Money Market Fund (MMF) regulation finalised - PwC comments

The Money Market Fund (MMF) regulation* was finalised today with a vote in the European Parliament. Amanda Rowland, asset management regulation partner at PwC, comments:

“Action is now required for asset managers as today’s European Parliament vote finalises a new regulatory regime for Monetary Market Funds. The most critical issue will be assessing whether current funds offering a constant net asset value (CNAV) will be able to continue to do so under the new criteria.

“Many fund managers will be faced with difficult choices around changing their portfolios to meet more stringent CNAV requirements or moving towards variable net asset value funds. Some may choose to shut down their MMFs altogether. Funds remaining as CNAV will need to prepare to use liquidity fees and redemption suspensions under certain circumstances, and all MMF managers will have to address the detailed rules around eligible assets, portfolio maturity, liquidity, valuation and transparency. 

“Those who have not already done so need to start seriously considering these strategic choices and begin what is likely to be quite a complicated journey around client communications, governance procedures and revisions to the prospectus. While the industry won many important battles during the long negotiation process, including the abandonment of a 3% capital buffer, the final regulation will still prove very challenging to implement.”

 *Money Market Funds (MMFs) are mutual funds that attempt to maintain price stability by having portfolios comprised of short-term and high quality securities.