As the likelihood of a December interest rate hike increases, investment managers are maintaining shorter portfolio weighted average maturities, especially within dollar money market funds (MMFs).
According to ratings agency Moody’s, sterling MMFs' assets under management (AUM) hit their second lowest level in twelve months in the third quarter (Q3) of 2015, registering a fall of 3.8% to £93.1 billion (€132.7 billion).
For euro denominated MMFs, the deterioration in France's sovereign creditworthiness led to a decline in credit quality, with a significant shift into Aa2- rated securities: 22% of AUM in Q3 from 19% at the end of the previous quarter.
Exposure to securities above three months decreased to 23% of AUM at the end of Q3 from 26% making the average maturities slightly decline by 0.3 days to 44.6 days.
"For euro prime funds, investors have adapted to the new net negative yield environment affecting those funds since the middle of Q2," says Vanessa Robert, a vice president at Moody's.
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