Advanced Notice: European Money Fund Summit 2012 takes place in November in Frankfurt

Learn about the Regulatory landscape, Risks, Portfolio construction, Investors requirements and Distribution of the European money market.

The European Money Market landscape is quite challenging at the moment. The Euro crisis undermines trust in governmental institutions and banks. The interbank market could be affected once again. An upcoming recession could decrease the supply of paper being available. The other ongoing challenge is low interest rates.

Funds in Europe operate under clearly defined regulatory landscapes. They are usually set up as UCITS and are subject to the requirements in UCITS legislation and any supplemental regulations imposed in the funds domicile. By next year MMFs must respect the European Securities and Markets Authority (ESMA) guidelines on money market funds as implemented by the regulator in the funds domicile. In general there is a danger that the overall liquidity requirements are a little bit of overkill for the retail funds.

An interesting development is the growth of the fixed-income sector in terms of Assets under Management. Especially short-term money market style funds experience significant growth. The success of these money market ETFs in Europe is driven by daily transparency, relative safety and very low costs. The vehicle is swaps. The diversification is according to UCITS rules. If one takes into account the discrediting of the agency rating system over the past few years which failed to warn investors of the risks in many structure finance securities there is a strong case to search for even safer places to park cash.