Fitch MMF 2014 Outlook

8/13/2019 Fitch MMF 2014 Outlook

1/13

Fund and Asset Manager Rating Group

www.fitchratings.com 12 December 2013

Money Market Funds / Global

2014 Outlook: Money Market FundsPlanned Regulatory Changes Pose Challenges, But Would Take Time to Implement

Outlook Report

Conservative Portfolios Underpin Outlook: Fitchs stable rating outlook for money market

funds (MMFs) globally is underpinned by the fundsconservative, active management of credit,

market, and liquidity risks. It also reflects the status quo in the near term with respect to MMF

regulations globally, as Fitch believes that any regulatory reform will take time to implement.

High Liquidity: Short-term liquidity remains high compared with historical norms, although

MMFs continue to lengthen portfolio durations in response to the low-yield environment.

Regulatory Changes Ahead: Regulations proposed for MMFs, if enacted, would have far-

reaching implications, both in the US and Europe. Unexpectedly high investor redemptions

from MMFs in response to regulatory changes could pressure certain funds. In preparation for

potential changes, managers have been reviewing their offerings and discussing alternative

liquidity products with clients.

Treasurers Need Liquidity Options:Corporate cash holdings are at record high levels. While

European cash holdings are expected to decrease and US corporate cash could grow at a

lower rate than previously, absolute amounts are expected to remain high. As such, treasurers

and other short term investors will continue to look for convenient and diversified investment

solutions, whether through pooled options like MMFs or through segregated mandates.

MMFs Seek New Supply: Regulatory and political changes are causing the supply of eligible

investments for MMFs to decrease. For example, evolving assumptions on sovereign support

for banks may reduce further the number of Tier 1 rated banks. In response to reduced supply

from traditional issuers, MMFs are venturing into newer markets and approving new issuers.

MMFs are also increasingly investing in innovative money market products, such as callable

commercial paper (CP), collateralised CP and repo backed by non-government collateral.

Further Consolidation Expected:The low interest environment is expected to persist in 2014,

and will continue to present MMF managers with operational challenges. Given the importance

of scale in this market, we expect additional industry consolidation, particularly in Europe.

MMFs Important Globally:While MMF assets under management predominantly reside in the

US and Europe, MMF products continue to grow in other markets. Portfolio guidelines for

MMFs in these markets are converging with current US and European standards.Nevertheless, emerging market MMFs can exhibit greater volatility.

Figure 1 Figure 2

0

10

20

30

40

50

Nov12

Dec12

Jan13

Feb13

Mar13

Apr13

May13

Jun13

Jul13

Aug13

Sep13

Oct13

US MMFs - Daily USMMFs - Weekly

EU MMFs - Daily EU MMFs - Weekly

Source: Fitch

Liquidity in Prime MMFs(% of portfolio)

0

10

20

30

40

50

60

70

Nov12

Dec12

Jan13

Feb13

Mar13

Apr13

May13

Jun13

Jul13

Aug13

Sep13

Oct13

US MMFs - F1+ EUMMFs - F1+

Source: Fitch

Rating Mix Prime MMFs(% of Portfolio)

Rating Outlook

STABLE

(2013: STABLE)

Related Research

Other Outlooks

www.fitchratings.com/outlooks

MMF ResearchEvolving Bank Support: Impact on MoneyMarket Funds (November 2013)

Money Market Funds (MMF) Snapshot - End-October 2013 (November 2013)

U.S. Money Market Funds Dashboard 3Q13(November 2013)

European Money Market Fund Quarterly -Euro - 3Q13 (November 2013)

European Money Market Fund Quarterly -Sterling - Q313 (November 2013)

European Money Market Fund Quarterly -US Dollar - Q313 (November 2013)

AnalystsGreg Fayvilevich+1 212 [email protected]

Charlotte Quiniou, CFA+33 1 44 29 92 [email protected]

Alastair Sewell

+44 203 530 [email protected]

Gwen Fink-Stone, J.D.+1 212 [email protected]
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2014 Outlook: Money Market FundsDecember 2013

2

Rating Outlook Stable

Fitchs stable rating outlook for MMFs globally is underpinned by the funds active, conservative

management with respect to credit, market, and liquidity risks. The current outlook also reflects

the status quo in the near term with respect to MMF regulations globally, as Fitch believes that

any regulatory reform will take time to implement.

Nevertheless, Fitch recognises that MMF reforms, if adopted, would have far reaching

implications for funds and investors in the US and Europe. The regulatory uncertainty faced by

MMFs and developments in the political and short-term market environments will pose

important challenges for MMFs in 2014.

