A press release comments, "Fitch Ratings says today that European money market funds are facing continuing low interest rate and market challenges which have forced some fund managers to make fresh adjustments to the exposure and tenure of certain investments, particularly those in Spain and Portugal. Despite the view of many market participants that euro, sterling and US Dollar interest rates will remain on hold until at least the end of 2010, MMFs have not taken this opportunity to position themselves longer on the yield curve, Fitch says in its latest 'European Money Market Funds Quarterly' newsletter for Q210. As a result, the weighted average maturity of 'AAA'-rated European money market funds has been much lower than would be expected in such a stable rate environment." Roxana Mahboubian, Director in Fitch's Fund and Asset Manager Rating group, says, "Money market fund managers have had the opportunity to build additional yield into their funds, however, the risk-return trade-off has been deemed unattractive in the current market environment. The greater focus has been on managing a high level of liquidity, including overnight exposure, and managing credit risk through lower tenors. As uncertainty over the redemption activity of MMFs continues and liquidity risk is a concern, MMFs are building cash positions close to levels last seen at the height of the 2008 financial crisis."
