Global money market fund (MMF) reform has made a significant step forward this year, as changes in Europe follow on from the conclusion in 2016 of MMF reforms in the US, reports Fitch Ratings.

The credit ratings agency (CRA) is discussing the impact of MMF reform on cash investment at a conference in South Africa and says the two jurisdictions matter, as they account for the lion’s share of MMF assets globally.

South Africa’s MMF regulation has yet to move as much as in other jurisdictions, which means that stable price funds remain the norm, comments Fitch. Cash investors value the utility of stable pricing for operational and accountancy reasons.

Faster growth

Speaking at today’s Nedgroup Investments Treasurers’ Conference in Johannesburg, Alastair Sewell. Fitch’s head of EMEA fund and asset manager ratings is highlighting the importance of major changes in the MMF industry globally and their implications for investing cash in South Africa.

“South Africa stands out for its sophistication – as in the major global MMF domiciles, corporate treasurers, are the cornerstone of the industry,” says Sewell. “Their presence brings growth and it brings resilience to the industry. MMF assets have grown faster in South Africa than in MMFs globally as the South African investor base has institutionalised.

“More fundamentally, these investors, like corporate treasurers around the world, demand timely liquidity and principal preservation – the core principles to which we rate funds, and the core objectives which, when delivered by managers who understand these needs, bring resilience.”

Sean Segar, head of cash solutions at Nedgroup Investments, comments: “The uptake of MMFs as a tool for corporates and other institutional investors to put idle cash to work means that the South African money market industry is well supported, in good shape and positioned as an attractive and stable alternative for liquidity management.

“The added benefit of a very robust regulatory framework puts us in the unique position of being able to adopt a ‘wait and see’ approach to the reforms playing out in the US and Europe with a view to implementing value-adding best practices here. This is crucial given the current backdrop against which South African corporates and treasurers are using MMFs – essentially as a haven for cash reserves.”