Abandoning Stable NAV Deters European Finance Professionals from MMFs

Senior treasury and finance professionals in Europe would not use money market funds (MMFs) if regulatory reform removed the stable net asset value (NAV) and allowed such funds to ‘break the buck’.

This was the key finding of a ‘Treasury Verdict’ session sponsored by JP Morgan Treasury Services, taken by a live audience poll of senior treasury and finance professionals at EuroFinance’s recent conference on international cash and treasury management, held in Monaco.

Only 12% of European finance professionals said that they would invest in MMFs if regulatory reform means that they lose their stable net asset value (NAV) status. As a short-term investment option, MMFs are traditionally only behind bank deposits in terms of popularity, so this represents a potential industry-wide shift in the way that corporates manage their cash.

Katharine Morton, EuroFinance’s managing editor, said: “Obviously the regulators have a tough balancing act on their hands when it comes to MMFs. They rightly want to ensure that this type of instrument is robust and has the confidence of the corporates that are using them. However, the stable NAV is vital for treasurers from a risk management perspective. Tamper with that and they risk critically undermining MMFs.”