Keep Calm and Keep Investing
Industry Reflections on European Money Market Funds
In September 2017, six leading money market fund (MMF) providers were joined by corporate treasurer Séverine Le Blévennec from Honeywell and Justin Meadows, CEO of portal provider NEX Treasury, to discuss the forthcoming MMF reforms and wider themes in corporate cash investment. Here follows an edited transcript of the event. We would like to thank BlackRock for kindly hosting this event, and NEX Treasury for their support.
- Séverine Le Blévennec, Director Treasury, EMEA at Honeywell
- Justin Meadows, CEO, NEX Treasury
- Beccy Milchem, Head of International Corporate Treasury Cash Sales, BlackRock Cash Management
- Reyer Kooy, Managing Director, Deutsche Asset Management and Chair, IMMFA
- Hugo Parry-Wingfield, EMEA Head of Liquidity Product, HSBC Global Asset Management
- Jim Fuell, Managing Director, JPMorgan Asset Management
- Kathleen Hughes, Global Head of Liquidity Solutions Sales at Goldman Sachs Asset Management
- Ian Lloyd, Head of Liquidity Distribution, Legal & General Investment Management
- Chair: Helen Sanders, Editor, TMI
Now that the detail and timing of the long awaited new regulations for European MMFs have been published (figure 1 - see page 2), what has the industry response been?
The details of the final regulations have been very well telegraphed, which in many respects are a codification of practices that are already in place, so there’s nothing too surprising. The one big difference is the introduction of a new fund type, the low-volatility net asset value (LVNAV) fund. If you compare the US with Europe, investors had the option of not changing at all, whereas in Europe, everything is going to be different. So there is more for the industry to do, and more for clients to understand.
Séverine Le Blévennec
Hugo, HSBC AM
Like other fund providers, we have been communicating proactively with clients to provide information, dissecting what the new regulations mean, and how our products and proposition will be affected. This is an iterative process: initially, we outlined the features of the regulation and where the impact was for our clients. This has now developed into the more practical considerations, which in turn will evolve into more concrete information and support on what the new products will look like and how clients can take advantage of them.
From a corporate perspective, it is the practical aspects that create the biggest worries initially. For example, at this stage, it is not clear whether the LVNAV will be considered as cash or cash equivalent for accounting purposes, so we will need to liaise with our accounting team, auditors and fund providers on this. We are a US corporation, but we invest from our in-house bank in Belgium, so we need to seek assurance on the accounting treatment both from a Belgian and US perspective, which adds another level of engagement and complexity.
Automation is also an issue. We execute MMF transactions through NEX Treasury with a high level of straight-through processing to our treasury management system (TMS), so we need to achieve the same degree of efficiency in the future, both for LVNAV or any other funds in which we invest. Personally, I have fewer concerns at a strategic level. While fees and gates are a possibility, in practice it was already the case, and ultimately it is the investor who benefits from greater investment rigour. We will, of course, need to consider the tax treatment, review our investment policy and explain the changes to our board.