Moody’s reveal MMF strategies in H2 2011
0Sterling-denominated Money Market Funds (MMFs) slightly increased their exposure to A2-rated securities in the second half of 2011.
Data from Moody’s showed that while funds still kept their investment approach conservative, with continued reductions in exposure to European bank debt, more managers adopted a barbell strategy, increasing investment in the A2-rated securities from 5% to 10%. Investments in Aaa-rated securities increased by 15%.
During the period exposure to longer-dated securities with over six month maturity declined to below 2% from 6%.
On average 40% of Euro-denominated MMFs were in Aa3-rated securities, reflecting these funds’ exposure to financial institutions. The second half of last year did, however, see the funds increase exposure to Aaa-rated European sovereigns and sub-sovereigns by 5%.
US dollar denominated MMFs had reduced their exposure to European financial institutions to $185 billion in December 2011, from about $477 billion at its peak in April 2011.
“Due to market concerns regarding the strength of the banking sector, coupled with the ongoing uncertainty concerning European sovereign debt, towards the end of 2011 most prime money market funds increased their investments in highly rated securities, reduced exposures to European banks, maintained very high levels of overnight liquidity and decreased investment in longer-dated securities,” said Moody’s VP Vanessa Robert.
