New MMF types

New EU MMF types

There are now four types of EU MMF under the new Regulation.MMFs are also divided into two categories, short-term and standard. Short-term MMFs are more conservative.

Public Debt CNAV

Public Debt Constant Net Asset Value (CNAV) MMFs are short-term MMFs.Funds must invest 99.5% in government assets. Units in the fund are purchased or redeemed at a constant price rounded to the nearest percentage point.

LVNAV

Low Volatility Net Asset Value (LVNAV) MMFs are short-term MMFs.Funds are primarily invested in money market instruments, deposits and other short-term assets. Units in the fund are purchased or redeemed at a constant price so long as the value of the underlying assets do not deviate by more than 0.2% (20bps) from par (i.e. 1.00).

Short Term VNAV

Short-term Variable Net Asset Value (VNAV) MMFs are primarily invested in money market instruments, deposits and other MMFs. Funds are subject to looser liquidity rules than Public Debt CNAV and LVNAV funds. Units in the funds are purchased or redeemed at a variable price calculated to the equivalent of at least four significant figures (e.g. 10,000.00).

Standard VNAV

Standard MMFs must be VNAV funds.Funds are primarily invested in money market instruments, deposits and other short-term assets. Funds are subject to looser liquidity rules than Public Debt CNAV and LVNAV funds AND may invest in assets of much longer maturity.Units in the funds are purchased or redeemed at a variable price calculated to the equivalent of at least four significant figures (e.g. 10,000.00).

EU MMFs are open-ended investment vehicles, typically authorised under the EU UCITS funds legislation.

The EU MMF Regulation does not make any reference to either fund or portfolio external credit rating requirements. Throughout the transition EU MMFs overwhelmingly retained their existing ratings, and the credit rating agencies have confirmed their commitment to the MMF-specific rating criteria they each maintain.