European MMFs Post-Reform

European post-reform highlights

1. The European Money Market Fund Regulation (EU) 2017/1131 (the Regulation) was implemented in full on 21 March 2019.

2. As predicted, IMMFA investors remained invested overwhelmingly in the same funds as they were in prior to reform:

Responding to the ban on using share cancellation to handle negative yield, also known as the Reverse Distribution Mechanism or RDM, most investors chose an Accumulating share class of a Low Volatility Net Asset Value (LVNAV) for their Euro investment, in place of the curtailed Distributing share class. Demand for a short-term Variable Net Asset Value (VNAV) option was very limited amongst investors in constant NAV funds.

3. Assets in the European money market fund (MMF) industry continued to show steady growth for constant NAV funds. VNAV fund balances have remained steady since the Regulation was confirmed in 2017.

4. The VNAV sector continues to be dominated by French domiciled standard VNAV MMFs, which are distinct from IMMFA MMFs, the overwhelming majority of which are short-term MMFs.