The doom-mongering around money market fund regulation has now stopped. Instead, talk has moved on to low interest rates, credit quality, digital investment channels, and the rise of environmental, social and governance investment criteria. Treasurers are also exploring different short-term investment options, such as separately managed accounts, and their curiosity is being piqued by a new product, the fixed-term fund.
This time last year, money market fund (MMF) reform in Europe was still the hot topic in the short-term investment space, with some industry commentators predicting a significant decline in corporate usage of MMFs as a result of the new regulations (see Box 1 for a summary of the changes). Despite a surprise alteration to the reforms late in the day, investors have largely taken the new regulations in their stride since they came into force across the EU on March 21 2019.
Box 1: Regulatory snapshot
As Jim Fuell, Head of Global Liquidity Sales, International, J.P. Morgan Asset Management, reminds us: “The new regulations provide investors with a high degree of optionality for investing their short–term cash, with two types of MMFs and three structural options available.”
Fuell notes that MMFs must be classified as either a Short-term MMF or a Standard MMF:
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