New rules may be “death sentence” for money market funds

Coins fallingProposals to tighten regulation of money market funds in Europe, particularly the controversial plan to impose a 3% capital buffer on some funds, could deal a fatal blow to this
market segment, says a research firm. "Europe wants more safeguards including tighter investment criteria, no short selling, and issuer and securities exposure limits," says Barbara Wall, a Cerulli director. "So far, so reasonable, but other proposals are less palatable and potentially destructive." The proposal to impose a 3% capital buffer on funds that use a constant net asset value is particularly unwelcome, says Cerulli, because it will cost an extra 30 basis points at a time when many investors are already losing money on their money market funds. Other controversial proposals include a ban on money market fund sales to retail customers. Angelos Gousios, a senior analyst at Cerulli, says the buffer proposal is likely to drive all but the biggest groups out of the market. "The net result will be fewer, but bigger funds – so potentially a bigger individual systemic risk – and less liquidity in the financial system with fewer buyers of government bonds,” says Gousios. “Or, precisely the issues that Europeans should be seeking to avoid." ©2013 funds europe

Executive Interviews

INTERVIEW: Put your money where your mouth is

Jun 10, 2016

At Kempen Capital Management, they believe portfolio managers should invest in their own funds. David Stevenson talks to Lars Dijkstra, CIO of the €42 billion manager.

EXECUTIVE INTERVIEW: ‘Volatility is the name of the game’

May 13, 2016

Axa Investment Managers chief executive officer, Andrea Rossi, talks to David Stevenson about bringing all his firm’s subsidiaries under one name and the opportunities that a difficult market...


ROUNDTABLE: Beyond the hype

Oct 13, 2016

The use of smart beta investing continues to grow. Our panel, made up of both providers and users, discusses what the strategy actually means, how it should be used and the kind of pitfalls that may arise when using this innovative investment technique.

MIFID II ROUNDTABLE: Following the direction of travel

Sep 07, 2016

Fund management firms Aberdeen and HSBC Global meet with specialist providers to speak about how the industry is evolving towards MiFID II.