Fitch on South African MMFs
Fitch writes in a "South African Money Market Funds Sector Review", "Fitch Ratings has completed a sector review of South African money market funds (MMFs), which resulted in the affirmation of the National Fund Credit Ratings (NFCRs) and National Fund Volatility Ratings (NFVRs) of the following six MMFs at 'AA+(zaf)'/'V1(zaf)' -- Absa Money Market Fund, Investec Corporate Money Market Fund, Investec Money Market Fund, Nedgroup Investments Corporate Money Market Fund, Nedgroup Investments Money Market Fund, and STANLIB Corporate Money Market Fund.... As of end-February 2014 the funds' combined assets under management (AUM) was approximately ZAR133bn, equivalent to just over half of the total domestic AUM in the MMF sector in South Africa as of end-December 2013, according to statistics from the Association for Savings and South Africa (ASISA). Total domestic AUM in the South African fund management industry continues to rise, reaching ZAR1.4trn in December 2013. MMFs account for around 20% of that total -- a declining proportion of the total in relative terms, but broadly stable in cash terms. The MMF sector is evenly split between institutional and retail investment. As in other jurisdictions, corporate treasurers are major users of MMFs, as part of their cash management strategy.... Fitch monitors the rated funds continuously, based on a monthly review of portfolio holdings as well as summary statistics on the portfolio and investment activities. The MMFs are constant net asset value (NAV) funds, therefore: The funds are regulated by South Africa's Financial Services Board under the Collective Investment Schemes Control Act of 2002 (CISCA, specifically Notice 80 of 2012). Changes have been proposed to CISCA, including the introduction of a monthly mark-to-market process. The new regulations also pave the way for variable net asset value MMFs. All of the Fitch-rated MMFs in South Africa have a constant net asset value. Therefore the NFVRs are driven by the market risk exposure of the underlying portfolios, which may not necessarily be reflected in the funds' NAVs. The new regulatory proposals also envisage that all MMFs hold at least 4% of the portfolio in assets in liquid form. This falls below the level proposed by regulators in Europe (10%) and the requirement in Fitch's Global Money Market Fund Rating Criteria (published 13 January 2014) of 10%."
