Euro MMFs turn away from UK toward core Europe – Fitch

Analysis of euro denominated constant net asset value money market funds has found a re-allocation away from UK towards core European and supranational exposures over the past 12 months, ratings agency Fitch has said.

Fitch said it identified a 7% average exposure re-allocation in this way between April 2012-April 2013. This has taken French exposures to 40% of total euro MMF holdings, up from 36%. At the same time, exposure to UK issuers has almost halved to 9% of total assets.

Total exposure to secured assets, primarily repo, has increased to about 18% of total assets across Fitch’s sample as of April 2013. This represents a 9% increase over the year. From a peak of 25% of assets in November 2012, repo exposure has come down in the context of a low repo rate and scarcity of eligible collateral, Fitch said.

“Average portfolio maturities in euro MMFs have increased over the past year, as managers are cautiously seeking yield along the curve. This has been effected through a “barbelling” strategy with a combined four percentage point increase in longer dated corporate and government note exposures counterbalanced by a 9% increase in overnight repos.”

Fich’s reserach does not cover variable NAV MMFs. Its sample represents about €50bn, or 55% of euro MMF assets.


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