The contribution of IMMFA funds to the Money Markets. A report commissioned to PwC by the Institutional Money Market Funds Association (IMMFA)

Transcription

1 The contribution of to the Money Markets A report commissioned to PwC by the Institutional Money Market Funds Association (IMMFA) 3 February 211

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3 Table of Contents 1. Executive Summary 4 2. Introduction The MMF industry Development of IMMFA Funds 6 3. The contribution of to the overall Money Markets The evolution of IMMFA fund portfolios The contribution of to the CP and ABCP markets The contribution of to the CD market The contribution of to the Repo market The contribution of to the TD market The contribution of to the FRN market The contribution of to the T-Bill market Conclusion The IMMFA contribution Appendix Objectives Scope of the report Methodology Treasury funds vs Prime funds Glossary Contacts 29 IMMFA 3

4 Executive Summary Money Market Funds (MMFs) have grown to represent almost one third (EUR 5.8 tn) of the global funds industry at their recent peak. Within this segment, alone have almost doubled their assets under management (AUM) over the last five years, accounting for EUR 458 bn by mid-21. MMFs perform a vital role within the global economy. By purchasing commercial paper (CP), deposits and treasury bills (T-Bills), MMFs provide key funding for companies, governments and households on a daily basis. On a macroeconomic level, we have found that IMMFA funds contribute significantly to M3 in various economic regions, particularly the UK. These funds contribute: 6.5% of M3 to the UK economy; 1.8% of M3 to the US economy; and 1.5% of M3 to the Eurozone economy. Specifically within the money markets, have deepened the CP and certificate of deposit (CD) markets, particularly in Europe. The volume of CP and CDs held by has increased dramatically compared to the market size over the last five years. However, due to a larger and more liquid market for other money market instruments, have not as yet had the same impact on the T-Bill, repurchase agreement (Repo), time deposit (TD) or floating rate note (FRN) markets. Regarding the market for specific money market instruments, we have discovered: have enabled significant growth of the CP markets in which they participate: held over 16% of the market share of outstanding EUR denominated CP (EUR 33 bn) as at June 21, up from approximately 9% in late 25 (EUR 19 bn). A sharp increase in the contribution of to the USD denominated CP market was also witnessed over the past five years, as the market share more than doubled from 2% (EUR 35 bn) in late 25 to 5% (EUR 51 bn) as at June 21. While precise figures for the total market size are not currently available for the GBP denominated CP market, it is likely that an increase in market share also occurred due to market contraction and growth of GBP CP AUM. held assets of EUR 37 bn in this market at June 21, an increase of 13% since late 25. The IMMFA contribution as at Q2-1 (Figures in Euro million) Instrument * Q1-1 USD Market Size IMMFA Funds Market Share USD Portfolio helped develop the market for CDs, though more in EUR than in USD (GBP development is also likely): more than quadrupled their market share of outstanding EUR denominated CDs to 8.3% as at June 21 (EUR 29 bn), from 1.8% in late 25 (EUR 4 bn) due to a marked increase in portfolio holdings offsetting a substantial growth in market size. almost doubled their market share in USD denominated CDs from 3.2% in late 25 (EUR 12 bn) to 6.2% as at June 21 (EUR 62 bn) despite very strong growth in the market size. Large and liquid markets like T-bills, Repos, TDs and FRNs were less influenced by activity. EUR Market Size IMMFA Funds Market Share EUR Portfolio GBP Market Size IMMFA Funds Market Share GBP Portfolio Treasury bills 1,46,138.38% 672,479.4% 8,55.23% Repos 3,27,8*.74% 6,979,.2% 779,217.85% Time deposits 1,85, ,758,673.46% 1,852, % Commercial paper 998, , % - - Certificates of deposit 998,9 6.23% 347, % - - Floating rate notes 1,827,829.7% 3,223,316.27% 734, % Source: PwC Analysis based on Bank of England, Bank of International Settlement, Debt Management Office (UK Treasury), Euroclear, European Central Bank, Eurostat, FDIC, Federal Reserve, Federal Reserve Bank of NY, IMMFA and the US Treasury data. 4 PwC

