VNAVs are a “stable place” to park money
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LATIF 2015. Photo: Tina Miguel
Local authorities should consider variable net asset value money market funds as an option for investing core cash for periods of three months or longer, according to a speaker at Room151’s Local Authority Treasurers’ Investment Forum.
Speaking to delegates at the event held in London last week, Robin Creswell, chief executive at investment manager Payden & Rygel, said that VNAVs are a good alternative to lower yielding constant asset net asset value funds.
He advised councils to consider the option in response to increasingly low rates paid on deposits for non-operational cash by banks.
Cresswell said: “Bank deposits are not good value and they lead to too much concentration. Constant NAV MMFs yield 30 to 50 basis points net and are AAA rated so they do have a role.
“However, variable NAV MMFs release managers from the very tightest constraints. They prevent them being forced into that very ultra short space where there is a lack of available securities that are most highly priced where you get the worst value. ”
He said that VNAV funds are increasingly attractive as treasurers become more adept at anticipating their cash flows.
“If you have core money that is going to be around 120 days or longer, a variable nav fund is a good stable place to park your money,” he said.
In addition, Cresswell said that treasurers could still call cash invested in VNAVs at short notice, even if they anticipated holding it for longer.
He said: “Just because you don’t anticipate calling it, it doesn’t mean you can’t call it. You can still call it. Everything we suggest we think should be called at 24 hours’ notice.”
During a separate presentation, Gavin Haywood, director at asset manager Federated Investors, told delegates that legislation passing its way through the European Parliament aimed at regulating the MMF market was unlikely to kill off CNAV funds.
He said: “We are very confident, irrespective of what happens, that we will be in a position to offer CNAV products. We will be focused on ensuring that for our clients nothing very much is going to change.”
