits
Cash holdings for nonprofits on CWAN’s platform are low. Excepting a COVID surge (visible across all institutional profiles, as investors adopted a “wait-and-see” approach), balances have not moved particularly cyclically. Unshown here, the decline in cash also corresponds with a decline in fixed income exposure—and a rise in equities. As cash returns are declining, nonprofits are likely to keep their allocations subdued or falling.
Government (state and local)
Like corporates, state and local governments are investing with operational needs in mind. Even so, treasurers have historically kept cash balances somewhere below corporates and above insurers. At present, CWAN’s database shows governments are holding reasonably steady, with cash exposure drifting down a few percentage points over the last six months. We expect this trend to continue as the Fed cuts, and MMFs (preferred by governments—see below) lose more clout.
Cash is a catch-all term that comprises hard currency, commercial paper, money market funds, repos, and short-term T-bills (to name a few). Given the option set, institutions do not hold the same types of cash. CWAN’s database reveals stark differences in what different investors find appealing.
The most noteworthy trend here is the reduced exposure to MMFs in the first quadrant (corporates). While their overall cash holdings are proportionally higher, American firms also favor directly held T-bills and commercial paper.
Additional research by Tyler Busby, Data Scientist