Fitch Affirms UBS Euro MMF AAAs
Fitch Ratings on Feb. 22 affirmed top ratings for four funds managed in Ireland by UBS Asset Management. The action followed the funds’ conversion under the European money market fund reform. Fitch listed the funds involved: "UBS (IRL) Select Money Market Fund - EUR: affirmed at 'AAAmmf' following its conversion to low volatility net asset value (LVNAV); UBS (IRL) Select Money Market Fund - GBP: affirmed at 'AAAmmf' following its conversion to LVNAV; UBS (IRL) Select Money Market Fund - USD: affirmed at 'AAAmmf' following its conversion to LVNAV; and UBS (IRL) Select Money Market Fund - US Treasury: affirmed at 'AAAmmf' following its conversion to public debt constant net asset value (public debt CNAV)." A release explains, "The funds completed their conversion on 18 Feb., 2019. The euro fund is permitted by the Central Bank of Ireland to continue to use the reverse distribution mechanism until 21 March, 2019. The funds are sub-funds of the Irish-domiciled umbrella fund, UBS (IRL) Fund Plc, registered and authorised by Central Bank of Ireland as an UCITS." The subject of options facing managers of euro-based funds no longer being able to use the cited RDM to cope with a prolonged period of negative fund yields was addressed during a Webcast earlier this month. (See our Feb. 1 News, "Fitch Discusses European MMF Reform Delay; ICI: Money Fund Assets Fall.") Fitch analysts mention, "The end of RDM renders euro-denominated LVNAVs and public-debt CNAVs with distributing (or stable price) share classes untenable. Potential solutions include converting euro CNAVs to short-term variable NAV funds or LVNAVs with accumulating ('decumulating' in fact given the negative yield environment in euros) share classes only. Accumulating (variable price) share classes comprised only 22% of euro Prime AUM to be converted, with the rest being distributing share classes," as of Jan. 11, said Fitch. They have "not seen any material changes to key metrics such as assets under management, overnight and weekly liquidity, following the conversion," the agency noted. Additionally, "The funds seek to maintain diversified, high credit quality portfolios consistent with Fitch's criteria for 'AAAmmf'-rated MMFs." The funds seek to maintain high levels of overnight and weekly liquidity in excess of the minimum levels specified in Fitch's applicable rating criteria. Fitch's analysis of the UBS MMFs before conversion shows overnight and one-week liquidity levels consistently above the agency's applicable rating criteria. Reported liquidity levels, in addition to assets under management, have been broadly stable across the funds in the run-up to, and few days after, the conversion." (See our Jan. 22 News, "European MMF Reforms Going Live, or Not? Economist Swipes at RDM Kill Our News" for more.)
