EFAMA, the European Fund and Asset Management Association, recently published its annual "Fact Book," which includes a wealth of statistics on European-domiciled funds and a section on European money market funds. The press release titled, "EFAMA's 2025 Fact Book shows consistently declining fund costs and a steady shift towards larger funds," tells us, "EFAMA ... published its 2025 industry Fact Book. This year's edition includes an in-depth analysis of trends in the European investment fund industry (for 2024 and over the longer term) and an extensive overview of regulatory developments across 29 European countries. It also contains a series of info-boxes addressing some important regulatory topics EFAMA is actively working on, including retail investment, sustainability reporting, securitisation, financial data access, DEBRA, AI and tokenisation." See the full EFAMA 2025 Fact Book here. (Note: Please join us for our European Money Fund Symposium, which is Sept. 22-23, 2025 in Dublin, Ireland. Registrations are still being accepted and our discounted hotel rate expires July 28.)
EFAMA Director General Tanguy van de Werve comments, "Each year, the EFAMA research team expands its analysis of the European investment fund industry in the Fact Book. Amid the wealth of data and insights it offers, some emerging trends that might otherwise fly under the radar deserve attention. These include the strong growth of closed-ended AIFs in recent years, the waning popularity of sector-specific equity funds and inflation-linked bond UCITS, and the steady increase in cross-border fund ownership among European households, to name just a few."
The section on "Money Market Fund UCITS," explains, "Net assets of money market funds (MMFs) ended the year above EUR 2 tn. In 2024, net sales rose to an absolute record (EUR 226 bn), beating the previous record of pandemic year 2020 (EUR 215 bn). The surge was largely driven by an inverted yield curve, which persisted for much of 2024. An inverted yield curve indicates that short-term interest rates are generally higher than long-term rates, resulting in a higher yield for funds that invest primarily in short-term products -- such as MMFs -- hence their appeal to investors in 2024. Additionally, these strong inflows suggest that some investors opted for MMFs as a cash alternative, maintaining a wait-and-see approach to weather geopolitical uncertainties."
It continues, "Net asset growth of MMFs amounted to 19% in 2024.... Fluctuations in short-term interest rates have a significant impact on demand for MMFs. MMFs mainly invest in very short-term debt, often with a maturity of less than one year. When short-term interest rates rise, MMF yields typically follow, making them more attractive to investors.... Demand for MMFs is also shaped by other factors, particularly their role as a 'safe haven' during periods of market uncertainty. This was clearly demonstrated in 2020, when despite short-term rates remaining largely unchanged, uncertainty surrounding the COVID-19 pandemic drove high net inflows into MMFs."
EFAMA writes, "The average annual costs of MMFs decreased from 0.14% in 2020 to 0.10% in 2021, before rising to 0.17% in 2024. These rising costs in recent years may be attributable to exchange rate fluctuations. Despite the increases, ongoing charges remain very low in comparison to most long-term funds.... The average annual net performance of MMF UCITS was exceptionally high in 2024, reaching 7.8%, the highest in the past five years. Moreover, they performed well in 2022, with MMF returns remaining positive at 1.6% while all long-term UCITS experienced negative returns."
Their Fact Book continues, "The MMF market is highly concentrated in three key domiciles. Ireland holds the largest share of UCITS MMF net assets at 43%, followed by Luxembourg at 29% and France at 21%. Together, these three countries accounted for 93% of the European total at end 2024."
It says, "The EU MMFR ('Money Market Fund Regulation') was adopted in 2016 and came into full effect in January 2019. The MMFR distinguishes between three main categories of MMFs: Public Debt Constant Asset Value (PDCNAV) MMFs; Low Volatility Net Asset Value (LVNAV) MMFs; and, Variable Net Asset Value (VNAV) MMFs. These categories aside, the MMFR also distinguishes between Short-term and Standard MMFs. Short-term MMFs must adhere to tighter investment rules than Standard MMFs. All three types can be categorised as Short-term MMFs; Public Debt CNAV, LVNAV and Short term VNAV. Standard MMFs must be variably priced. Thus only VNAV can be Standard MMFs."
EFAMA explains, "PDCNAV and LVNAV MMFs use amortised cost accounting -- provided certain conditions are met -- to value all their assets and to maintain a net asset value (NAV) or value of a share of the fund, at EUR1/GBP1/USD1. Public Debt CNAV MMFs must invest a minimum of 99.5% of their assets in public debt. Units/shares in an LVNAV MMF can be purchased or redeemed at a constant price, as long as the value of the assets in the fund does not deviate by more than 0.2% from par. Public Debt CNAV and LVNAV can only be short-term MMFs. VNAV MMFs refer to funds that use mark-to-market accounting to value some of their assets. The NAV of these funds will vary with the changing value of the assets and - in the case of an accumulating fund -- by the level of income received. VNAV can be either short-term or standard MMFs."
Discussing "Asset allocation -- Currency Breakdown," they write, "MMFs net assets can be broken down by base currency. Collectively, three primary base currencies accounted for 99.5% of UCITS net assets at end 2024. The EUR held the predominant position with 43.8% of net assets, followed by USD at 37.4% and GBP at 18.3%. The proportion of EUR MMFs declined from above 45% in 2014 to 40.5% in 2022, as the demand for USD and GBP MMFs increased over the same period. This was influenced by generally higher interest rates in those currencies. In 2023, the market share of GBP MMF declined from 23.6% to 19.4%, while the shares of EUR MMFs and USD MMFs increased. This trend continued in 2024."
EFAMA says, "In 2024, investors demonstrated a strong preference for short-term USD and EUR MMFs, each attracting EUR 72 bn in net inflows. Short-term GBP MMFs saw more modest inflows (EUR 25 bn). As in previous years, short-term MMFs represented the majority of total MMF sales.... `Net sales of Standard MMFs were relatively flat over the year, with the exception of standard EUR MMFs, which attracted EUR 37 bn in net new money. These standard EUR VNAV MMFs are predominantly used in France, where they serve as a key cash management tool for many French corporations."
On "Asset Allocation," the piece tells us, "At end 2024, an overview of MMFs holdings by geographical region shows that 38% of the short-term paper held by UCITS MMFs was issued in Europe. The US accounted for 32%, with Asia-Pacific region 17%. Another 13% was issued in other countries, predominantly Canada in this case.... US issuers of short-term paper accounted for the largest share of MMF assets at 32%, followed by short-term securities issued in France (20%) and Australia (14%). Canada (12%) and the UK (5%) complete the top five."
Finally, EFAMA comments, "European MMFs have experienced significant shifts in the maturity composition of their asset holdings over the past decade. Given that most MMF fixed-income investments usually have a maturity of less than one year, the maturity breakdown can change entirely from one year to the next. By end 2024, just over 40% of MMF fixed-income assets had maturities of between three and six months, while a slightly smaller proportion fell within the six-to twelve-month range. Over the past decade, the share of bonds with maturities exceeding one year has generally declined, although it did increase again during 2023. Conversely, although generally quite small, the proportion of fixed-income holdings maturing in under three months has grown recently, rising from 4.1% in 2023 to 8% in 2024."
