A Monetary Fund, the product apparently the simplest and most common, yet still covers in Europe very different realities. Where the joint initiative of the European association (Efama) management and the Association of institutional money funds to attempt to achieve a common definition of this financial product, in theory among the safest. Only, "the financial crisis has demonstrated that the triple objective of a Monetary Fund - preservation of capital, liquidity and performance - could be achieved in phases of acute turbulence," notes the Efama.
His initiative is to maintain confidence for a capital segment for Europe, representing around 30 of the market of management. On the old Continent, it is the France, the Ireland and the Luxembourg are the main markets of domiciliation of monetary products (see illustration). It is therefore for these countries an important issue. The French regulator also refines the final details of its new classification "monetary euro" (read below). "There is in Europe of the quite significant differences in the classification (perimeter, rules, authorized...). monetary funds, which led the Efama to work on a common definition, explains Eric Pagniez, Delegate General Assistant of the French Asso-depreciation of financial management (AFG). Thus, for example, Germany, monetary funds cover a broad enough set, which will funds from regular cash to absolute performance and UCITS short-term bond funds.
Indicator of maturity
The two associations recommend that monetary funds are divided into two sub-categories: regular and Fund Fund short-term. The first should have an average maturity weighted less than or equal to one year and the latter titles less than sixty days. Across the Atlantic, the Monetary Fund face a limit of 90 days. This indicator of maturity is used to measure the sensitivity of a fund to the evolution of interest rates. This is however not the risk that was originally of woes of some Monetary Fund during the financial crisis. What are the risks of liquidity and credit. The latter is apprehended through an indicator evaluating the time after which the principal amount of the duty is paid (without taking into account the rate of interest). Over this prospect of repayment is remote, the greater the risk of an issuer credit. Short-term funds will thus be less than six months average life, and less regular funds to a year and a half. In addition, the first will not invest in variable rate instruments with a residual maturity greater than two years, and not more than 10 of their assets in securities with a maturity between one and two years.
Regular Fund will have more room for manoeuvre which can place up to 10 of their assets on variable rate instruments with a maturity between two and five years. Being able to meet the demands of redemption of its customers without delay or penalties is one of the objectives first monetary product with the preservation of capital. This should lead to invest in assets liquid, easy to assign, without penalties and very quickly. Thus, should short-term funds invest at least 5 of their assets in cash and other instruments transferable in a day, and 20 of their outstanding marketable securities in a week.
To not disrupt markets, management companies and clients by implementing these recommendations, the two associations provide for a transitional period of three years during which the funds did not meet the requirements of one of the two sub-categories (short term Fund) and regular funds will still be able to avail themselves of the monetary label, but under the classification "other".
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