Liquidity Reflects Potential Political and Regulatory Changes

MMFs are positioned conservatively against a potential liquidity stress that could stem from

political or regulatory events.

The next US debt ceiling deadline may arise between March and June 2014, and could again

create liquidity pressure on MMFs denominated in US dollars. MMFs will likely implement

strategies similar to those they applied ahead of the October 2013 debt ceiling deadline prior to

its resolution, primarily by building up liquidity buffers. It turned out that investor redemptions

were relatively muted in September and October, resulting in limited liquidity pressures on the

funds.

In a similar vein, new regulations in the US and in Europe, if adopted, have the potential to

significantly change the nature of MMFs, with unknown investor reaction. While proposed

implementation timelines for the reforms are lengthy, investors can behave in unexpected ways

ahead of the final rules, including redeeming large amounts of money from MMFs.

Credit Quality Declines Modestly in the Face of Shrinking Availability of

Eligible InvestmentsMMFs rated AAAmmf by Fitch invest only in securities rated at least F1 or its equivalent and

maintain diversified portfolios to limit credit risk to investors. However, further regulatory,

political, and market developments may continue to shrink the universe of eligible investments

for MMFs, forcing funds to search for suitable replacements and limit portfolio concentration in

existing investments (see Supply section). This trend was observed in the rating mix of

European and, to a lesser extent, US MMFs where the proportion of F1+ exposure declinedin

2H13 after French bank downgrades (see figure 2).

Lengthened Average Portfolio Maturities

The persistent low-yield environment in the US and in Europe is pushing MMF managers to

slowly but consistently lengthen the weighted average life (WAL) of portfolios to earn

incremental yield (see figure 4), although still staying well within Fitchs and regulatory limits of

120 days. This increase in WAL reflects MMFsmore barbelled maturity management approach

in the current ultra-low yield environment, which translates to an increased allocation towards

longer dated assets, while maintaining high short-term liquidity.

MMFs weighted average maturity (WAM; figure 3) is still being managed prudently as the

interest rate environment is evolving. The US Federal Reserve has indicated that it may soon

begin reining in some of its quantitative easing, although the prospect of higher short-term

interest rates may still be some time away.


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On the other hand, the ECB has recently cut its refinancing operations rate from 50 bp to 25 bp

to fight deflation fears in the eurozone. Some market participants believe that the ECB may

further reduce its deposit facility rate in 2014, below its current 0% level. Additionally, a

potential second long-term refinancing operation (LTRO) to European banks could rebuild

liquidity in markets and put further pressure on short term rates. Both could cause market

yields to fall low enough to trigger the activation of flexible share class mechanisms in Europe,

effectively causing some European money funds to have negative yields.

Figure 3 Figure 4

Regulatory Changes on the Horizon

In both the US and Europe, regulatory proposals are on the table which, if adopted, would have

far reaching implications on the terms and investment strategies of MMFs. Fitch believes that

the implementation timeframe for regulatory reform would be relatively long and hence its MMF

outlook for 2014 is based on a continuation of the status quo.

Whichever reform alternative is adopted, it is likely that certain current users of MMFs willreallocate cash to other investments that better match their needs. In preparation for potential

changes to MMFs, fund managers have been reviewing their offerings and discussing options

with clients. Examples of new or growing alternative liquidity products include separately

managed accounts, short term bond funds, hybrid prime/government MMFs and unregistered

commingled funds.

Many larger investors may ultimately adapt to the new market paradigms in the US and

Europe, assuming MMFs continue to offer the same level of security, liquidity and

transparency. By contrast, some of the less sophisticated and smaller constant net asset value

(CNAV) investors may determine that the required changes to their internal processes to adapt,

notably to variable net asset value (VNAV), are disproportionately expensive and abandon

MMFs as a cash management tool.