5 Introduction 2.1 The MMF industry Since their inception in the late 196s and early 197s, MMFs worldwide have experienced strong growth globally. At their recent peak of EUR 5.8 tn in 28, they accounted for almost one third of the fund industry. MMFs gained traction for two basic reasons: (a) they provided institutional and corporate clients whose cash balances are typically in excess of deposit guarantees with the benefit of diversification of risk; and (b) they enabled cash and credit risk management to be outsourced at low cost given the economies of scale achieved by the funds. At the end of 29, 62% of European investors in MMFs were in the institutional category (termed here as corporations and pension funds), similar to the US market. Retail investors form the bulk of the remaining investor base. Approximately 9% of the global MMF market is divided between the US and European money markets, with the US share forming approximately two thirds of this. Within the European region, France, Luxembourg and Ireland hold 86% of MMF domiciliation between them. Figure 1: Worldwide MMF Assets EUR Eur Billion Billion 7, 6, 5, 4, 3, 2, 1, 3,364 3,864 4,957 5,791 5,271 4, Q1-1 Source: ICI Figure 2: Euro Area Investors in MMF end 29 38% 27% Non-financial corporations Other sectors Insurance corporations and pension funds Households, non-profit institutions serving households 13% 22% Source: EFAMA Figure 3: Domiciliation of MMF end 29 24% 4% 2% 8% 37% France Luxembourg Ireland Other Italy Switzerland Source: EFAMA 25% IMMFA 5

6 2.2 Development of IMMFA Funds came into being in 2 with the establishment of the IMMFA representative body and may be distinguished from other triple-a rated MMFs in the global markets in a number of respects. Primarily must adhere to a Code of Practice to ensure that members offer a consistently high quality product to investors. The requirements of this Code are additional to any legal or regulatory requirements applicable to an IMMFA fund in the jurisdiction in which it is domiciled, which shall always take precedence. It is also important to note that the industry in Europe was historically not defined by a single definition or legal framework. Unlike the US funds, and European MMFs in general did not have a single set of regulatory guidelines at the EU level prior to the issuance of CESR's guidelines in May 21. As a result a broad array of funds developed in Europe, ranging from, which are similar to US funds and adhere to the Code of Practice, to variable NAV money market funds, notably in France, and enhanced cash and short-term bond funds. Overall IMMFA MMFs have been steadily increasing market share regardless of the trends affecting other MMFs. Within the UCITS MMF market over the last five years, IMMFA funds almost doubled their market share, going from 2% (EUR 168 bn) at end 25 to 37% (EUR 458 bn) by June 21. Speaking about since 27, a senior industry figure said, Versus the rest of the pan European industry, I would say that performed extremely well so clearly the public favoured the most conservative funds in Europe over the longer dated or higher risk variety of cash funds. Between 27 and 29, the IMMFA industry took in EUR 96bn in assets. 1 Figure 4: Composition of European MMF - end 29 Variable NAV 33% 67% Source: EFAMA Figure 5: Evolution of IMMFA fund assets compared to European MMF EUR Billion % Share of IMMFA funds 1,4 4% 1,264 1,25 1,269 1,284 1,243 1,2 1,152 1,128 35% 1, % 1, % 8 2% % % % 25 Jun-6 26 Jun-7 27 Jun-8 28 Jun-9 29 Jun-1 MMF Assets Share of Source: ECB and IMMFA 1 Professional Wealth Management - The Evolution of Money Market Funds, 25 March 21 6 PwC

