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Fitch Affirms 39 European Money Market Funds at 'AAAmmf' on Peer Review
April 16, 2014 / 7:42 PM / 3 years ago

Fitch Affirms 39 European Money Market Funds at 'AAAmmf' on Peer Review

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(The following statement was released by the rating agency) Link to Fitch Ratings' Report: Fitch Affirms 39 European Money Market Funds at ‘AAAmmf’ on Peer Review here PARIS, April 16 (Fitch) Fitch Ratings has affirmed 39 European money market funds' (MMFs) 'AAAmmf' ratings, following a review of the sector. Collectively, the 39 MMFs held approximately EUR271bn of assets under management at end-March 2014 and are managed by Aberdeen AM, Amundi, BNP Paribas AM, CCLA IM, Federated Investors, Goldman Sachs AM, Ignis AM, Insight AM, JPMorgan AM, L&G IM, Lombard Odier IM, Morgan Stanley IM, Natixis AM, Invesco, SSgA and SWIP. The 39 funds and related ratings are listed below. Monthly surveillance information on each MMF is available at www.fitchratings.com/FAM > Surveillance. The rating actions worksheet available through the link above provides a full list of ratings affirmed, a hyperlink to each MMF monthly surveillance page and analysts' contact details. KEY RATING DRIVERS The main drivers for the affirmations are: -- The MMF portfolios' overall credit quality and diversification -- Low exposure to interest rate and spread risks -- Holdings of daily and weekly liquid assets consistent with shareholder profile and concentration -- Maturity profiles consistent with Fitch's MMF rating criteria -- The capabilities and resources of the respective asset managers PORTFOLIO CREDIT QUALITY/DIVERSIFICATION Consistent with Fitch's MMF rating criteria, the reviewed funds seek to maintain high credit quality portfolios by investing exclusively in short-term securities rated at least 'F1' by Fitch or equivalent. Generally, these MMFs limit their exposures to individual issuers at 10% of the fund's assets, with no more than 5% for those above seven days in tenor. Minor and temporary deviations from this parameter may be incurred mainly due to seasonal cash outflows. The funds also limit their individual repurchase agreement (repo) exposures to individual counterparties to 25% of total fund's assets, provided the counterparties are rated 'A' or higher and that such repos are fully collateralised by high credit quality and liquid government securities. At end-March 2014, the funds' Portfolio Credit Factor (PCF), which is a risk-weighted measure that considers the credit quality and maturity profile of the portfolio of securities, met Fitch's 'AAAmmf' rating criterion of 1.50 or less. As MMFs hold sizable exposures to the banking sector, Fitch will monitor how MMF managers proactively manage and find suitable high quality replacements to those banks likely to be downgraded as a result of changing assumptions of sovereign support for banks. These are likely to lead to downward revisions of Support Rating Floors (SRF) for banks in the US, Europe and a handful of other countries within the next one to two years. Where bank's Long-Term Issuer Default Ratings (IDR) are driven by their SRF, this is likely to result in downgrades of these IDRs, as indicated by the change in Outlooks to Negative on 26 March 2014. As a result and absent mitigating fundamental improvements, some banks held by MMFs may see their Short-Term rating falling below the 'F1' level. MATURITY PROFILES The reviewed MMFs seek to limit interest rate and spread risk by maintaining their weighted average maturity (WAM) and weighted average life (WAL) below 60 days and 120 days, respectively. The maturity date of any single investment is kept below 397 days. Portfolios and/or individual securities maturity limits may be lower, in line with the funds' or asset managers' investment policy and depending on issuers' creditworthiness. LIQUIDITY PROFILES The funds seek to maintain sufficient levels of daily and weekly liquidity to meet investors' redemption requests. Specifically, MMFs invest at least 10% of total assets in securities offering daily liquidity and at least 25% of total assets in securities providing weekly liquidity, in line with Fitch rating criteria. In cases where funds have access to liquidity facilities, which are limited to 10% of portfolio total assets as per UCITS regulation, these are considered by Fitch as part of its assessment of a fund's liquidity. In limited circumstances, some funds have temporarily and modestly deviated from Fitch's liquidity guidelines due to outflows. Fitch expects liquidity levels to be restored in a timely manner. FUNDS' OBJECTIVES The funds seek to maximise current income to the extent consistent with the preservation of capital and maintenance of liquidity. INVESTMENT MANAGERS Fitch views the investment capabilities, resource commitment, operational controls, corporate governance, and compliance procedures of the respective fund's investment managers as consistent with the rating of the funds. There has been recent corporate activity affecting the SWIP and Ignis asset management businesses. The change of control of the SWIP business to Aberdeen Asset Management from the Lloyds Banking Group took place on 31 March 2014. On 26 March 2014, it was announced that Standard Life had entered into an agreement with the Phoenix Group to acquire Ignis. Phoenix also agreed a long-term