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70

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Dec12

Jan13

Feb13

Mar13

Apr13

May13

Jun13

Jul13

Aug13

Sep13

Oct13

US Prime MMFs EU MMFs - EUR

EU MMFs - GBP EU MMFs - USD

Source: Fitch

MMF WAM (Days)

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Dec12

Jan13

Feb13

Mar13

Apr13

May13

Jun13

Jul13

Aug13

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Oct13

US Prime MMFs EU MMFs - EUR

EU MMFs - GBP EU MMFs - USD

Source: Fitch

MMF WAL (Days)


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Figure 5Summary of Key Regulatory Proposals in the US and EuropeUS

Timeline Proposed by SEC June 2013 Comment period ended September 2013

Uncertain timeline for final rule Implementation period of up to two years

Government MMFs Exempted from floating NAV Additional disclosure and reporting

Prime MMFs Alternative 1: floating NAV with retail prime MMFs exempted Alternative 2: CNAV with redemption fees and liquidity gates Potential for combination of both Greater diversification requirements Additional disclosure and reporting

EuropeTimeline Proposed by European Commission (EC) September 2013

Review by the European Parliament has started Council of Ministers to review the European Commission proposal Three parties (EC, Parliament, Council) to agree on a final text Final vote in Parliament currently expected I April 2014 Uncertain timeline for final regulation

Proposed Valuation No amortised cost valuation regardless of assets residual maturity Unless the fund uses the CNAV method and maintains a 3% capital buffer

Portfolio rules andasset eligibility

Greater diversification and liquidity requirements Restrictions on eligible repo collateral and securitised assets Issuers and counterparties must be assessed through an internal credit quality

assessment and rating mechanism except when the issuer or guarantor is aEuropean sovereign or a European supranational entity

Procedures for stress testing and investor base monitoringPublic disclosure andinformation

Greater reporting and disclosure requirements MMFs must not be rated on a solicited basis

Source: Fitch, SEC, European Commission

MMF Investment Options Reflect Changing Environment

MMF Bank Exposures Likely to be Adjusted Amid Evolving Bank Support andRegulation

Fitch believes that MMF exposures to banks are likely to be adjusted as a result of changing

political, regulatory and economic climates affecting the banking sector. As of October 2013,

Fitch-rated MMFs had an average allocation of 77% to the banking sector, in secured and

unsecured forms.

The evolving dynamics of sovereign supports for banks are likely to result in some credit

deterioration among banks held by MMFs. The level of extraordinary sovereign support that

may be forthcoming in times of stress is a key factor underpinning Fitchs bank ratings. This

factor is reflected in a banks Support Rating Floor. A banksIssuer Default Rating (IDR) is set

as the higher of its Support Rating Floor and Viability Rating, which reflects the entity s

standalone financial strength.

Excluding offsetting fundamental improvements, bank IDRs that are most at risk of being

downgraded are those anchored at the level of their Support Rating Floor, in jurisdictions with

political initiatives aimed at reducing the risk of government-backed bank bailouts in the future.

Such downgrades may also impact related Short-Term Ratings. As a result, some banks held

by MMFs may see their Short-Term rating falling below the F1 level that is generally required

for prime money fund investments (See related reports: Evolving Bank Support: Impact on

Money Market Funds, The Evolving Dynamics of Support for Banks, and Bank Support:

Likely Rating Paths).

Bank downgrades below F1 would put pressure on MMFs to find suitable high-quality

replacements and avoid excessive portfolio concentration. This will be a key challenge for

MMFs in 2014, particularly since Basel III regulations are already constraining money market

supply from banks. Although the new Basel III capital and liquidity rules do not take full effect
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until 2019, banks have been under pressure to achieve compliance much sooner. As a result,

banks may continue to scale back their short-term borrowings in 2014 to comply with the Basel

III coverage ratio (a banks short-term liquid assets relative to its potential net cash outflows

over a 30-day period under stress conditions).

Basel III Prompts Innovation in Money Market InstrumentsBanks are responding to the unfavourable treatment of short-term financing under Basel III by

issuing instruments that extend the duration of their liabilities beyond 30 days while maintaining

eligibility for MMFs.

Callable and putable CPs are examples of such new products. The entity issuing a callable CP

is expected to call the CP before the critical 30-days-to-maturity boundary is reached and

higher liquidity fees are due to the bank providing a guarantee. Likewise, putable CP typically

requires an advance notice from CP holders of at least 30 days prior to payment. Some MMFs

have already been active buyers of such securities, mostly issued in US dollars thus far. Fitch

believes such assets are likely to gain more traction in the market and may ultimately grow in

MMFs.

MMFs Explore New Types of Repo Collateral

The ultra-low yield environment, combined with a scarce supply of high quality collateral,

notably in euro and sterling, may encourage more MMFs to invest in repo backed by collateral

other than high-quality sovereign assets. Such repo practices are currently more common in

the US than in Europe, but the trend may spill over to the European market as well. Fitch views

exposure via non-government collateral as unsecured for diversification purposes under its

MMF rating criteria, given the potential for wrong way risk in times of stress.

