Nov 12 - Fitch Ratings says in a new report that the European money market funds (MMFs) it
rates have reallocated almost 20% of their portfolios by geography over the past two years. This
represents an industry-wide geographic shift of around EUR100bn of assets.
The reallocation has been from peripheral Europe, the US and the UK, to core
Europe, the Nordic countries and, to a lesser extent, Asian and Middle East
issuers. Nevertheless, MMFs retain large exposures to European issuers, with the
average portfolio 75% exposed to Europe.
Fitch believes that further adoption of issuers from non-traditional geographies
will be slow, driven by investment manager and investor preferences and volumes
of issuance in the funds' base currency, rather than credit considerations.
Among Fitch-rated European MMFs, only 12% invest in Middle Eastern issuers and
25% in Asian ex-Japan issuers at end September 2012. Exposure to Asia Pacific
issuers is a growing portion of MMF portfolios across all currencies; increasing
7% on average over the past two years.
Bank rating downgrades, sovereign concerns, and a lessened need for banks'
short-term funding are leading investment managers to consider a wider universe
of potential holdings. Some investment managers are more willing than others to
invest outside of their traditional country range - a function of research
resources and asset managers' caution, amongst other considerations.
Link to Fitch Ratings' Report: Reallocation of European MMF Regional Exposures