strategic alliance with Standard Life. These corporate events have so far not affected liquidity management resources and processes, which remain appropriate and consistent with the ratings of the funds. The rated SWIP, Ignis and Aberdeen MMFs continue to be managed in line with Fitch's 'AAAmmf' rating criteria. RATING SENSITIVITIES The ratings may be sensitive to material changes in the credit quality, market risk, and/or liquidity profiles of the funds. Temporary deviations from Fitch's criteria need not automatically result in rating changes, provided the fund manager is able to address them with credible near-term remedial actions. However, material adverse and continued deviations from Fitch's guidelines for any key rating driver may lead to the rating being placed on Rating Watch Negative (RWN) or downgraded. SURVEILLANCE Fitch receives weekly fund holdings information and other pertinent fund data from the funds' administrators and managers to conduct surveillance against ratings guidelines and maintain its money market fund ratings. For additional information about Fitch's MMF ratings guidelines, please review the criteria referenced below. List of MMFs affirmed: Aberdeen Liquidity Fund (Lux) - Canadian Dollar Fund, affirmed at 'AAAmmf' Aberdeen Liquidity Fund (Lux) - Sterling Fund, affirmed at 'AAAmmf' Aberdeen Liquidity Fund (Lux) - US Dollar Fund, affirmed at 'AAAmmf' Amundi Money Market Fund - Short Term (EUR), affirmed at 'AAAmmf' Amundi Money Market Fund - Short Term (GBP), affirmed at 'AAAmmf' Amundi Money Market Fund - Short Term (USD), affirmed at 'AAAmmf' BNP Paribas InstiCash EUR, affirmed at 'AAAmmf' CCLA Public Sector Investment Fund - The Public Sector Deposit Fund, affirmed at 'AAAmmf' Federated Short-Term Euro Prime Fund, affirmed at 'AAAmmf' Federated Short-Term Sterling Prime Fund, affirmed at 'AAAmmf' Goldman Sachs Euro Liquid Reserves Fund, affirmed at 'AAAmmf' Goldman Sachs Sterling Liquid Reserves Fund, affirmed at 'AAAmmf' Goldman Sachs US Dollar Liquid Reserves Fund, affirmed at 'AAAmmf' Ignis Asset Management Euro Liquidity Fund, affirmed at 'AAAmmf' Ignis Asset Management Sterling Liquidity Fund, affirmed at 'AAAmmf' Insight Liquidity Funds plc - ILF GBP Liquidity Fund, affirmed at 'AAAmmf' JPMorgan Liquidity Funds - Euro Liquidity Fund, affirmed at 'AAAmmf' JPMorgan Liquidity Funds - Sterling Gilt Liquidity Fund, affirmed at 'AAAmmf' JPMorgan Liquidity Funds - Sterling Liquidity Fund, affirmed at 'AAAmmf' JPMorgan Liquidity Funds - US Dollar Government Liquidity Fund, affirmed at 'AAAmmf' JPMorgan Liquidity Funds - US Dollar Liquidity Fund, affirmed at 'AAAmmf' JPMorgan Liquidity Funds - US Dollar Treasury Liquidity Fund, affirmed at 'AAAmmf' LGIM Liquidity Funds PLC - LGIM Sterling Liquidity Fund, affirmed at 'AAAmmf' LGIM Liquidity Funds PLC - LGIM US Dollar Liquidity Fund, affirmed at 'AAAmmf' LO Funds (CH) - Short-Term Money Market (CHF), affirmed at 'AAAmmf' LO Funds (CH) - Short-Term Money Market (EUR), affirmed at 'AAAmmf' LO Funds (CH) - Short-Term Money Market (USD), affirmed at 'AAAmmf' MS Liquidity Funds - Euro Liquidity Fund, affirmed at 'AAAmmf' MS Liquidity Funds - Sterling Liquidity Fund, affirmed at 'AAAmmf' MS Liquidity Funds - US Dollar Liquidity Fund, affirmed at 'AAAmmf' Natixis Cash A1P1, affirmed at 'AAAmmf' STIC (Global Series) plc - Euro Liquidity Portfolio (Invesco), affirmed at 'AAAmmf' STIC (Global Series) plc - Sterling Liquidity Portfolio (Invesco), affirmed at 'AAAmmf' STIC (Global Series) plc - US Dollar Liquidity Portfolio (Invesco), affirmed at 'AAAmmf' State Street Global Advisors Liquidity PLC - SSgA EUR Liquidity Fund, affirmed at 'AAAmmf' State Street Global Advisors Liquidity PLC - SSgA GBP Liquidity Fund, affirmed at 'AAAmmf' State Street Global Advisors Liquidity PLC - SSgA USD Liquidity Fund, affirmed at 'AAAmmf' SWIP Global Liquidity Fund plc - Euro Liquidity Fund, affirmed at 'AAAmmf' SWIP Global Liquidity Fund plc - Sterling Liquidity Fund, affirmed at 'AAAmmf' Contact: Charlotte Quiniou, CFA Director +33 1 44 29 92 81 Fitch France SAS 60 rue de Monceau 75008 Paris Committee Chairperson Ralph Aurora Senior Director +1 212 908 0232 Media Relations: Hannah Huntly, London, Tel: +44 20 3530 1153, Email: hannah.huntly@fitchratings.com. Additional information is available at www.fitchratings.com. Applicable criteria, Global Money Market Fund Rating Criteria (13 January 2014), are available on www.fitchratings.com. Related research: - 2014 Outlook: Global Money Market Funds (12 December 2013) - European Money Market Fund Quarterly - Euro - 4Q13 (4 February 2014) - European Money Market Fund Quarterly - Sterling - 4Q13 (4 February 2014) - European Money Market Fund Quarterly - US Dollar - 4Q13 (4 February 2014) - Money Market Funds (MMF) Snapshot - End-February 2014 (26 March 2014) - Sovereign Support for Banks - Rating Path Expectations (27 March 2014) Applicable Criteria and Related Research: Global Money Market Fund Rating Criteria here European Money Market Fund Quarterly - Euro - 3Q13 here European Money Market Fund Quarterly - Sterling - Q313 here European Money Market Fund Quarterly - US Dollar - Q313 here Money Market Funds (MMF) Snapshot — End-January 2014 here Sovereign Support For Banks: Rating Path Expectations here 2014 Outlook: Money Market Funds here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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