After last year’s fun and games in the world of money market funds, when it turned out they were not as stable and secure as everyone thought, there is a rush to come up with new classifications, in an attempt to make them less risky and also to make sure everyone agrees on what a money market fund is.
The latest is the UK’s Association of British Insurers, which has created a new category of investment funds: the Treasury & Deposit sector. These can be distinguished from your regular money market fund by the fact that they must be 100 per cent invested in money market instruments (compared to 95 per cent for regular MMFs) and have stability of capital as their over-riding objective.
The ABI definition is supported by the Investment Management Association and was developed in consultation with the Financial Services Authority. So at least there should be some consistency within the UK market.
How closely aligned the new classification is with that mooted by the European Fund and Asset Managers’ Association and the Institutional Money Market Funds Association, or that of the French trade association AFG, or whatever the US Securities and Exchange Commission eventually comes up with, is a challenging question to puzzle over as the autumnal evenings draw in and we have time to compare these documents.