J.P.Morgan Asset Management's global liquidity department has hired Peter Pergovacz for German and Austrian sales, however he takes on the role in a climate so challenging for European cash funds that some managers, including at J.P. Morgan, have capped inflows.
J.P.Morgan Asset Management’s global liquidity department has hired Peter Pergovacz for German and Austrian sales, however he takes on the role in a climate so challenging for European cash funds that some managers, including at J.P. Morgan, have capped inflows.
At J.P.Morgan, Pergovacz’s will be based Frankfurt, reporting to Sven Lorenz, head of global liquidity in North Central and Eastern Europe.
He was previously a relationship manager at J.P.Morgan Worldwide Securities Services.
Lorenz said: “[This] hire represents our expansion into continental Europe and our belief in the money market sector as a whole.”
However, the sector faces significant challenges, not of its own making.
At least five core European nations’ short-term debt instruments – exactly the kind of securities cash funds buy – recently yielded nearly zero, or had negative yields.
Bob Parker, senior advisor, asset management, at Credit Suisse, said recently he questioned the future role of the money market industry: “In a zero interest rate environment its role as a source of funding will be significantly reduced”.
The ultra-low rates on core debt makes it all but impossible for many funds to generate acceptable returns from money freshly fed into markets – and as a result many have halted subscriptions. A spokeswoman from JP Morgan Asset Management confirmed the unit was one of these.
Allocators seeking safe havens but acceptable yields from their cash are looking instead to China, where money market funds last quarter hit their highest assets in three years.
According to data provider iMoneyNet’s July report, Euro government funds saw outflows of €701.8m in the week to 20 July, taking total assets down to €8.73bn.
Cash market allocators seemed to be preferring into Chinese money market funds, which Fitch Ratings reported increased total assets by CNY 61.8bn (€7.8bn) during the second quarter, to about CNY 358.9bn, the highest level in three years.
Fitch says inflows have been driven partly by a risk-averse attitude of local investors, and partly by short-term retail considerations.
It expects Chinese money markets to remain an attractive investment option in the current volatile environment, especially as more dedicated offerings for institutional investors are developed over time.