Collateralised CP (CCP) has emerged in the US as an attractive alternative to issuing banks

and MMFs. CCP is backed by collateral in the form of repo, allowing the issuing bank and

MMFs to transact in term repo.

Diversification into New Markets and Issuers

MMFs continue to selectively consider investments in financial issuers from the Asia-Pacific

and the Middle East regions, and to a lesser extent Latin America. These non-traditional

issuers for US and European MMFs still represent small portfolio allocations (3.2% in Asia ex-

Japan, 0.6% in the Middle-East and 0.1% in Latin America on average). They primarily include

issuers from Singapore, China, South Korea, the United Arab Emirates, Qatar and Chile. These

are detailed in Appendix B. Further adoption of such issuers will likely be slow and selective,

driven by volumes of issuance in the funds base currency, credit considerations and

investment managers level of confidence inthe markets being considered.

Supply-Driven Allocation to Quasi-Sovereigns and Corporates Rises

MMF allocations to non-US sovereigns and quasi-sovereign entities, such as supranationalsand government agencies, have been rising, but remain a function of available supply and the

level of yield offered. Volumes of short-term assets issued by quasi-sovereign entities have not

significantly developed since 2011 and yields are low. Investment constraints arising from the

short-term issuance activity of high-quality quasi-sovereigns are particularly acute for sterling

and euro denominated funds. The high credit quality of sovereigns and quasi-sovereigns

typically held in MMF portfolios will allow fund managers to favour relatively longer-dated

assets from these issuers to compensate low yields.

MMFs continue to have appetite for high-quality non-financial corporates, particularly since

supply is limited. Factors that could nevertheless encourage corporates to issue more short-

term paper include attractive market financing costs and funding diversification benefits. US

and euro corporate CP outstanding amounts increased a little in 2013. Should they continue to

rise, even at a slow pace, they will likely fuel new MMF investments.


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Figure 6 Figure 7

US Treasury Floaters to Materialise in 2014; Fed Reverse Repo Facility

The Fedsnew reverse repo program (RRP) was well received by MMFs as a source of new

supply. The RRP is a fixed-rate, overnight repo facility wherein market participants, including

certain MMFs, may lend cash to the Fed, collateralised by securities held by the Fed. Demand

for the RRP so far has been most robust at quarter- and month-ends, when banks typically

reduce repo and other borrowings, but has otherwise been weak due to the low interest rate

paid by the Fed. Lower market repo rates or a higher rate paid by the Fed may lead to more

regular participation. Although the RRP is scheduled to end at end-January 2014, it is possible

that the Fed may extend the end date.

Also, the US Treasury will conduct i ts first auction of floating rate notes (FRN) in January 2014.

It will be the first new US Treasury product in 17 years, a major development adding a sizable

high-quality and liquid asset pool to the market. Treasury FRNs will be issued with a 2-year

maturity and a daily reset of their floating rate, which make them eligible to MMFs. MMFs will

likely buy such Treasury floaters, given the potential yield pickup it could offer relative toTreasury bills. However, MMFs ability to allocate large portions of their portfolios to these

floaters will likely be limited given the relatively long maturity of the instruments.

Low Yields Perpetuate Waivers and Consolidations

Low Yields Persist

Fitch expects the low interest rate environment to persist in 2014, with only limited increases in

2015 (see Global Economic Outlook, December 2013). Fitch would therefore expect MMF

gross yields to remain low for the foreseeable future, barring any event-driven spike in interest

rates.

Fee waivers continue to be endemic in certain fund classes and Fitch would expect these to

persist, notably for government and prime euro MMFs. In Europe 100% and 85% (respectively)

of euro and US dollar government MMFs had fee waivers1 in place and 45% of prime euro

MMFs. In the US 100% of institutional government funds, and 95% of prime institutional funds

had fee waivers in place as of end-September 2013. The waivers reflect the low yield

environment.

1Based on iMoneyNet data as of 31 October 2013, comparing gross and net yields. The net yieldrepresents the yield realised by investors net of fees and charges, notably manager fees. Fitchassumes a fee waiver is in place where the difference between the gross and net yield is less than10 basis points. However, there may be instances in which the fund manager charges fees outsideof the fund, which would not be captured by this analysis

0

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(USDbn)

Non-financial Financial ABCP

Source: Federal reserve

US CP Outstanding

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80

Nov 11 Jul 12 Mar 13 Nov 13

(EURbn)(EURbn)

Corporates (LHS)Sov, Supra, Agencies (LHS)

ABCP (LHS)Financials (RHS)

Source: ECB STEP Market

Euro CP Outstanding

Source: ECB STEP Market, AFME
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Figure 8 Figure 9

Continued Consolidation and Innovation Expected

Fitch believes there is potential for further industry consolidation in 2014. The sustained low

yield environment and resulting margin pressure, combined with potential corporate cashoutflows (in Europe at least), may cause some, notably smaller, managers to reconsider their

commitment to the cash management business.

