The total asset of
money market funds (MMFs) under European manager’s control stood at €1.44 trillion (tn) in
2021, the European Securities and Markets Authority (ESMA) disclosed in its
inaugural market report on European Union MMFs published on Wednesday. The
securities market regulator noted that 89% of the funds are domiciled in France, Luxembourg and Ireland.
The market report is
ESMA’s first “comprehensive market-level” report on the continent’s money market funds and is based on
regulatory data collected by the EU’s National Competent Authorities and ESMA.
In the report, ESMA
divided money market funds operating in the continent into three categories:
low-volatility net asset value (LVNAV), variable net asset value (VNAV) and
constant asset value (CNAV).
According to the
regulator, LVNAV, which invests in a broader range of assets such as
commercial papers, certificates of deposit and other short-term assets,
accounted for almost half (46%) of the total assets. LVNAV’s investment range
surpasses that of CNAV, ESMA said.
LVNAV’s asset percentage is closely
followed by VNAV which accounted for 42% of the total assets in 2021. ESMA
defines VNAV as money money funds whose value are based on current market
prices. This type of money fund invests in a range of money market instruments such as government debt, commercial papers and certificate of deposits, ESMA noted.
Watch the recent FMLS22 session on trends that will define fintech regulation in 2023.
Of the three types of
money market funds, CNAV accounted for the least assets, with their value
standing at just 12% in 2021. This type of mutual fund invests at
least 99.5% of their assets in government debt and repurchase agreements collateralized
by government debt or cash.
“All MMFs domiciled
in France are of the VNAV type and almost exclusively denominated in EUR. MMFs
in Luxembourg and Ireland are mainly in non-EU currencies and set up mostly as
CNAVs and LVNAVs. MMFs authorized in other EU jurisdictions are VNAVs
denominated in other EU domestic currencies and account only for a small
fraction of assets,” ESMA further explained.
Who Invests in Money
Market Funds in Europe?
According to ESMA’s
report, more than 90% of investors in money market funds in the continent are
professional investors.
“Financial
corporations are the main unitholders of MMF shares, with insurance firms,
pension funds and banks accounting together for 25% of NAV and other financial
institutions, including collective investment undertakings, for 45% of the
NAV,” ESMA explained.
Meanwhile, the securities regulator recently proposed changes to test scenarios applied to money market funds
in the continent. ESMA is currently consulting with the
public on this and will stop accepting feedback from industry
stakeholders after April 28, 2023.
The total asset of
money market funds (MMFs) under European manager’s control stood at €1.44 trillion (tn) in
2021, the European Securities and Markets Authority (ESMA) disclosed in its
inaugural market report on European Union MMFs published on Wednesday. The
securities market regulator noted that 89% of the funds are domiciled in France, Luxembourg and Ireland.
The market report is
ESMA’s first “comprehensive market-level” report on the continent’s money market funds and is based on
regulatory data collected by the EU’s National Competent Authorities and ESMA.
In the report, ESMA
divided money market funds operating in the continent into three categories:
low-volatility net asset value (LVNAV), variable net asset value (VNAV) and
constant asset value (CNAV).
According to the
regulator, LVNAV, which invests in a broader range of assets such as
commercial papers, certificates of deposit and other short-term assets,
accounted for almost half (46%) of the total assets. LVNAV’s investment range
surpasses that of CNAV, ESMA said.
LVNAV’s asset percentage is closely
followed by VNAV which accounted for 42% of the total assets in 2021. ESMA
defines VNAV as money money funds whose value are based on current market
prices. This type of money fund invests in a range of money market instruments such as government debt, commercial papers and certificate of deposits, ESMA noted.
Watch the recent FMLS22 session on trends that will define fintech regulation in 2023.
Of the three types of
money market funds, CNAV accounted for the least assets, with their value
standing at just 12% in 2021. This type of mutual fund invests at
least 99.5% of their assets in government debt and repurchase agreements collateralized
by government debt or cash.
“All MMFs domiciled
in France are of the VNAV type and almost exclusively denominated in EUR. MMFs
in Luxembourg and Ireland are mainly in non-EU currencies and set up mostly as
CNAVs and LVNAVs. MMFs authorized in other EU jurisdictions are VNAVs
denominated in other EU domestic currencies and account only for a small
fraction of assets,” ESMA further explained.
Who Invests in Money
Market Funds in Europe?
According to ESMA’s
report, more than 90% of investors in money market funds in the continent are
professional investors.
“Financial
corporations are the main unitholders of MMF shares, with insurance firms,
pension funds and banks accounting together for 25% of NAV and other financial
institutions, including collective investment undertakings, for 45% of the
NAV,” ESMA explained.
Meanwhile, the securities regulator recently proposed changes to test scenarios applied to money market funds
in the continent. ESMA is currently consulting with the
public on this and will stop accepting feedback from industry
stakeholders after April 28, 2023.