The London-based Institutional Money Market Funds Association, or IMMFA, recently sent a survey to members entitled, "Considerations for the future structure of money market funds," asking a number of questions about members preferences regarding potential money fund regulatory and structural changes. IMMFA writes, "The industry and its regulators are in the process of reviewing the key features of money market funds, both in the United States and the European Union." The organization seeks "to enable IMMFA to participate in that review process by seeking views on the future features of the product."
IMMFA says, "The prolonged credit crisis has put unprecedented pressure on money market funds, including both constant net asset value funds (CNAV, e.g. IMMFA funds and 2a-7 funds) and variable net asset value funds (VNAV, e.g. French tresorerie reguliere and dynamic funds, and enhanced yield funds). In particular, a large number of money market funds have experienced significant shareholder redemptions. In the absence of liquid markets, those funds have found it difficult to sell assets at fair value prices to meet redemption payments." IMMFA says some funds have been suspended and others have received sponsor support.
It says, "From the perspective of money market fund sponsors, the cost of providing support to their funds had not been factored into their fee, and consequently calls into question the economic viability of the current product structure. From the perspective of central banks, the systemic importance of money market funds had not been properly appreciated, and consequently calls into question whether and under what conditions, it is reasonable for funds to expect central bank liquidity support.
Questions include: Should the maximum WAM be altered? Should a "formal minimum maturity ladder for liquidity purposes" be implemented? Should IMMFA funds "be subject to formal individual shareholder and client segment concentration limits" or "be subject to more stringent diversification limits?" The survey also asks whether shareholders should bear the costs of any credit events, and whether "IMMFA funds should continue to maintain a constant net asset value." Finally, they also ask whether funds should create "loss reserves" to protect against future credit events.
