Treasury Today Country Profiles in association with Citi

Best Practice Handbook

Treasury Today Short-Term Investments and Money Market Funds 2016 Buy print copy button

Short-Term Investments and Money Market Funds 2016

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Short-term investments and money market funds

Amid unprecedented regulatory upheaval and the ongoing drift of yields into negative territory, the short-term investment climate has changed considerably over the past several years.

This Best Practice Handbook is designed to bring corporate investors fully up-to-date with all of these developments and more. A number of areas will be covered across the handbook’s five sections, including all the latest market trends, introductions to the main short-term investment instruments, considerations for selecting a money market fund (MMF), and an explanation of how MMFs are managed. It should be essential reading for every corporate treasurer.

A new era for US investors

In the US, the long awaited regulatory shakeup has finally arrived. For companies that rely on MMFs for cash investments the new regulatory environment is likely to necessitate a fresh approach. Some treasuries may need to update treasury systems to take into account the new variable net asset value (VNAV) MMFs; some may also need approval from the board to update investment policies in order to reflect the new rules.

Over the long term asset managers are convinced that the value proposition of prime MMFs will endure. Still, treasurers will need time to adapt and, as such, a shift from prime to government MMFs – which will continue to maintain a constant share price of $1 – may initially be on the cards.

EU reform nearing conclusion

In Europe, regulatory proposals still being negotiated by European Union (EU) policymakers could have an equally transformative impact once formally approved. Like in the US, it seems that the days of prime constant net asset value (CNAV) MMFs are numbered. Unlike in the US, however, we may yet see an entirely new category of fund established: low volatility (LVNAV) MMFs.

While we will outline in this handbook some proactive steps treasurers might consider taking ahead of the coming regulation, the real work of preparation will only begin once there is clarity over the final regulation and the timescale of its implementation. Of course, Treasury Today will seek to provide additional updates to readers as and when the new rules are formalised.

Editorial independence

Full responsibility for the editorial content of the Handbook rests with Treasury Today.