Bank deleveraging has been a factor in the M&A activity in Europe in 2013, notably the

acquisition of the Royal Bank of Scotland MMFs by Goldman Sachs Asset Management and

the acquisition of Scottish Widows Investment Partnership (owned by Lloyds Bank PLC),

including its MMFs, by Aberdeen Asset Management PLC. Other banks may elect to sell their

asset or MMF management businesses for structural reasons, for example to focus on core

activities. In the US, consolidation activity has slowed in 2013, as some fund sponsors already

exited the business in the years following the 2008 crisis.

Global MMFsGlobal MMF assets under management (AUM) shrank between 2Q12 and 2Q13 by about 2%

to just under USD4.5trn, according to ICI data. MMF AUM shrunk in most global regions, save

for the Americas, driven by an increase in MMF AUM in the US.

The vast majority of MMFs are domiciled in just five countries (the US, France, Ireland,

Luxembourg and Australia), collectively accounting for almost 90% of total worldwide MMF

AUM as of 2Q13. Of these jurisdictions, the US dominates at almost 60% of the total, followed

by the European CNAV sector (primarily Ireland and Luxembourg domiciled funds, collectively

representing 15% of the total) and French, predominantly VNAV, funds at 10% of the total.

Australia is the last major MMF domicile, representing 7% of the global total. The remainder are

domiciled in multiple other countries, notably Brazil, Mexico, South Korea and China (all at

approximately 1% of the total).

AUM shrunk overall in the larger MMF domiciles between 2Q12 and 2Q13, save for limited

growth in the US (3%), Mexico (3%) and South Korea (5%).

Fitch expects global MMF assets to continue to be dominated by the US and core European

domiciles (France, Ireland and Luxembourg). However, the AUM of these funds may decline as

investors seek higher yielding or bespoke cash management alternatives to MMFs or withdraw

money in response to regulatory uncertainty or new regulation.

MMF regulation continues to vary country-by-country. Nonetheless, Fitch sees some

comparability and convergence towards US and European standards. For example, the maximum

asset maturity prescribed by applicable regulations in China, Taiwan, South Africa and Thailand is

397 days, similar to US limits. Fitch regularly comments on MMFs in these markets, see, for

instance Fitch: Rated Chinese MMFs Weather Volatility,dated 26 June 2013.

0

1

2

3

4

5

6

Sep 08 May 10 Jan 12 Sep 13

Base Rates Have FallenBank of England

ECB refinancing operations

Fed funds target rate

(Base rate, %)

Source: BoE, ECB, Fed

0

1

2

3

4

5

6

Sep 08 May 10 Feb 12 Oct 13

Euro Sterling

US prime offshore US prime onshore

Source: iMoneyNet

(Net yield, bp)

European MMF Yields have Fallen Too
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Figure 10 Figure 11

Americas61%

Europe27%

AsiaPacific11%

Africa1%

Global MMF AUM

Source: ICI, Fitch

-10

-8

-6

-4

-2

0

2

4

68

10

Americas Europe Asia Pacific Africa

Source: ICI, Fitch

(Percentage change (%))

Percentage Change in Global MMFUM 2Q12 - 2Q13


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Appendix A

Figure 12

Top 30 Issuer Exposures in Fitch-Rated Prime MMFs(As of 31 Oct 13, ratings as at 10 December 2013)

Entity Country SectorLong-TermRating

Short-TermRating

iabilityRating

SupportRating Floor

Portfolioaverage (%)

