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Marina Cremonese, Moody’s

20753

Brexit would have a limited impact on Europe’s money fund industry, says Moody’s

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A Brexit would not prompt any major changes in European money market fund (MMF) managers' operations, management strategy and total assets under management, according to a survey by Moody's Investors Service. 

If the UK were to vote to leave, the USD258 billion of MMFs assets managed out of the UK would likely remain there.

The rating agency surveyed 12 EU-based asset management companies about the impact the separation could have on their MMF business. Collectively, these firms manage USD550 billion of European constant net asset value (CNAV) MMFs, representing the vast majority of the European CNAV sector and approximately 40 per cent of the entire MMF industry (CNAV and variable net asset value MMFs) in Europe.

"Should the UK decide to leave the EU, it would be a non-event for the European money market fund industry," says Vanessa Robert, a Vice President and Senior Credit Officer at Moody's.

"Most managers surveyed believe that MMFs would be seen as a safe asset class and MMF assets would therefore remain stable or could even benefit from a flight to quality amid uncertainty in the financial markets. That said, half of the respondents would still increase their portfolio liquidity ahead of the vote," says Marina Cremonese (pictured), a Vice President and Senior Analyst at Moody's.

According to 89 per cent of the asset managers surveyed, a Brexit would not prompt a relocation of management functions. However, the respondents said it will be critical for asset managers to maintain the Undertaking for Collective Investments in Transferable Securities (UCITS ) passport because nearly half (48 per cent) of all European CNAV MMF assets are sold to non-UK clients through the passporting facility.

If the UK were to leave the EU, distribution teams would have to be located in one of the EU countries for UCITS MMFs to continue to be distributed in Europe. However, only 18 per cent of asset managers think they would need to strengthen their capabilities in the EU, while the vast majority already have capabilities in place. All respondents consider that their ability to distribute in the UK would not be compromised.

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