RiskBrexitMoody’s: Brexit wouldn’t dent European money market funds

Moody’s: Brexit wouldn’t dent European money market funds

The European money market fund wouldn’t be significantly affected if UK voters support a withdrawal from the European Union in next month’s referendum, says the credit ratings agency.

A ‘Brexit’ wouldn’t prompt any major changes in European money market fund (MMF) managers’ operations, management strategy and total assets under management, according to a survey by Moody’s Investors Service.

If the UK were to vote to leave the European Union (EU) in the June 23 referendum, the US$258bn of MMFs assets managed out of the UK would likely remain there.

The credit ratings agency surveyed 12 EU-based asset management companies about the impact the separation could have on their MMF business. Collectively, these firms manage US$550bn of European constant net asset value (CNAV) MMFs, representing the vast majority of the European CNAV sector and approximately 40% of the entire MMF industry (CNAV and variable net asset value MMFs) in Europe.

“Should the UK decide to leave the EU, it would be a non-event for the European MMF industry,” said Vanessa Robert, a vice president and senior credit officer at Moody’s.

“Most managers surveyed believe that MMFs would be seen as a safe asset class and MMF assets would therefore remain stable or could even benefit from a flight to quality amid uncertainty in the financial markets,” added Marina Cremonese, a vice president and senior analyst at Moody’s. “That said, half of the respondents would still increase their portfolio
liquidity ahead of the vote.”

According to 89% of the asset managers surveyed, a Brexit would not prompt a relocation of management functions. However, respondents said it will be critical for asset managers to maintain the Undertaking for Collective Investments in Transferable Securities ( UCITS ) passport because nearly half (48%) of all European CNAV MMF assets are sold to
non-UK clients through the passporting facility.

If the UK were to leave the EU, distribution teams would have to be located in one of the EU countries for UCITS MMFs to continue to be distributed in Europe. However, only 18% of asset managers think they would need to strengthen their capabilities in the EU, while the vast majority already have capabilities in place. All respondents consider that their ability to distribute in the UK would not be compromised.

Related Articles

The trends set to define the fintech, banking and finance industry in 2020

Brexit The trends set to define the fintech, banking and finance industry in 2020

6d Pierre-Antoine Dusoulier
Treasury Live: Lord Malloch Brown on the impact of Brexit

Brexit Treasury Live: Lord Malloch Brown on the impact of Brexit

2m Tom Lemmon
What the Brexit extension and UK snap election means for corporate treasurers

Brexit What the Brexit extension and UK snap election means for corporate treasurers

3m Aaran Fronda
London 'to continue as major financial centre despite Brexit'

Brexit London 'to continue as major financial centre despite Brexit'

5m Jay Ashar
Brexit and sterling: hedging strategies for uncertain times

Brexit Brexit and sterling: hedging strategies for uncertain times

1y Jonathan Pryor
UK SMEs increase European business as Brexit looms

Brexit UK SMEs increase European business as Brexit looms

1y The Global Treasurer
80% of businesses expect difficulties in European trading post-Brexit

Brexit 80% of businesses expect difficulties in European trading post-Brexit

2y Laura Noble
The UK’s alternative finance industry remains bullish despite the spectre of Brexit

Brexit The UK’s alternative finance industry remains bullish despite the spectre of Brexit

2y Ricardo Fernandez

Whitepapers & Resources

Transaction Banking Survey 2019

Transaction Banking Survey 2019

4m
TIS Sanction Screening Survey Report

Payments TIS Sanction Screening Survey Report

6m
Enhancing your strategic position: Digitalization in Treasury

Payments Enhancing your strategic position: Digitalization in Treasury

8m
Netting: An Immersive Guide to Global Reconciliation

Netting: An Immersive Guide to Global Reconciliation

11m