7 The contribution of to the overall Money Markets In this section we look at the composition of the average IMMFA fund portfolio and its evolution over the last five years. We then go on to examine the market for each of the main instruments in order to assess the overall contribution of to the broader money markets. 3.1 The evolution of IMMFA fund portfolios operate in three distinct money markets: the US, the UK and the Eurozone. At the end of June 21: USD denominated assets accounted for 47% of IMMFA fund portfolios and channeled more than EUR 217 bn to US money markets and borrowers; GBP denominated assets accounted for 28% of IMMFA fund portfolios and channeled more than EUR 126 bn to UK money markets and borrowers; and EUR denominated assets accounted for 25% of IMMFA fund portfolios and channeled approximately EUR 114 bn to Eurozone money markets and borrowers. Regarding the main asset classes, primarily invest in negotiable debt securities. CP (including ABCP) and CDs accounted for 56% of IMMFA fund portfolios at June 21 with TDs and Repos representing 26% of the portfolio. The remaining 18% of assets were invested in treasury, FRNs and T-Bills. As illustrated in the adjacent pie charts, the composition of has changed over the last five years. A critical point occurred between July and August 27 when the USD portfolios of IMMFA funds swiftly reallocated exposures from CP (4 to 34%) to the liquidity bucket (TDs increased from 9% to 14% and Repos from 9% to 12%). Figure 6: Portfolio composition of (December 25)* 12% 24% 7% 13% Source: IMMFA 1 15% 1 7% 29% 43% Figure 7: Portfolio composition of (June 21)* Source: IMMFA 27% *Graphs based on average of portfolio breakdown CP and ABCP CDs T-Bills Repos TDs FRNs CP and ABCP CDs T-Bills and treasury Repos TDs FRNs IMMFA 7

8 are also divided into Prime and Treasury (or Government) funds. Prime MMFs can invest in all types of money market securities, from deposits to short dated assetbacked securities, whereas Treasury MMFs only invest in government debt, which is considered to be lower risk. 2 Treasury funds have increased in percentage terms from 7% of IMMFA fund AUM in December 25 to 13% in June 21, with Treasury fund portfolios becoming more streamlined in this period. At the instrument level of IMMFA funds globally, the changes are as follows: A decrease in the CP allocation mainly due to the decline of the ABCP market Although CP was originally the most used instrument within IMMFA s portfolios, CP allocation began to decrease from the end of 26 when nearly half of the IMMFA assets were allocated to CP (43% of the USD portfolio, 48% of the EUR denominated portfolio, 5% of the GBP portfolio). By mid-21 the allocation had dropped sharply to a 27% average, with 23%, 28% and 29% of the USD, EUR and GBP portfolios respectively allocated to CP. The downturn in the US real estate market led the majority of investors to turn away from the entire ABCP market during 27 and afterwards. Also, interviews revealed that many adopted policies restricting new investment into any ABCP regardless of market value risk, in part because of large institutional investor concerns. Some IMMFA funds returned to the ABCP market in early 28 but in many cases only after adopting policies limiting ABCP investments to the large bank-sponsored and fully supported programmes. Despite this, the CP market remains attractive for fund managers as CP generally gives a higher yield (with a trade-off against liquidity) than other money market instruments. An increase in the CD allocation The decrease in the CP/ABCP share of IMMFA assets should be seen in parallel with the increase of CD allocation within portfolios. Since the end of 26, the allocation to CDs more than doubled for the USD and GBP portfolios, and trebled for the EUR portfolio as portfolio managers across the MMF industry sought to replace the CP/ABCP components of their funds with a more liquid and transparent instrument. did not differ in this regard and from 27 onwards the ABCP positions of were largely reallocated to the CD market. A stable T-Bill allocation T-Bills are generally not extensively used by IMMFA fund managers in Prime Funds as investors into these funds are willing to accept the potentially higher risk of other instruments in expectation of correspondingly superior yields. The allocation of IMMFA fund portfolios in T-Bills remained very low over the last five years regardless of market conditions. As at June 21 allocations were 3% for the USD portfolio,.2% for the EUR portfolio and. for the GBP portfolio (please note that Treasury Funds naturally have a much higher focus on this instrument, but within the presented data their share is relatively low. See Appendix 5.4 for portfolio comparison). An increase in the liquidity bucket (Repos and TDs) In response to client demand and a desire to increase liquidity, IMMFA funds focused heavily on high quality paper and increased their liquidity bucket of Repos and TDs to shorten the duration of their portfolios. Because of these actions the size of the liquidity bucket doubled in the last quarter of 27 to 3 of IMMFA assets, and has grown incrementally since then to reach 36% by mid-21. It should be noted that in the UK and the Eurozone MMF markets, TDs are generally preferred to Repos, while operating in the US markets tend to rely more on Repos. This preference is changing in Europe, however, as IMMFA fund managers look at diversifying their assets more broadly. Hence, while TDs reached approximately 27% of the EUR and GBP denominated portfolios at end 27, started to invest more in Repos (mainly overnight). The use of Repos may also be explained by the collateral they offer and increasing concerns regarding the credit quality of the banks offering TDs. A decrease in the FRN allocation As began looking for shorter maturities in order to increase liquidity, they also had to consider the reduction in yield from FRNs due to low interest rates. Between both factors it was discovered that the high-quality FRNs suitable for triple-a rated funds had become too expensive and consequently began to reduce their exposure to the FRN market. While in the first quarter of 27 FRNs still represented 23% of the overall IMMFA portfolio, this share was gradually reduced to 7% by mid IMMFA Insights, Selecting a Money Market Fund, 21 see also the glossary in Appendix PwC

