Low interest rates force Berenberg to cut money market fund fees
The continued low interest rate environment has forced Germany’s Berenberg Bank to reduce the fees on its money market fund.
From this month the annual fee for investing in the Berenberg Euro Money Market fund is down by a third, to 0.2% from 0.29%.
The investment manager said the cut was due to the “continued low interest rate environment in the Euro area, in which it is increasingly challenging to achieve an appropriate value for investors.”
The fee reduction applies to both the retail and institutional share classes of the €800m investment vehicle.
Berenberg is not the first manager to take measures to protect the troubled asset class from further losses and make the fund more attractive to investors.
The latest 0.25% rate cut by the European Central Bank this summer led to a number of rmanagers closing their money market funds to new subscriptions until further notice.
Investec, for example, closed its European money market fund to new subscriptions in July, stating that the rate cut “will make it very difficult to manage the Euro fund within the investment guidelines without having a negative effect on the capital and yield [of the fund] if subscriptions requests continue to be accepted”.
JPMorgan Chase, BlackRock and Goldman Sachs all followed suit the week the news was announced. By closing their funds to new money, the firms hope to protect the interests of existing shareholders.
JPMorgan spokeswoman Kristen Chambers told the New York Post the bank’s investment arm had temporarily closed the funds “because we think it will help prevent further dilution in yields, which is in the best interest of clients.”
Fitch ratings said in July it expects more funds to cap new subscriptions, or cut their fees, to keep a positive yield. Berenberg’s latest announcement seems to be proof of this speculation.