Fitch Ratings Discusses Impact of MMF Reform

Global money market fund (MMF) reform made a significant step forward in 2019 with the conclusion of reform in Europe, following on from the conclusion of MMF reforms in the US in 2016.

These jurisdictions matter, as they account for the lion’s share of MMF assets globally. In South Africa, MMF regulation has not moved as much – yet – as in other jurisdictions. This is important as it has it means stable price funds remain the norm. Cash investors value the utility of stable pricing for operational and accountancy reasons. 

Today, at the Nedgroup Investments Treasurers’ Conference in Johannesburg, Alastair Sewell from Fitch Ratings, will highlight the importance of the significant changes taking place in the MMF industry globally, and outline their implications for investing cash in South Africa.

Alastair Sewell, Head of EMEA Fund & Asset Manager Ratings at Fitch Ratings, said: “I’ve had the pleasure of a long association with Nedgroup Investments Treasurers’ Conference over the past seven years, and I’ve witnessed significant changes in the MMF industry during this time. South Africa stands out for its sophistication – as in the major global MMF domiciles, corporate treasurers, are the cornerstone of the industry. Their presence brings growth and it brings resilience to the industry. MMF assets have grown faster in South Africa than in MMFs globally as the South African investor base has institutionalized. More fundamentally, these investors, like corporate treasurers around the world, demand timely liquidity and principal preservation – the core principles to which we rate funds, and the core objectives which, when delivered by managers who understand these needs, bring resilience.”

Sean Segar, Head of Cash Solutions at Nedgroup Investments, commented: “The uptake of Money Market Funds as a tool for corporates and other institutional investors to put idle cash to work means that the South African Money Market industry is well supported, in good shape and positioned as an attractive and stable alternative for liquidity management. The added benefit of a very robust regulatory framework puts us in the unique position of being able to adopt a ‘wait and see’ approach to the reforms playing out in the US and Europe with a view to implementing value-adding best practices here. This is crucial given the current backdrop against which South African corporates and treasurers are using Money Market Funds - essentially as a haven for cash reserves”.