9 Figure 8: Evolution of the asset allocation of (USD portfolio)* 25, 2, 15, 1, 5, 93,726 25% 8% 15% 13% 12,134 24% 12% 16% 12% 135,1 % 25% 7% 14% 169,78 162,744 % 19% 27% 13% 7% 17% 2% 14% 17% 212,417 14% 12% 17% 6% 24% 216,846 2% 8% 199,26 196, ,344 3% 6% 4% 3% 7% 6% 12% 14% 9% 13% 14% 22% 15% 15% 14% 17% 16% 27% 32% 29% CP CDs Treasury Repos TDs FRNs Govt Other Other 37% 35% 43% 4 32% Q4-5 Q2-6 Q4-6 Q2-7 Q4-7 Q2-8 Q4-8 Q2-9 Q4-9 Q2-1 Source: IMMFA Figure 9: Evolution of the asset allocation of (EUR portfolio)* 27% 22% 22% 26% 23% 12, 1, 8, 6, 4, 2, 36, % 8% 41,483 38,725 28% 28% 14% 18% 7% 5% 56,437 23% 17% 4% 65,112 18% 28% 4% 15% 88,125 89,128 12% 15% 19% 5% 14% 7% 32% 22% 13,56 4% 9% 2 15% 26% 112, ,878 6% 8% 8% 15% 12% 13% 2% 1 24% 25% CP CDs Treasury Repos TDs FRNs Govt Other Other 4 Source: IMMFA 52% 48% 56% 35% Q4-5 Q2-6 Q4-6 Q2-7 Q4-7 Q2-8 Q4-8 Q2-9 Q4-9 Q2-1 Figure 1: Evolution of the asset allocation of (GBP portfolio)* 36% 26% 24% 29% 29% 14, 12, 1, 8, 6, 4, 74,33 2% 13% 16% 78,811 2% 12% 17% 88,895 18% 15% 17% 1,73 13,229 14% 11,898 18% 18% 16% 12% 26% 17% 2% 38% 26% 97,621 26% 3% 33% 122,544 6% 18% 6% 3% 37% 111,17 6% 17% 6% 3% 33% 126,587 8% 2 5% 3% 34% CP CDs Treasury Repos TDs FRNs Govt Other Other 2, 52% 5 5% 53% 28% 3% 27% 29% 35% 29% Source: IMMFA Q4-5 Q2-6 Q4-6 Q2-7 Q4-7 Q2-8 Q4-8 Q2-9 Q4-9 Q2-1 * Graphs represent average of both Treasury and Prime portfolio breakdown. IMMFA 9

