The Financial Times writes, "EU Cash Investors Navigate Negative Rates," which says, "Investors who want to safeguard their capital using ultraconservative money market funds are having to choose racier assets to avoid losing money. The E1tn European money market fund industry provides a cash reservoir from which companies and banks can deposit or borrow short-​term money. Many euro-​denominated money market funds are already yielding near negative returns -- in effect charging investors -- as they track the record-​low lending rates set by the European Central Bank. In response, growing numbers of investors seeking short-​term security are having to buy longer-​dated or lower quality assets, according to fund managers. "The main driver has been the desire for investors to make their cash investments work harder for them," said Jason Straker, a portfolio manager at JPMorgan Asset Management. "​Money market funds tend to invest only in top credit rated instruments, whereas a separately managed account offers the ability to step out of this level of credit rating and thus achieve better returns, albeit moving up the risk curve slightly." The number of separately managed money market accounts has more than doubled over the past three years and they now account for nearly a fifth of JPMorgan'​s $​538bn global money market business, according to the company. Last month a report by Moody'​s, the rating agency, warned that in spite of waiving management fees many euro-​denominated funds were poised to go to negative yields before Christmas. "It'​s a paradigm shift -- clients are not used to paying for liquidity," said David Callahan, head of money markets at Lombard Odier, which manages about E4bn. "We are looking at a fund with looser investment guidelines both further out the curve and further down the credit spectrum to try and pick up more yield."" The article continues, "The decline into negative territory followed the decision by the ECB in June to cut its deposit rate below zero -- the first central bank in the world to take such action -- in effect, charging banks to park their surplus funds there. In September, the ECB increased its levy on banks from 0.​1 per cent to 0.​2 per cent. But in spite of slim or non-​existent returns, investors continue to find money market funds attractive, in part because of their "​haven" status and also because some custodian banks are charging clients to deposit their cash reserves."

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