Investment

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An Investment Revelation for Corporate Treasurers The Editor discusses some of the current issues in the money funds industry, and how corporate investment behaviour is changing.

An­­ Investment Revelation for Corporate Treasurers

In this interview with TMI, we feature Thierry Ancona, Global Head of Corporate Clients, and Thierry Darmon, Head of Money Market and Short Term Solutions for leading asset management company Amundi. As part of a comprehensive range of asset management services, with €692.9bn under management (as of June 30, 2012) and 3,000 institutional clients, Amundi provides euro-denominated CNAV (constant net asset value) and VNAV (variable net asset value) money market funds (MMFs) for which assets total €112bn. Helen Sanders, Editor discusses some of the current issues in the money funds industry, and how corporate investment behaviour is changing.

There are a large number of companies providing MMFs; how would you distinguish Amundi and your product offering?

Thierry Ancona: While many MMF providers are well-established in providing CNAV MMFs, and may now be considering introducing VNAV funds, Amundi has a long, proven track record as a leader in VNAV funds, although we also provide CNAV funds. We have over 100 risk and research professionals providing in-depth analysis and extensive risk monitoring. We are not simply product providers, but our focus is on delivering solutions that specifically meet our clients’ requirements. This represents quite a different approach from many fund managers. In particular, we recognise the importance of our role as a trusted, strategic business partner for our clients. We take the time to understand our clients’ investment objectives and constraints, and develop solutions accordingly. Over time, a company’s investment requirements will change as their business strategy evolves, alongside on-going market developments, so we work closely with our clients over the long term to ensure that these changing needs continue to be met.

You mention CNAV and VNAV funds. How would you distinguish between the two?

Thierry Ancona: There is a popular misconception that MMFs can only be AAA-rated, CNAV funds as defined by IMMFA (Institutional Money Market Funds Association). In reality, this group of funds is relatively small compared with the wider spectrum of MMFs that have a variable NAV, although these have not typically been part of most corporates’ investment strategy in the past.

Thierry Darmon: A constant or stable NAV money market fund seeks to maintain an unchanging face value NAV (for example $1/€1 per unit/share). A variable NAV fund uses mark-to-market accounting so as the value of assets changes, the value of each share will vary a little.

Thierry Ancona: Under definitions published by the European Securities and Markets Authority (ESMA), AAA-rated IMMFA funds fall within the category of ‘short-term money market funds’. Funds that are still subject to stringent regulation and have similar investment objectives, but permit a slightly broader scope of assets for longer maturities, are defined as ‘money market funds’. These are described more fully in figure 1 (see next page). Within these categories, while short-term MMFs may be either CNAV or VNAV, MMFs under the second definition cannot have a constant NAV. Most corporates using money funds today invest in short-term MMFs, and have not yet explored the opportunities that MMFs offer.

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