Fitch Ratings has revised its sector outlook for European low volatility net asset value (LVNAV) money market funds (MMFs) to negative from stable.
In the longer term, if ESG becomes common in traditional MMFs, demand for named ESG MMFs may decrease.
The European high-yield bond fund sector appears to be operating with significant liquidity risk.
Fitch Ratings expects ratings to remain stable across its portfolio of global money market funds (MMFs) in 2019.
The reforms became effective for new funds on 21 July and will apply to existing funds from January next year.
Green bond funds are rapidly emerging as a sub-asset class in fixed-income funds as investor demand for “green” investments grows.
The probability of a discretionary or mandatory liquidity fee or redemption gate being imposed on European money market funds (MMFs) post-reform is low, absent a systemic shock or idiosyncratic credit event.
Fitch Ratings has launched ‘MMF Compare’, a new European money market fund (MMF) interactive comparison tool to provide investor education.
A recurring shortage of overnight deposit and repo facilities around year-end will leave European money market funds increasingly dependent on custodian banks for managing their liquidity.
Fitch Ratings believes that the likelihood and impact of fund liquidity mismatch risk has increased to a record high in 2016.
Changes made to Italy’s insolvency laws since mid-2015 and measures introduced to reduce the length of time creditors need to wait before settling claims are positive, but we are still at an early stage and reforms have yet to be put into practice, says Fitch Ratings.
The European Central Bank’s decision to cut its deposit rate and extend quantitative easing is likely to push euro money market fund yields further below zero, adding to the challenge funds face in maintaining assets under management, Fitch Ratings says.