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Fitch: global money funds stable in 2017; alternative products to grow

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Fitch Ratings says the rating and sector outlooks for money market funds are stable in 2017, aided by the implementation of US money market fund reform and newly agreed EU money fund regulation. As a result of the structural changes from US money fund reform, Fitch expects alternative products to prime money funds to continue to grow, including private money funds, ultra-short bond funds and separate accounts.

In the run-up to US money fund reform implementation on 14 October 2016, over USD1trn moved from prime to government funds, but asset levels have now stabilised and fund managers and investors are beginning to revert to a more normal portfolio strategy. Still, Fitch notes that the risk of liquidity “fees & gates” remains a concern for investors in prime money funds. European money fund reform will include similar rules for some fund types.

“With European money fund reforms finally agreed after three years of debate, the implementation clock is now ticking. Given an 18-month implementation period, reforms will likely be fully effective by the end of 2018, accompanied by potential launches of newly authorised fund types,” said Alastair Sewell, Senior Director, Fitch’s MMF team in London.

The full commentary is available here.

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