Money Market Funds
Money Market Funds (MMFs) are open-ended, collective investment schemes. They invest in short-term debt instruments issued by financial and non-financial corporate entities, sovereign governments and related agencies, as well as supranational bodies, among others. The MMF investment in such instruments provides an essential source of financing for these entities, one that often complements traditional bank financing through loans, especially for non-financial companies. Typically, money market instruments include commercial paper (CP), certificates of deposit (CDs), short term bonds, as well as bank deposits and repurchase agreements (repo and reverse repo).
International work is well underway to review existing standards applicable to MMFs, accompanied by work at the ESMA and European Commission levels in Europe. EFAMA refutes some of the commonly held misconceptions around MMFs, and seeks to inform future policy amendments based on facts and direct experience from European MMF managers.
The European Fund and Asset Management Association (EFAMA) has published its second Market Insights highlighting the major trends shaping the European Money Market Fund (MMF) landscape since the entry into force of the Money Market Fund Regulation (MMFR).
European MMFs in the Covid-19 market turmoil: Evidence, experience and tentative considerations around eventual future reforms
The pandemic-induced market events experienced in March 2020 have marked the first true ‘stress-test’ for European MMFs, following the introduction of the EU Money Market Fund Regulation (MMFR) in 2017. Despite the severity of the liquidity stress in the secondary market for short-term instruments and the significant outflows experienced by European MMFs across all three of the MMFR-identified categories (public debt CNAV, LVNAV and VNAV), funds proved resilient.
The growth in MMF net assets occurred against the backdrop of resolute actions by governments and monetary authorities
across the world to mitigate the impact of the Covid-19 crisis.