10 3.2 The contribution of IMMFA funds to the CP and ABCP markets Commercial Paper Corporations, banks and governmental agencies can meet their short-term funding needs by issuing CP. CP is usually sold at a discount from face value with maturities ranging from one to 27 days. Issuers with high quality credit ratings are generally able to issue CP at interest rates that are typically lower than bank loan rates. The CP market was traditionally viewed as a bastion of high liquidity and low risk. But recently the CP market has experienced significant waves of downgrading, with those who found it difficult or expensive to refinance themselves leaving the market. Since then, as the balance sheet of corporate issuers has improved and become more cash-rich, corporations now tend more to invest in CP markets rather than borrow from them. In the US The USD denominated CP market declined strongly, dropping in size by 45% from its peak of EUR 1,783 bn in mid-27 down to EUR 998 bn in mid-21. In order to stimulate the market in late 28, the US authorities launched direct purchases of CP worth up to EUR 26 bn. While also decreased the level of USD denominated CP within their funds, the reduction in exposure was a far less steep decline of 2% during the same period. In absolute terms this meant that the IMMFA market share in US denominated CP remained fairly stable until the beginning of 29. From 29 the IMMFA market share of US denominated CP began to trend upwards from 3.9% to circa 5% in 21. In Europe The European CP market is easily accessible and well developed, particularly so in France, and European CP remains one of the most liquid markets with the highest level of supply. Correspondingly, this market fully complies with triple-a rated fund requirements in terms of transparency, liquidity and ratings. Our interviews revealed that, in France, which is the main market for European CP, 95% of issues are suitable for triple-a rated fund investments. However, despite these advantages, participants revealed that the market for EUR denominated CP has declined by 27% from its peak of EUR bn in late 28 to EUR 21.5 bn in mid-21. Figure 11: Outstanding amount of USD denominated commercial paper and share held by USD denominated commercial paper 2,, 1,8, 1,6, 1,4, 1,2, 1,, 8, 6, 4, 2, Q4-5 Q1-6 Q2-6 Q3-6 Includes US and EU issuers of USD denominated CP USD commercial paper Source: Federal Reserve, Euroclear and IMMFA Q4-6 Q1-7 Q2-7 Q3-7 Q4-7 Q1-8 Q2-8 Q3-8 Q4-8 Q1-9 Q2-9 Q3-9 Q4-9 Q1-1 Q2-1 % held by Figure 12: Outstanding amount of EUR commercial paper and share held by Euro denominated commercial paper 3, 25, 2, 15, 1, 5, Source: Euroclear and IMMFA EUR commercial paper Q4-5 Q1-6 Q2-6 Q3-6 Q4-6 Q1-7 Q2-7 Q3-7 Q4-7 Q1-8 Q2-8 Q3-8 Q4-8 Q1-9 Q2-9 Q3-9 Q4-9 Q1-1 Q2-1 % held by 3% 25% 2% 15% 5% % 8% 6% 4% 2% % 1 PwC

