13th July 2020 – J.P. Morgan Asset Management has today launched JPMorgan Liquidity Funds – EUR Standard Money Market VNAV Fund, a fixed income UCITS solution intended to meet the needs of risk-averse European cash investors.
Against a backdrop of negative rates in Europe – likely to persist for some time – many cash investors are looking for ways to eke out additional yield against a more negative yielding backdrop, without incurring too much risk. Many cash investors have little appetite for losses.
The fund will take a conservative approach to managing corporate credit, with a focus on capital preservation. The fund will take incremental risk in a controlled way, by stepping out from AAA short-term money market fund eligible securities into BBB rated credit and extending duration a little (max 6 months), in order to pursue incremental return.
This approach intends to reduce the level of negative returns cash investors are generating on their euro assets while still maintaining a high degree of liquidity. The fund will seek to outperform cash over time, with an excess return target over 3 month Bunds (3 month government bills), the fund’s benchmark.
An increasing number of European cash investors are rethinking their strategy of turning to banks to leave their money on deposit where, in many cases, they’re now confronted with punitive charges for doing so. Many of these investors are instead turning to asset managers in search of zero yield options. But zero yield, previously the hallmark of short term money market funds, is no longer achievable for conservative short term nor standard money market funds where the yields remain in negative territory, in line with far lower market rates.
“We’re pleased to be able to offer this euro standard MMF solution which seeks to help our clients mitigate the impact of negative rates, for those willing to take on incremental credit risk. At present, sitting on the side-lines in cash can mean you’re deeply in negative territory,” said Jim Fuell, International Head of Global Liquidity Sales at J.P. Morgan Asset Management.
“For those cash investors that do not have overnight requirements and are in a position to take a slightly longer investment horizon – say 3 months – our step-out-from-cash solution offers a way to access additional yield within a liquid, low risk and low volatility framework,” said Neil Hutchison, a portfolio manager within JPMAM’s Global Liquidity investment team.
The fund’s institutional share class will have a total expense ratio of up to 21 basis points, waived to 10 basis points, for the first 12 months. JPMAM’s Global Liquidity platform manages $773 billion (as at March 2020) across liquidity, ultra-short duration (‘Managed Reserves’) and short duration strategies.
