In a recent release from London entitled, "Moody's highlights regulatory action on 'shadow pricing' of money funds," the ratings agency said, "The US Securities and Exchange Commission and the Irish Financial Services Regulatory Authority have separately announced modifications to their regulation of the money market funds that would permit funds, on an interim basis, to apply amortized cost accounting for calculating prices of underlying securities, subject to important conditions. Specifically, the two authorities have reiterated the continuing obligations on the funds' boards of directors or fund directors, as the case may be, to first assess and then decide on the calculation method, amortized value or marked-to-market, used by the fund in determining the shadow prices of certain eligible securities. Eligible securities are defined as those with short term maturities (60 days or fewer and 90 days or fewer for the US and Irish based funds, respectively); and which the fund expects to hold in its portfolio until maturity."
It adds, "Moody's recognizes that boards of directors have a legitimate concern in assessing the economic value of assets that the fund intends to hold until maturity. In the case that amortized-cost accounting is being used by a fund, Moody's would expect to receive such valuations, and the rationale for using such method, and will include these in its analysis. However, while the economic value is an important consideration, in times of stress the liquidation price may be more relevant. This is especially true given the risk that disruptive market conditions may lead simultaneously to accelerated redemptions and realized losses on forced sales of securities. In order to dimension these risks, Moody's will continue to request from rated funds information on the marked-to-market value of all securities held in their portfolios and will use that information in its analysis."
Moody's also recently assigned a Aaa rating to Tamarack Prime Money Market Fund. Its release says, "The fund, managed by Voyageur Asset Management Inc., commenced operations in 1991, and as of October 15 has $10.2 billion in assets. The Aaa rating reflects not only the fund portfolio's high quality of investments, but also Voyageur's conservative risk-controlled investment approach and effective liquidity management. In addition, the adviser benefits from very experienced portfolio management and research teams. Voyageur has avoided all credit and liquidity issues over the last year.... Tamarack Prime is a retail fund with a very diversified client base, sourced primarily from RBC's wealth management and corporate trust clients, and fund net assets have been stable-to-growing."
