The corporate investment industry in Asia is set to grow, mirroring a trend in the United States and Europe, as companies seek better returns on their rising cash holdings, HSBC Investments said yesterday.

"We've seen corporate treasury investment sophistication evolve, firstly in the US, then in the last 10 years or so in Europe and now we're just seeing the nascent start of it in Asia," said Peter Knight, global head of liquidity at HSBC Investments (USA) Inc in Hong Kong.

HSBC Investments is the asset management arm of global banking group HSBC Plc.

"We're building up a team that focuses on corporate investments, basically making sure that treasurers are maximizing returns while keeping their risks to a minimum," New York-based Knight said.

Knight said the driving force behind the corporate investment management industry was growing cash held on balance sheets.

"Cash holdings are high at the moment. There hasn't been the frenzy of M&A activity in, say, 2000 during the technology boom," he said.

Companies can also use cash holdings to pay down debt or buy back shares.

Major US companies in the S&P's 500 index, for example, have seen cash holdings rise six times to about US$600 billion in absolute terms over the last decade, making cash a major portion of a company's wealth, Knight said, citing data from S&P's.

"If you're going to maximize your companies' worth, you've got to make sure it's more than placing it on a bank deposit you've got to manage that wealth," he added.

Knight, who has been in the corporate cash management business for nearly 20 years, advises companies to forecast their cash flows, establish an investment policy and make effective investment decisions.

Depending on a firm's risk appetite and time horizon, it could invest in commercial paper, floating rate notes, money market funds and bonds, including corporate, government, agency and supranational.