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Fitch Affirms 38 European Money Market Funds at 'AAAmmf' on Peer Review
March 20, 2015 / 5:46 PM / in 3 years

Fitch Affirms 38 European Money Market Funds at 'AAAmmf' on Peer Review

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: Fitch Affirms 38 European Money Market Funds at ‘AAAmmf’ on Peer Review here PARIS, March 20 (Fitch) Fitch Ratings has affirmed 38 European money market funds' (MMFs) 'AAAmmf' ratings, following a review of the sector. Collectively, the 38 MMFs held approximately EUR329bn of assets under management at end-February 2015 and are managed by Aberdeen AM, Amundi, BNP Paribas AM, Dreyfus, CCLA IM, Federated Investors (UK) LLP, Federated International Management Limited, Goldman Sachs AM, Ignis AM, Insight IM, JPMorgan AM, L&G IM, Morgan Stanley Investment Management, Natixis AM, Invesco and SSgA. The 38 funds and related ratings are listed below. The rating actions worksheet available through the link above provides a full list of ratings affirmed, a hyperlink to each MMF monthly monitoring factsheet 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 result mainly due to seasonal cash outflows. The funds also limit their individual repurchase agreement (as a means of investment) exposures to individual counterparties to 25% of total fund's assets, provided the counterparties are rated 'A' and/or 'F1' or higher and that such transactions are fully collateralised by high credit quality and liquid government securities. At end-February 2015, 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. Among issuers that are on average most held by Fitch-rated MMFs, certain banks are on Negative Outlook reflecting Fitch's view of declining state support. These include ING Bank, Deutsche Bank, ABN Amro Bank, Lloyds, Societe Generale and Bank of America. Fitch expects to review these banks' ratings in 1H15 so that their Long-term Issuer Default Ratings are likely to be based on the Viability Ratings, currently 'a' for the first three, and 'a-' for Lloyds, Societe Generale and Bank of America. Fitch will monitor how MMF managers who have exposures to those banks proactively manage them. The funds' cash balances are held at their custodian banks (all rated 'A' or higher). Certain funds may, at times, have temporary high levels of non-invested cash left with their custodian banks, in excess of Fitch's concentration guidelines for 'AAAmmf' funds. Fitch sees, however, the resulting concentration risk as being mitigated by the segregation of fund's assets under custody and by the adequate operational set-up ensuring instant access to such cash. Nonetheless, the protection of investors resulting from custodian regulation and whether a fund's assets are being ring-fenced from its custodian assets depends on the fund's jurisdiction. Fitch is assessing the risk associated with non-invested cash positions and will comment as appropriate. 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 achieve a return in line with prevailing money market rates while aiming to preserve capital consistent with such rates and to maintain a high degree 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 ratings of the funds. 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 Global Liquidity Funds plc - Euro Liquidity Fund, affirmed at 'AAAmmf' Aberdeen Global Liquidity Funds plc - Sterling Liquidity Fund, affirmed at 'AAAmmf' 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' BNY Mellon U.S. Dollar Liquidity Fund, 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' Federated Short-Term U.S. 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' 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' Contact: Charlotte Quiniou, CFA Director +33 1 44 29 92 81 Fitch France SAS 60 rue de Monceau 75008 Paris Committee Chairperson Ian Rasmussen Senior Director +1 212 908 0232 Media Relations: Athos Larkou, London, Tel: +44 203 530 1549, Email: athos.larkou@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. Applicable Criteria and Related Research: Global Money Market Fund Rating Criteria here 2015 Outlook: Money Market Funds here Money Market Funds (MMF) Snapshot - End-January 2015 here European MMF Quarterly - 4Q14 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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