Money Market Funds

UCITS or AIFs investing in short‑term assets and having distinct or cumulative objectives offering returns in line with money market rates or preserving the value of the investment, must comply with the requirements of Regulation (EU) 2017/1131 on money market funds (the Money Market Funds Regulation or MMFR).

The MMFR categorizes money market funds as:

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  Short‑Term. ​MMFs having a Weighted Average Maturity up to 60 days and a Weighted Average Life up to 120 days.
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  Standard. ​MMFs having a Weighted Average Maturity up to 6 months and a Weighted Average Life up to 12 months.

Moreover, the MMFR introduced the following types of money market funds:

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  Variable NAV. ​​MMFs offering and redeeming their units at a variable dealing NAV based on market prices.
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  Public Debt Constant NAV. ​MMFs offering and redeeming their units at a fixed dealing NAV and investing at least 99.5% of their assets in government debt instruments.
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  Low Volatility NAV. ​MMFs whose constant dealing NAV must not deviate from the NAV per unit based on market prices by more than 0.2%.

The MMF Regulation significantly strengthened the requirements imposed on money market funds. We can help you to address any related needs in the following areas:

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  Investment Restrictions Monitoring. MMFs must invest in specific categories of financial assets, and only if they meet the ad hoc rules defined in the MMF Regulation. Financial derivative instruments can be used only for hedging purposes.
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  Stress Testing. Severe stress test scenarios must be applied according to ESMA guidelines and considering at a minimum hypothetical adverse changes to: asset side liquidity; credit risk; credit spreads; interest rates; exchange rates; unitholders' redemptions; macro systemic shocks.
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  Internal Credit Quality Assessment Procedure. An effective internal assessment procedure, based on a thorough analysis of the key factors driving the issuer's creditwhortiness and the credit quality of the instrument, must be implemented and reviewed whenever there is a material change that could impact the existing assessment, or at least annually.
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  Know Your Customer Policy. Liability side liquidity risk monitoring must take into account at least the evolution of inflows and outflows, the type of investors and their ownerships concentration; under certain conditions, identifiable patterns in investor cash needs, investors risk aversion and close links/correlation between investors must be considered as well.
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  Mandatory Reporting. MMFs have specific reporting obligations towards investors (certain portfolio risk and return data must be made available at least weekly) and towards supervisory authorities.