Treasury Today Country Profiles in association with Citi

Best Practice Handbook

Treasury Today Short-Term Investments and Money Market Funds handbook 2014 Buy print copy button

Short-Term Investments and Money Market Funds 2014

Contents

Listings

Section 1: Market commentary
Section 2: Short-term investment instruments
Section 3: Choosing and using money market funds
Section 4: What’s the outlook for MMFs? Will they survive?

Cost: £150 per copy – included in premium subscription.

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Introduction

This Best Practice Handbook is designed to bring investors fully up-to-date with short-term investments and money market funds – covering both the market for these products as well as the market environment in which we are operating. It is essential reading for any corporate treasurer.

Shake-up in the US

Treasurers are already under huge pressure as they try to maintain liquidity and search for yield on their short-term investments amid market conditions that continue to be challenging. On top of this, the industry has a tidal wave of regulation to contend with.

The regulation of money funds in the US has undergone significant change since the last edition of this Handbook was published in 2012. In July 2014 the Securities and Exchange Commission unveiled reforms which are widely seen as the most dramatic shake-up to money fund products since the 1970s.

Some of the key features of the new reforms include the requirement of a floating (or variable) net asset value (VNAV) for institutional prime money market funds, and the introduction of liquidity fees and redemption gates

Although the measures are designed to protect investors, it will take time for funds and investors alike to adapt. Fortunately, the SEC has put in place a two-year implementation period to ease the transition.

Europe to follow suit?

The big question for money fund investors in Europe is what course the European Commission will take with its own regulation. A European Parliamentary vote on money fund reform was cancelled in March 2014 owing to disagreements between some members of the European Parliament and the elections in May caused further delays in decision-making.

At the time of going to press (August 2014), a decision is expected during the term of the new European Parliament in Autumn 2014. What remains to be seen is how much inspiration regulators in Europe may take from reform in the US. Despite these uncertainties, it is clear that investors will continue to face significant pressure as they pursue short-term yield over the coming months to years.