San Francisco – August 31, 2021 – In its comments earlier this month to the Financial Stability Board’s (FSB) Consultation Report on Policy Proposals to Enhance Money Market Fund Resilience, ICD shared trading data from its platform to show the relative strength of money market funds with stable net asset values (NAV). ICD is an independent portal provider of institutional money market funds (MMFs) for treasury organizations, globally.
Among the money market fund proposals under consideration for further regulation is the elimination of stable NAV funds, or Low Volatility Net Asset Value (LVNAV) funds, the assets of which are valued at amortized cost. But trading data on ICD Portal shows that during March 2020, when the impact of the global pandemic caused a rush to liquidity, LVNAV funds in Europe were more resilient than prime funds in the U.S., with outflows at 11% and 30%, respectively.
ICD explains: “Amending MMF regulation to eliminate stable NAV funds could have the unintended consequences, as we’ve seen in the U.S., of small losses due to temporary dislocation in mark-to-market valuation for investments designed to be held to maturity. It will potentially cause additional investor outflows, above and beyond what ordinarily would be expected with a stable NAV product that values itself at amortized cost. In addition, the unintended result of the proposal to switch from LVNAV to VNAV will result in significantly less utilization of the funds as we saw following the imposition of a floating NAV in the U.S. in October 2016.”
In June, ICD also sent comments opposing the elimination of stable NAV to the European Securities and Markets Authority (ESMA) in response to its Consultation Paper on the EU Money Market Fund Regulation – legislative review.
ICD is treasury’s trusted, independent portal provider of money market funds and other short-term investments. We provide intuitive technology and unbiased access to over 300 investment products through ICD Portal, a model in the industry for trading, reporting and analysis. Through our Global Trade Desk, located in London, Boston and San Francisco, we offer follow-the-sun support and expert service.