Societe Generale (SG) France Bank A F1 a- A 3.7Credit Agricole France Bank A F1 a A 3.7BNP Paribas France Bank A+ F1 a+ A 3.0Rabobank Group Netherlands Bank AA- F1+ aa- A+ 3.0Mitsubishi UFJ Trust and Banking Corp. Japan Bank A F1 a A- 2.8Deutsche Bank AG Germany Bank A+ F1+ a A+ 2.7Nordea Bank AB Sweden Bank AA- F1+ aa- A- 2.6Sumitomo Mitsui Banking Corporation Japan Bank A- F1 a- A- 2.5ING Bank NV Netherlands Bank A+ F1+ a A+ 2.5Standard Chartered Bank UK Bank AA- F1+ aa- A- 2.2Svenska Handelsbanken AB Sweden Bank AA- F1+ aa- A- 2.2JPMorgan Chase & Co. US Bank A+ F1 a+ A 2.1Barclays plc UK Bank A F1 a NF 2.0Lloyds Banking Group plc UK Bank A F1 bbb+ A 1.9

Groupe BPCE France Bank A F1 a A 1.9Credit Suisse Group AG Switzerland Bank A F1 a NF 1.9HSBC Holdings plc UK Bank AA- F1+ aa- NF 1.8Royal Bank of Canada Canada Bank AA F1+ aa A- 1.8Skandinaviska Enskilda Banken AB Sweden Bank A+ F1 a+ A- 1.7Bank of Nova Scotia Canada Bank AA- F1+ aa- A- 1.6DNB Bank Norway Bank A+ F1 a+ A 1.5Mizuho Financial Group, Inc. Japan Bank A- F1 bbb+ A- 1.4Toronto-Dominion Bank (The) Canada Bank AA- F1+ aa- A- 1.4National Australia Bank Limited Australia Bank AA- F1+ aa- A 1.3Banque Federative du Credit Mutuel France Bank A+ F1 n.a. A 1.3Wells Fargo & Company US Bank AA- F1+ aa- A 1.2FMS Wertmanagement Germany Gvt agency AAA F1+ n.a. AAA 1.2General Electric US Corporate n.a. n.a. n.a. n.a. 1.2The Royal Bank of Scotland Group plc UK Bank A F1 bbb A 1.1Bank of Montreal Canada Bank AA- F1+ aa- A- 1.1

Source: Fitch


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Appendix B

Figure 13Issuers from New Markets in Fitch-Rated Prime MMFs(As of 31 Oct 13, ratings as at 10 December 2013)

Entity CountryLong-TermRating

Short-TermRating iability Rating

Support RatingFloor

DBS Bank Ltd. Singapore AA- F1+ aa- A-Oversea-Chinese Banking Corp Singapore AA- F1+ aa- A-United Overseas Bank Limited Singapore AA- F1+ aa- A-Bank of China China A F1 bb AChina Construction Bank Corporation China A F1 bb AChina Petroleum & Chemical Corporation (Sinopec) China A+ F1 n.a. n.a.Industrial and Commercial Bank of China China A F1 bb AExport-Import Bank of Korea (KEXIM) South Korea AA- F1+ n.a. AA-Korea Finance Corporation South Korea AA- F1+ n.a. AA-Korea Land and Housing Corporation South Korea AA- n.a. n.a. n.a.Bank of East Asia Hong Kong n.a. n.a. n.a. n.a.Hong Kong Mortgage Finance Corp Hong Kong n.a. n.a. n.a. n.a.

Central American Bank for Economic Integration Latam Supranational A F1 n.a. n.a.Banco del Estado de Chile Chile A+ F1 bbb A+Abu Dhabi Commercial Bank United Arab Emirates A+ F1 bb+ A+Mubadala Development Company PJSC United Arab Emirates AA F1+ n.a. n.a.National Bank of Abu Dhabi United Arab Emirates AA- F1+ a- AA-Qatar National Bank Qatar A+ F1 a A+State of Qatar Qatar n.a. n.a. n.a. n.a.National Bank of Kuwait Kuwait AA- F1+ a AA-Islamic Development Bank Saudi Arabia AAA F1+ n.a. n.a.

Source: Fitch


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Appendix B

Figure 14Fitch-Rated Money Market Funds(As of 31 Oct 13)

Investment advisor Fitch Rating Assets (USDm)US MMFs PrimePrime US Dollar Funds Total 395,995AllianceBernstein Exchange Reserves AllianceBernstein AAAmmf 1,556BMO Prime Money Market Fund Bank of Montreal AAAmmf 3,778BofA Money Market Reserves BofA Advisors AAAmmf 15,482Daily Assets Fund Institutional Deutsche IM AAAmmf 5,109Dreyfus Cash Management Dreyfus AAAmmf 26,658Dreyfus Institutional Cash Advantage Fund Dreyfus AAAmmf 27,109Dreyfus Institutional Reserves Money Fund Dreyfus AAAmmf 2,944Federated Prime Cash Obligations Fund Federated AAAmmf 19,111Federated Prime Obligations Fund Federated AAAmmf 42,406First American Prime Obligations Fund First American AAAmmf 10,187Goldman Sachs Financial Square Prime Obligations Fund Goldman Sachs AAAmmf 17,399JPMorgan Prime Money Market Fund JP Morgan AAAmmf 117,311Morgan Stanley Institutional Liquidity Fund - Prime Portfolio Morgan Stanley AAAmmf 25,723

