by Jim Fuell, Managing Director, Head of International Global Liquidity Sales, J.P. Morgan Asset Management
The Security and Exchange Commission’s (SEC’s) long-awaited US money market fund (MMF) reforms have finally made their way through the pipeline and into practice. They’re the latest in a long line of regulatory changes, and they won’t be the last, says Jim Fuell, Managing Director, Head of International Global Liquidity Sales, J.P. Morgan Asset Management. Now is the time for short-term fixed income investors in Europe to start thinking about the impact that similar reforms could have on their own portfolios.
The SEC’s MMF reforms came into effect in the US on 14 October. What do the changes really mean for investors in the US and beyond?
Simply put, they mean that institutional prime MMFs must shift from a stable net asset value (NAV) to a floating NAV, as well as setting liquidity fees and redemption gates.
For our clients, it’s not the rules of how they invest that are changing, but the landscape around them. But when it comes to the impact by region, there’s a real market dislocation among investors. In the US, billions of dollars have moved out of prime or credit-style MMFs into government-style funds, with direct consequences for LIBOR, spreads and short-term bank issuance.
In Europe, our investors may not be directly affected by events in the US, but they are affected by short-term changes in the investment market, and they need us to help them understand that. That’s where we come in.