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The Future of Money Market Funds

by Gail Le Coz, Chief Executive Officer, Institutional Money Market Funds Association

Money market funds have experienced monumental growth since they first appeared in the 1970s. Since the introduction of rule 2a-7 in 1983, funds under management in the US have increased by 2100%, and in Europe, funds under management as represented by the Institutional Money Market Funds Association (IMMFA) have increased by 975% since the creation of IMMFA in 2000.

One of the foremost challenges facing the industry is the regulatory response to the global market turmoil.

However, the experience of the industry since last autumn now places the product at a crossroads. There is increased attention by regulators and legislators of the product, its objectives and risks, and the role it plays in the wider monetary system. If the product is to continue to grow and offer a viable proposition to investors, the industry must react to the market turmoil and develop in response to the challenges that it faces.

One of the foremost challenges facing the industry is the regulatory response to the global market turmoil. A variety of regulatory bodies wish to restrict exposure of investors to loss, and ensure adequate market confidence and financial stability. A number of suggestions have been made, but as yet, no concrete proposals have been tabled.