Short-Term Investments Trust Liquid Assets Portfolio Invesco AAAmmf 21,980Short-Term Investments Trust STIC Prime Portfolio Invesco AAAmmf 2,889SSgA Money Market Fund State Street AAAmmf 5,418SSgA Prime Money Market Fund State Street AAAmmf 6,906State Street Institutional Liquid Reserves Fund State Street AAAmmf 38,392Virtus Insight Money Market Fund Virtus AAAmmf 373Western Asset Institutional Liquid Reserves Legg Mason AAAmmf 5,261

Cayman Islands US Dollar FundWestern Asset Institutional Liquid Reserves, Ltd. Legg Mason AAAmmf 67,183

US MMFs - MunicipalMunicipal US Dollar Funds Total 16,115Alpine Municipal Money Market Fund Alpine AAmmf 170BofA Municipal Reserves BofA Advisors AAAmmf 1,291Federated Municipal Obligations Fund Federated Ammf 2,800

Federated Tax-Free Obligations Fund Federated AAAmmf 7,246Morgan Stanley Institutional Liquidity Fund - Tax Exempt Portfolio Morgan Stanley AAAmmf 213Wells Fargo Advantage Municipal Cash Management Money Market Fund Wells Fargo AAAmmf 1,198Wells Fargo Advantage National Tax-Free Money Market Fund Wells Fargo AAAmmf 3,197

US MMFs - GovernmentGovernment US Dollar Funds Total 189,561AllianceBernstein Government Reserves MMF AllianceBernstein AAAmmf 377BMO Government Money Market Fund Bank of Montreal AAAmmf 581BofA Government Plus Reserves BofA Advisors AAAmmf 928BofA Government Reserves BofA Advisors AAAmmf 6,701BofA Treasury Reserves BofA Advisors AAAmmf 9,425Dreyfus Institutional Reserves Treasury Fund Dreyfus AAAmmf 1,160Dreyfus Institutional Reserves Treasury Prime Fund Dreyfus AAAmmf 1,055Federated Government Obligations Fund Federated AAAmmf 31,290First American Treasury Obligations Fund First American AAAmmf 8,340

First American US Treasury Money Market Fund First American AAAmmf 833JPMorgan U.S. Government Money Market Fund JP Morgan AAAmmf 59,504Short-Term Investments Trust Government & Agency Portfolio Invesco AAAmmf 6,561Short-Term Investments Trust Treasury Portfolio Invesco AAAmmf 20,144SSgA U.S. Government Money Market Fund State Street AAAmmf 5,402SSgA U.S. Treasury Money Market Fund State Street AAAmmf 7,786State Street Institutional Treasury Money Market Fund State Street AAAmmf 17,432State Street Institutional Treasury Plus Money Market Fund State Street AAAmmf 2,752State Street Institutional U.S. Government Money Market Fund State Street AAAmmf 8,194The Milestone Funds Treasury Obligations Portfolio CLS Investments AAAmmf 289Western Asset Institutional U.S. Treasury Obligations Money Market Fund Legg Mason AAAmmf 6Williams Capital Government Money Market Fund Williams Capital Group AAAmmf 801

Cayman Islands US Dollar FundWestern Asset U.S. Treasury Obligations Money Market Fund, Ltd. Legg Mason AAAmmf 2


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Fitch-Rated Money Market Funds (Cont.)(As of 31 Oct 13)

Investment advisor Fitch Rating Assets (m)

