JP Morgan To Offer All European Fund Options; ICI MMF Holdings Update – Crane Data LLC

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A press release entitled, “J.P. Morgan Global Liquidity Announces Intended Money Market Fund Changes in Response to New European Regulations,” tells us, “J.P. Morgan Asset Management (JPMAM) today announced their intent to respond to the fund changes required by the incoming European Union Money Market Fund (MMF) Regulations. The new regulations will require providers to make a number of changes to their funds in terms of structure, composition, valuation, liquidity requirements and information reporting.” J.P. Morgan Asset Management, the largest manager of money market funds in Europe with $178 billion and the second largest manager globally with $425 billion, is the first fund complex to announce plans to offer a full fund lineup under the pending new European money fund regulations. We review JPMAM’s release and European MMF options, as well as ICI’s new “Money Market Fund Holdings” update, below.

Jim Fuell, Head of Global Liquidity Sales, International, at J.P. Morgan Asset Management comments, “As a first mover in announcing our intent to offer our clients complete optionality under the recategorisation required by the new regulations, we’re well positioned to continue to offer clients the benefits of short-term liquidity investing with a comprehensive range of products…. Our liquidity fund range investment options will evolve to allow us to provide choices to USD, GBP and EUR investors across all categories including public debt constant net asset value (CNAV), low volatility net asset value (LVNAV) and variable net asset value (VNAV) funds. These changes to the fund range will have no impact on the investment profile or philosophy of any of our funds.”

The release explains, “Under the new rules, MMFs will be split into two types, with three structural options available to investors. The new regulations will also preserve Constant Net Asset Value (CNAV) for government funds and will create a new type of fund — Low Volatility Net Asset Value (LVNAV).”

Kerrie Mitchener-Nissen, Head of Product Development, International, adds, “Having successfully introduced wide-ranging reforms for MMFs in the US in October 2016, we are bringing a high level of experience, knowledge and skill to the program in Europe, and we are committed to making the transition to the new regime as smooth as possible for our investors.”

The release also says, “While existing MMFs have until 21 January 2019 to comply with the new rules, J.P. Morgan Asset Management intends to be fully compliant well ahead of the implementation deadline in order to support its clients through the transition to the new regime, with fund changes at this time planned to go into effect in the fourth quarter of 2018.”

An accompanying document, “Fund Range Options: European Money Market Fund Regulation,” explains, “The new European Money Market Fund (MMF) Regulations will require providers to make a number of changes to their funds in terms of structure, composition, valuation, liquidity requirements and information reporting. As a result, clients investing in the short-term space will benefit from greater optionality. Under the new rules, MMFs will be split into two types, with three structural options available to investors. The new regulations will also preserve Constant Net Asset Value (CNAV) for government funds and will create a new type of fund — Low Volatility Net Asset Value (LVNAV).”

It states, “While existing MMFs have until 21 January 2019 to comply with the new rules, J.P. Morgan Asset Management intends to be fully compliant ahead of the deadline in order to support its clients through the transition to the new regime.”

The “Fund Range Options” document notes, “Under the new regulation, J.P. Morgan Asset Management’s liquidity fund range will evolve. Below is a summary of the planned fund range options we intend to offer in the short-term space for USD, GBP and EUR investors.” The “Planned fund range options” include: “Public Debt Constant Net Asset Value (CNAV) funds in USD (treasury and govt), GBP (gilt) and EUR (continuing to evaluate investor demand); Low Volatility Net Asset value (LVNAV) funds in USD, GBP and EUR (all credit); and Variable Net Asset Value (VNAV) funds in USD (treasury, govt and credit), GBP (gilt and credit) and EUR (credit).

Finally, Fuell adds, “Our MMFs range is well positioned to allow clients to capitalise on the opportunities represented by the new regulation…. As our clients continue to reap the benefits offered by MMFs, we are pleased to be able to offer them a comprehensive range of products to help them maximise the impact of their short-term cash.”

In other news, the Investment Company Institute released its latest monthly “Money Market Fund Holdings” summary (with data as of Oct. 31, 2017) Wednesday. This monthly update reviews the aggregate daily and weekly liquid assets, regional exposure, and maturities (WAM and WAL) for Prime and Government money market funds. (See too Crane Data’s Nov. 13 News, “Nov. Money Fund Portfolio Holdings: Treasuries Jump Again, CDs Higher.”)

The MMF Holdings release says, “The Investment Company Institute (ICI) reports that, as of the final Friday in October, prime money market funds held 23.7 percent of their portfolios in daily liquid assets and 43.3 percent in weekly liquid assets, while government money market funds held 57.4 percent of their portfolios in daily liquid assets and 77.3 percent in weekly liquid assets.” Prime DLA decreased from 30.0% last month and Prime WLA decreased from 45.0% last month.

ICI explains, “At the end of October, prime funds had a weighted average maturity (WAM) of 30 days and a weighted average life (WAL) of 72 days. Average WAMs and WALs are asset-weighted. Government money market funds had a WAM of 30 days and a WAL of 82 days.” Prime WAMs remained the same from the prior month, and WALs were up one day. Govt WAMs decreased by 2 days and Govt WALs decreased by 4 days from last month.

Regarding Holdings By Region of Issuer, ICI’s release tells us, “Prime money market funds’ holdings attributable to the Americas fell from $177.68 billion in September to $169.04 billion in October. Government money market funds’ holdings attributable to the Americas fell from $1,781.12 billion in September to $1,720.51 billion in October.”

The Prime Money Market Funds by Region of Issuer table shows Americas-related holdings at $169.0 billion, or 37.9%; Asia and Pacific at $88.8 billion, or 19.9%; Europe at $184.1 billion, or 41.2%; and, Other (including Supranational) at $4.4 billion, or 1.0%. The Government Money Market Funds by Region of Issuer table shows Americas at $1.721 trillion, or 77.8%; Asia and Pacific at $102.1 billion, or 4.6%; and Europe at $384.7 billion, or 17.4%.

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