11 The recent decline of the CP market in Europe may also be explained by the fact that many companies are simply more cash rich and need less financing. Moreover, firms who still wish to raise finance via CP have found that only the highest rated companies can overcome the current investor risk aversion and consequently, while the CP market is reduced, overall the quality of the remaining issuers is better. Regardless of the contraction in the market size since its peak in 28 the market share of has continued to grow. While the Euro denominated CP market today is similar in size to 25 levels, IMMFA market share has grown in general, going from approximately in late 25 to 16.2% in the second quarter of 21. This upward trend results from the market contraction to some extent, but the overall trend has been for to gain market share over the last five years. Asset-Backed Commercial Paper ABCP are secured by a pool of underlying assets such as trade receivables, mortgage loans, auto loans or credit card receivables. The ABCP class is less popular with many money market fund investors who view the product as risky due to the fact that the underlying assets may be grouped together in a blind pool which makes the underlying assets difficult to evaluate. The reaction of investors, coupled with the resources needed to investigate underlying assets, has affected the approach of many to ABCP instruments. In interviews a number of IMMFA fund managers revealed that they had to introduce policies that explicitly restricted any new investment in any ABCP in response to concerns from their larger institutional investors. Those who initially reduced ABCP in their portfolios in 27 returned to the market in early 28, but in many cases only after adopting policies limiting ABCP investments to large, bank-sponsored and fully supported programmes. Still other IMMFA fund managers, also with the scope to invest in ABCP, have highlighted the necessity of having a skilled credit research team to evaluate the underlying assets of the ABCP products. One industry figure deserves to be quoted at length. We only invest in the highest quality paper; however, instruments like assetbacked commercial paper continue to be an important component of a money market fund. What is most important is that the manager has sufficient resources to analyse the complexities inherent in securities such as ABCP. We look for strong sponsors committed to the structured market. Within that subset, we want programmes with good asset quality. We ve always had the resources to analyse ABCP and as a result we invest in ABCP when it makes sense on a relative basis to other securities available in the market as we are constructing portfolios. Another challenge facing IMMFA fund managers when selecting ABCP is that the number of issuers has also declined, either because issuers left the market or because the instruments were downgraded, leaving a smaller pool of eligible instruments to choose from. Despite these problems, interviews revealed that some IMMFA fund managers still look on ABCP as a beneficial asset due to the diversification possibilities, although as a group they had very different approaches to the CP and ABCP markets before and after late 28. Exposures varied greatly to ABCP before late 28, with some players holding as much as 9% ABCP within their CP share. During and after 28 all players reduced their exposure, some to % before tentatively approaching the market again. In interviews a cleavage emerged between USD denominated and other. USD denominated MMFs returned to exposures of up to 15%. For the European market, due to a short supply of high quality programmes, exposure was retained at a maximum of 3-5%. In the US The overall experience of ABCP differed between the European and US markets due to the respective reactions from their authorities. In Europe, most ABCP did not benefit from any kind of government-supported facilities, while in the US, by contrast, the Federal Reserve included ABCP in the categories of securities which banks could borrow against. According to the Federal Reserve Bank the current level of EUR 314 bn in outstanding ABCP as of August 21 represents a decline of 1 since the end of 29, or 64% when measured against the July 27 peak of EUR 875 bn. In addition to an uncertain economic environment and investor concern about ABCP, the continued decline in the asset class was also aggravated by the departure from the market of a number of conduits, while other programme sponsors were forced to strengthen remaining transactions and conduit structures. IMMFA 11

12 In Europe Before 27, a significant part of the growth in the CP market in Europe was due to the expansion of the ABCP segment (ABCP accounted for 32% of the European CP market in 26 before collapsing to 7% in 29). Currently the uncertain economic environment, combined with credit concerns for European banks, has played a large part in the decline of the asset-backed Euro commercial paper (ABECP) market. According to Euroclear, ABECP outstanding as of August 21 has declined by 19% since the end of 29 and 89% since July 27 when it peaked at EUR 22 bn. The current level of ABECP outstanding is EUR 25 bn or 9% of the Euro CP market. Since then Fitch Ratings have confirmed European MMFs as having materially moved away from asset classes that proved riskier or were perceived as such (mortgage and asset-backed notes, structured investment vehicles (SIVs), asset-backed commercial paper and bank floating-rate notes or CP) 3. Additionally Fitch Ratings reported that, while noting recent renewed interest by European MMF managers in ABCP, no material reallocation has yet taken place 4, a view that the agency had not substantially changed for Fitch: ABCP in European Money Market funds 6 July 29 4 Fitch: ABCP in European Money Market funds 6 July 29 Figure 13: Evolution of the US ABCP Market 1,, 9, 8, 7, 6, 5, 4, 3, 2, 1, Q4-5 Q1-6 Q2-6 Q3-6 Q4-6 Q1-7 Q2-7 Q3-7 Q4-7 Q1-8 Q2-8 Q3-8 Q4-8 Q1-9 Q2-9 Q3-9 Q4-9 Q1-1 Q2-1 Aug-1 Source: Federal Reserve - Data not seasonally adjusted Figure 14: Evolution of the European ABCP Market 25, 2, 15, 1, 5, Q1-7 Source: Euroclear Q2-7 Q3-7 Q4-7 Q1-8 Q2-8 Figure 15: Issuer breakdown of EUR commercial paper 9% 8% 7% 6% 5% 4% 3% 8% 32% 8% Q3-8 Q4-8 15% 2% Q1-9 Q2-9 Q3-9 36% 1 12% Q4-9 Aug-1 3 7% 8% 28% 9% 7% 3% 2% 5% 52% 55% 42% 54% 56% % Aug-1 Financial Corporate ABCP Sov/Supra/Agency Source: CPWare 12 PwC

