AFP On Crane's Euro Symposium
Tom Hunt, Director of Treasury Services at AFP published "Money Fund Talk at Crane Data Symposium: New Regs & Alibaba," a recap of last week's Crane's European Money Fund Symposium in London. He wrote, "Much of the discussion at the Crane Data's Money Fund Symposium last week centered around how money market funds (MMFs) are responding to new and pending regulations. In the United States, many fund companies are building business cases on the feasibility of developing new funds or share classes in response to the new retail MMF definition and operational changes from the regulations. Much of the discussion at the symposium addressed concerns about liquidity and supply, support of the repo market, the Federal Reserve's Reverse Repo offering, negative deposit rates in Europe, and responding to clients' inquiries on the various regulation impacts. In Europe, the focus is on the capital buffer proposal by the European Union. The overall sentiment was that it wouldn't pass since the Securities and Exchange Commission (SEC) didn't use the mechanism in its final regulations issued in July." His key takeaways were: "1. Continue to monitor China's largest money fund, Yu'e Bao. Despite over $90 billion in assets, Yu'e Bao will continue to grow because it is operated by Alipay.com, the payment service for Alibaba. The fund is heavily weighted in Chinese bank deposits and is experiencing enormous growth from its inception in June 2013.... 2. Watch for the Financial Accounting Standards Board ruling on floating net asset value (FNAV) MMFs -- will there be a mismatch to the International Financial Reporting Standards? 3. CME Clearing Collateral. It's yet to be determined if FNAV funds will be allowable per IEF2 program. Also discussed were IFRS' accounting treatments for MMFs in Europe. A presenter from PwC expects money funds in Europe to maintain the cash/cash equivalent classification under IFRS. FASB has yet to rule on regulatory reform in the U.S. and more information is to follow." In other news, Bloomberg writes "Money Funds Zero Pain to Worsen as Fed Maneuvers: Credit Markets", which reads, "Money-market investors who have endured almost-zero interest rates for about six years are bracing for even worse returns after the Federal Reserve limited how much cash it is willing to sop up. The central bank is working out how best to control short-term rates after its bond buying policies aimed at suppressing borrowing costs and stimulate economic growth flooded the banking system with $2.71 trillion of excess reserves. The Fed, which is forecast to start raising rates next year, surprised market participants earlier this month when it placed a limit on how much cash it will take out of the system each night through its reverse repurchase agreement program. The cap helped push overnight repo rates below what the Fed offers at its reverse repo program last week and sent Treasury bill rates below zero. That's adding to the pain of savers who have $2.5 trillion parked in money-market mutual funds, where yields have averaged 0.05 percent since the end of 2009, according to measures of the biggest 100 taxable funds compiled by Crane Data."
