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MMFs in the Spotlight

by Robin Page, Chief Executive

Welcome to the 2011 edition of TMI’s Guide to Money Market Funds, which we are delighted to be publishing in association with the Institutional Money Market Funds Association (IMMFA) and which I am sure will live up to its predecessors in providing a readable and authoritative tour d’horizon of this increasingly important segment of the financial sector.

Money market funds have indeed come a long way since their first introduction in the United States in the early 1970s, and they now constitute a well-established item in the treasurer’s  toolbox. Their use is expanding fast: they represented almost one third (€5.8tr) of the global funds industry at their recent peak, and within the UCITS MMF market IMMFA funds alone have almost doubled their assets under management in the last five years. This emerges from a study, commissioned from PwC by the Association to assess the contribution of its funds to the global money markets, which is discussed in an article by Nathan Douglas, the IMMFA Secretary General.

Like almost all the products at the disposal of treasury, MMFs have come under ever-increasing scrutiny by regulators in the wake of the worst financial crisis in recent history. How they will be managed  in the light of the new Basel III framework is the subject of a second article by Douglas, who points out that although Basel III is designed for banks it will have significant impact on both the funds and their investors, with fund managers likely to place greater emphasis on the provision of security and liquidity. The Association will be asking its members to provide additional disclosures to allow investors to identify a suitable money market fund. Regulation is also the topic of the article by IMMFA Director David Rothon, who surveys the key governance provisions and the new rules which provide that after July this year any fund based in Europe which refers to itself as a money market fund  will have to adhere to specific investment parameters.