Fitch Ratings published the brief, "Finalised EU MMF Reform Starts Implementation Clock - Liquidity Fees and Redemption Gates Create Uncertainty," which is subtitled, "Finalized EU MMF Reform Starts Implementation Clock Liquidity Fees and Redemption Gates Create Uncertainty." It summarizes, "An agreement has finally been reached on European money fund regulation between the EU, Parliament and Council after three years of debate.... Low-​volatility net asset value (​LVNAV) funds are a workable alternative to existing constant net asset value (​CNAV) funds, notably as a previously proposed sunset clause has been removed and liquidity requirements have been adjusted. It will result in LVNAV co-​existing with a new form of public debt CNAV funds, short-​term variable NAV (​VNAV) funds and standard VNAV money funds." The piece adds, "Public debt CNAV and LVNAV funds will be subject to liquidity fees and redemption gates, similar to US Prime MMFs, which suffered large outflows in the run-​up to US reform implementation. It remains to be seen how European investors will react to such redemption limiting provisions. Some may turn to full VNAV funds but we expect the impact of the European reform to be smaller than in the US as investors accustomed to CNAV funds, which account for half of EU MMF assets, may be comfortable with LVNAV funds." Finally, they adds, "The regulation should come into effect by the end of 2018, given an 18-​month implementation period after its enforcement, which is likely to be in 1H17. Fitch Ratings expects this period to be characterized by new fund launches and the adaptation of existing fund ranges into the new fund categories."

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