Treasury Today on EU Reforms
U.K.-based Treasury Today posted a piece written by J.P. Morgan Asset Management entitled, "Making sense of your MMF options," which discusses European Money Market Fund Reforms. It says, "New European money market fund (MMF) regulations are opening up the MMF landscape to include some products that could leave unwary investors short on their security or liquidity requirements. Investment decisions may no longer be as obvious as they once were.... The new regulations provide two categories of money market funds: short-term MMFs and standard MMFs. The short-term MMF is still the fund that most corporate treasurers have in mind when investing their operating cash. These funds have a Weighted Average Maturity (WAM) of 60 days or less, providing a high level of short-term liquidity and security." J.P. Morgan explains, "However, treasurers also have the choice to invest in less liquid longer-dated standard MMFs, which can hold instruments out to two years and have a WAM of up to six months. The proportion of the standard MMF portfolio that matures within one day and one week may be significantly lower than a treasury manager expects." The piece explains, "Under the new regulations, the traditional Constant Net Asset Value (CNAV) fund will be replaced by Low Volatility Net Asset Value (LVNAV), Variable Net Asset Value (VNAV), and public debt Constant Net Asset Value options. These new categories can be confusing. For example, LVNAV and public debt CNAV are short-term MMFs only, but VNAVs offer short-term or standard options. It's important therefore to understand the new acronyms and regulatory jargon if you want to avoid investing in a fund that unexpectedly adds risk.” Finally, the article says, "Treasurers therefore need to have a clear understanding of their own investment needs, and they also need to look closely under the hood of every fund they are thinking of investing in to ensure it meets their needs. It's not an issue of right or wrong, it's simply one of being aware of what the underlying investments are and what the funds add to your cash strategy." (Note: European Money Fund Reforms will be the main topic at next week's European Money Fund Symposium, which takes place Sept. 20-21 in London.)
