Treasurers adapt ahead of European money market reforms
With six months to go before money market reforms are imposed on all funds in Europe, treasurers hoping to earn a return on their cash are scoping out the best options available.
By January 21, existing and new European money market funds (MMF) will have to fall in line with reforms that will see constant net asset value (CNAV) restricted to government portfolios only.
Investors seeking higher returns from funds investing in short-term liabilities of non-government issuers will have to cope with variable net asset value (VNAV) funds instead, but will also have access to new low volatility net asset value (LVNAV) structures.
Regulators hope these distinctions will bring greater stability to the market.
With the reality of these regulations now looming, Natalie Cross, senior client portfolio manager at Invesco, says the reaction of investors so far has been positive. “Clients have responded well to the incoming changes,” she says. “The product types are acceptable to clients and their needs.”
Will Goldthwait, portfolio strategist, fixed income cash currency, at State Street Global Advisors (SSGA), says investors looking to deploy cash comprehend the coming alteration of market structure.
“Clients are understanding the rule changes and how they will be impacted by them,” he says. “They understand that the rules are, overall, positive and will make money market funds safer and more liquid.”