Cash & Liquidity Management

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The Benefits of IMMFA Membership for Investors in Money Market Funds Gail le Coz, Chief Executive at the IMMFA, explains the benefits – and responsibilities – of IMMFA membership for investors in money market funds. The author also examines the three principle objectives that the IMMFA operates in accordance with, explains the latest amendments to IMMFA’s Code of Practice, and looks at why there is a need for a trade association to represent money market funds.

The Benefits of IMMFA Membership for Investors in Money Market Funds

by Gail Le Coz, Chief Executive, IMMFA

The European money market fund industry has historically been quite disparate, with a plethora of funds operating under varying guidelines. Although regulators are currently seeking to implement additional clarity in this sector, a group of money market fund managers established the Institutional Money Market Funds Association (IMMFA) in 2000 to ensure high standards were maintained and provide appropriate representation for the industry.

IMMFA is the trade association which represents the European triple-A rated money market fund industry. It is the only trade association that specifically represents money market funds. Membership is open to managers of triple-A rated money market funds domiciled in Europe that comply with the IMMFA Code of Practice. Firms who provide services to these fund managers, for example credit rating agencies and the administrative community, are also eligible for membership.

Being a member of IMMFA brings with it certain responsibilities. Investors and potential investors can benefit from an understanding of these duties, which will also help position why IMMFA money market funds remain robust.

Implementing best practices

IMMFA operates with three principal objectives: (i) ensuring its members maintain a high quality product; (ii) informing and influencing policymakers; and (iii) educating investors. The key element in delivering the first objective is the IMMFA Code of Practice. This Code, which was first published in 2003, sets standards for the management and operation of a money market fund. It is designed to deliver best practices across the IMMFA membership and help maintain a high quality product at all times.

Following recent market events, IMMFA proactively decided that its Code needed to be updated. The amendments made were the result of the deliberations of a specially formed sub-committee of IMMFA members. Their intention was to make the product more resilient and therefore better able to meet its objectives of capital security and liquidity. The Code was subsequently updated to include additional quantitative and qualitative obligations, each intended to limit the risks to which an IMMFA money market fund could become exposed.

The Code of Practice now covers all of the following key areas:

  • interest rate risk – the funds must maintain a weighted average maturity of 60 days or less. This is calculated using the next interest reset date of floating rate assets;
  • credit risk – the funds must maintain a triple-A rating at all times. In order to achieve and maintain this rating, funds may only invest in high quality assets. The funds are also subject to a maximum weighted average final maturity of 120 days or less;
  • liquidity risk – the funds must maintain minimum amounts of overnight and one week assets. This backstop provides natural liquidity, as funds receive the cash proceeds of maturing investments and thereby can process redemption requests even in the most illiquid of markets;  
  • valuation methodologies – the funds should value all assets using the amortised cost method, but must conduct a weekly comparison with the market value and take appropriate action if any material discrepancy arises; and
  • disclosure – the funds must regularly disclose key data, including the duration and liquidity profile of the fund. This disclosure is intended to aid investors when assessing the risk within an IMMFA money market fund.


Through one of IMMFA’s standing committees, regular discussions are held on relevant issues which could necessitate further amendments being made to the Code of Practice. IMMFA regularly reviews the Code to ensure it remains relevant and that the standards required by it are set at the appropriate level.

The combination of the requirements imposed by mutual fund regulations (including the UCITS Directive), the constraints of a triple-A rating, and the content of the IMMFA Code of Practice result in IMMFA money market funds being managed to exacting standards.

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