European MMFs - PrimePrime Euro Funds Total 49,423Amundi Money Market Fund - Short Term (EUR) Amundi AAAmmf 4,764BNP Paribas Insticash EUR BNP Paribas IP AAAmmf 8,478Federated Short-Term Euro Prime Fund Federated AAAmmf 55Global Treasury Funds plc - Euro Fund (RBS) RBS AM AAAmmf 865Goldman Sachs Euro Liquid Reserves Fund Goldman Sachs AM AAAmmf 9,778Ignis Asset Management Euro Liquidity Fund Ignis AAAmmf 1,994JPMorgan Liquidity Funds - Euro Liquidity Fund JPMorgan AM AAAmmf 11,853LO Funds (CH) - Money Market (EUR) Lombard Odier IM AAAmmf 625MS Liquidity Funds - Euro Liquidity Fund Morgan Stanley IM AAAmmf 2,385Natixis Cash A1P1 Natixis AM AAAmmf 2,405Short-Term Investments Co. (Global Series) plc - Euro Liquidity Portfolio Invesco AAAmmf 279State Street Global Advisors Liquidity PLC - SSgA EUR Liquidity Fund SSgA AAAmmf 5,293SWIP Global Liquidity Fund plc - Euro Liquidity Fund SWIP AAAmmf 649

Prime Sterling Funds Total 82,066Aberdeen Liquidity Fund (Lux) - Sterling Fund Aberdeen AAAmmf 343Amundi Money Market Fund - Short Term (GBP) Amundi AAAmmf 415CCLA Public Sector Investment Fund - The Public Sector Deposit Fund CCLA AAAmmf 194Federated Short-Term Sterling Prime Fund Federated AAAmmf 1,559Global Treasury Funds plc - Sterling Fund (RBS) RBS AM AAAmmf 4,413Goldman Sachs Sterling Liquid Reserves Fund Goldman Sachs AM AAAmmf 5,741Ignis Asset Management Sterling Liquidity Fund Ignis AAAmmf 12,717Insight Liquidity Funds plc - ILF GBP Liquidity Fund Insight IM AAAmmf 15,692JPMorgan Liquidity Funds - Sterling Liquidity Fund JPMorgan AM AAAmmf 7,636LGIM Liquidity Funds PLC - LGIM Sterling Liquidity Fund L&G IM AAAmmf 13,074MS Liquidity Funds - Sterling Liquidity Fund Morgan Stanley IM AAAmmf 1,304Short-Term Investments Co. (Global Series) plc - Sterling Liquidity Portfolio Invesco AAAmmf 440State Street Global Advisors Liquidity PLC - SSgA GBP Liquidity Fund SSgA AAAmmf 2,882SWIP Global Liquidity Fund plc - Sterling Liquidity Fund SWIP AAAmmf 15,656

Prime US Dollar Funds Total 138,007Aberdeen Liquidity Fund (Lux) - US Dollar Fund Aberdeen AAAmmf 1,896Amundi Money Market Fund - Short Term (USD) Amundi AAAmmf 1,082

BNY Mellon U.S. Dollar Liquidity Fund BNY Mellon AAAmmf 8,892Federated Short-Term U.S. Prime Fund Federated AAAmmf 2,796Global Treasury Funds plc - US Dollar Fund (RBS) RBS AM AAAmmf 2,466Goldman Sachs US Dollar Liquid Reserves Fund Goldman Sachs AM AAAmmf 25,556JPMorgan Liquidity Funds - US Dollar Liquidity Fund JPMorgan AM AAAmmf 63,910LGIM Liquidity Funds PLC - LGIM US Dollar Liquidity Fund L&G IM AAAmmf 158LO Funds (CH) - Money Market (USD) Lombard Odier IM AAAmmf 1,219MS Liquidity Funds - US Dollar Liquidity Fund Morgan Stanley IM AAAmmf 7,497Short-Term Investments Co. (Global Series) plc - US Dollar Liquidity Portfolio Invesco AAAmmf 5,155State Street Global Advisors Liquidity PLC - SSgA USD Liquidity Fund SSgA AAAmmf 17,380Aberdeen Liquidity Fund (Lux) - US Dollar Fund Aberdeen AAAmmf 1,896

Prime Other Currency Funds Total 1,232Aberdeen Liquidity Fund (Lux) - Canadian Dollar Fund Aberdeen AAAmmf 163LO Funds (CH) - Money Market (CHF) Lombard Odier IM AAAmmf 1,069

European MMFs - Government Total 25,327JPMorgan Liquidity Funds - Euro Government Liquidity Fund JPMorgan AM AAAmmf 961JPMorgan Liquidity Funds - Sterling Gilt Liquidity Fund JPMorgan AM AAAmmf 386JPMorgan Liquidity Funds - US Dollar Government Liquidity Fund JPMorgan AM AAAmmf 2,370JPMorgan Liquidity Funds - US Dollar Treasury Liquidity Fund JPMorgan AM AAAmmf 21,611

Source: Fund administrators, fund advisors, Fitch


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2014 Outlook: Money Market Funds 13

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