FT on "Death, leaks and money funds"
Sunday's FT writes "Death, leaks and money market funds". It says, "Leaked reform proposals from the European Commission -- as reported in FTfm last Monday -- show that European money fund managers will be required to set aside cash buffers of 3 per cent or the market equivalent of E15bn. The proposals form part of a global regulatory backlash against constant NAV money funds, which invest in high-quality, short-term money market instruments and trade at a fixed €1 or $1 a share, except in extreme circumstances.... The leaked reforms, however, have left money fund specialists questioning their own mortality. "Three per cent will basically kill the CNAV industry in Europe. Even if it's negotiated down, we still believe that the vast majority of CNAV funds will get out of the business," one industry figure told FTfm. Others queued up to vent their anger. "It is a big spanner in the works. I don't see [the buffer] as workable," said Martin O'Donovan, assistant director of the Association of Corporate Treasurers. A significantly more irate London executive added: "There has been a sustained attack on money market funds for a while now and this 3 per cent buffer is just another example of the contempt for money funds. Regulators seem to want shot of us."" The piece adds, Dan Waters, managing director of `ICI Global, opposes any reform proposals that would impose "bank-like regulatory requirements, such as capital requirements" on funds. "Requiring advisers to commit capital would likely drive sponsors away from offering regulated money market funds," he told FTfm. Instead he suggests a positive step would be the imposition of "sensible, specific risk-limiting provisions, such as the liquidity requirements imposed in the US in 2010"."
