FT on Brexit and MMF Flows
The Financial Times writes, "Brexit vote prompts flood of cash into money market funds." It reads, "Investors are pouring cash into low-risk money market funds as they postpone allocation decisions amid market volatility and weaker business confidence. Sterling-denominated money market funds have seen more than $30bn of inflows since October last year, with a spike of new money in the aftermath of the UK's vote to leave the EU, according to EPFR Global, the research house.... "We're seeing inflows from larger corporate institutions that might want to leave cash with us," said Craig Inches, fixed income fund manager at Royal London Asset Management, which oversees L88bn. "We're [also] seeing investors who want to reduce the duration of the bonds that they have but keep returns." It continues, "Money market funds -- which are cash-like investment vehicles with higher returns -- typically purchase highly-rated government bonds and securities, so have also seen yields compressed by low interest rates. But they have proved popular for parking cash as investment decisions are postponed due to uncertainty. Mr Inches said that banks such as HSBC and Lloyds and other large institutional investors have shifted cash into the vehicles while they wait for fixed income yields to rise and interest rates "to reflect economic fundamentals." Royal London's largest money market fund has doubled in size to L2bn in the last year, he said, and it has launched another short term cash fund this year in response to demand. Steven Bell, fixed income fund manager at BMO Global Asset Management, the Canadian investment house, said that its asset management business is increasingly re-routing cash to money market funds while the outlook for global growth remains unstable. "I don't imagine that investors will sit on cash for ever but I do think that the shift between banks and money market funds is permanent," he said. With interest rates on savings accounts at record lows since the financial crisis, holders of larger sums of cash -- often institutional investors and banks -- have moved into the money markets.... Moody's, the rating agency, predicts that more assets will flow into money market funds "as uncertainty prevails." In related news, a press release says, "Moody's Investors Service has today assigned a Aaa-mf rating to the Aberdeen Liquidity Fund (Lux) Sterling Fund managed by Aberdeen Asset Managers Limited."
