Below, we excerpt from an article in the most recent Money Fund Intelligence entitled, "Money Funds in Europe: Q&A w/IMMFA's Le Coz." It says, "Recently, the Committee of European Securities Regulators, or CESR, published a two-tiered definition of money market funds in Europe. Another milestone in money funds' development in Europe also occurs this month as IMMFA, the London-based Institutional Money Market Funds Association which was founded to spread U.S.-style money fund standards, celebrates its 10th anniversary. We wanted to get an update on the status of money funds in Europe, so we interviewed Gail Le Coz, IMMFA's CEO. Our Q&A follows."
First MFI asked, "How will the CESR news impact IMMFA and money funds in Europe? Le Coz responded, "The impact is different for us, as we already had the IMMFA Code of Practice, as well as the guidelines from the ratings agencies in order to maintain the AAA rating. So, we already had our European money market fund rules by virtue of the Code and the rating. With the changes that we made to the Code last year, we have a 60 day WAM, we have a 120 day WAL, we have maturity limits, and we have credit limits by virtue of the credit rating agencies guidelines.... But now, within the short term money market fund subcategory, we will more likely be compared with funds that are purchasing similar types of investments."
She continued, "We were pretty much already there [in regards to the new CESR guidelines]. With certain things, such as the liquidity buckets that we have -- just like 2a-7 -- the CESR guidelines are not as strict. Their guidelines say you need to manage liquidity, but they don't specify minima. So with a lot of the CESR work, we were already there, and in certain instances we're still ahead."
MFI also asked, "In general, how is IMMFA doing on its 10th anniversary?" Le Coz answered, "We've seem phenomenal growth in the European currency funds, the Euro funds and the Sterling funds. We have seen similar types of outflows in Dollar funds as you have seen in the U.S. industry as a whole, which makes sense. This is due to some of the same trends -- you've got very low net yields, you may have people repatriating money back to the U.S., rather than leaving it in London or in Europe, if it's a subsidiary of an American company. But where we've been lucky is the fact that the market for money market funds wasn't quite as mature in the other two currencies. The European market is still growing as people start realizing the benefits of these funds."
We asked, "What makes IMMFA funds different?" She said, "There are a lot of different factors.... CESR is trying to create a European 2a-7 with their new guidelines. Before they did that, there were no specific guidelines in regulation that were as detailed as what our members had to respect by virtue of the Code of Practice.... I think that is what investors look at when they see that a fund is an IMMFA fund. They like the fact that we have these guidelines and they like the transparency.... The whole point of the Code, really, is to insure that the best practice standards are applied across the industry."
Finally, we asked, "What are IMMFA's future priorities? Le Coz answered, "In terms of things that we are working on, clearly we are trying to keep in the center of all of the regulatory debate and discussion around money market funds to ensure that the quality of the product and the information that investors are receiving is the best that they can have.... We have been doing investor outreach. We have been going to more conferences to talk about money market funds, as well as discussing them with investor associations.... We have been explaining what the product is, how it works, and why it's a good idea for someone [such as a treasurer] who's got excess cash to invest."