13 3.3 The contribution of IMMFA funds to the CD market Certificates of deposit (CDs) are regularly issued by financial institutions to raise cash for business needs and have a minimum face value of EUR 15, and a maturity of up to one year. For investors, a CD is a special type of deposit account with a financial institution that typically offers a higher rate of interest than regular savings bank accounts. CDs have traditionally been seen as a very low-risk instrument, similar to savings accounts insofar as they represent cash in the bank. These qualities make the instrument attractive to IMMFA portfolios despite the lack of liquidity that results from depositing the cash for a fixed period of time (typically three months). While CDs track interest rates closely (as the issuer will naturally attempt to make a spread between the cost of borrowing the cash and the savings rate issued to the depositor), regulation and market conditions can have a significant effect on CD rates by the time they reach the broader market. For example, banks attempting to increase their reserves (in response to regulation or otherwise) may offer more generous rates of return to attract deposits. It has also been suggested that, along with other shortterm debt instruments, when large volumes of CDs are issued they also function as a form of market discipline on the issuer. This is because wholesale purchasers of CDs, such as MMFs, tend to have a vested interest in the financial health of the issuer. Among the holders of shortterm bank debt, a large portion of creditors would have an interest in the financial condition of the banks themselves. The sizable volume of large denomination domestic CDs, foreign liabilities, and federal funds balances provides a basis for discipline at the bank level, with the greatest potential at the largest banks. 5 In the US The market for USD denominated CDs has displayed overall growth during the last five years, with a sharp jump in outstanding volumes from mid-28 onwards., which are a significant investors in this sector, reduced their portfolio exposure to US denominated CDs from 24% to 16% between second and fourth quarters of 28 before returning to the market in strength from 29 onwards, when they not only replaced but strengthened their exposure to US denominated CDs, increasing to a 29% portfolio exposure at the second quarter of 21. As the overall volume of outstanding US denominated CDs has almost trebled in the five-year period, the IMMFA market share is gradually trending downwards despite their increased exposure to this instrument. 5 Federal Reserve System Study Group on Disclosure, Staff Study, 173, Improving Public Disclosure in Banking, Study Group on Disclosure, Federal Reserve System, March 2 Figure 16: Outstanding amount of USD denominated certificates of deposit and share held by USD denominated certificates of deposit 1,2, 1,, 8, 6, 4, 2, Q4-5 Q1-6 Q2-6 Q3-6 Q4-6 Q1-7 Q2-7 Q3-7 Includes US and EU issuers of USD denominated CD USD certificates of deposit Source: Federal Reserve, Euroclear and IMMFA Q4-7 Q1-8 Q2-8 Q3-8 Q4-8 Q1-9 Q2-9 Q3-9 Q4-9 Q1-1 Q2-1 % held by 4% 35% 3% 25% 2% 15% 5% % IMMFA 13

14 In Europe The European market for CDs has been tracking an almost linear growth over the last five years, with the volume of CDs more than doubling in the same period from approximately EUR 15 bn to almost EUR 35 bn. By late 29 the upward trend in volume was even more pronounced. The European market sees a smaller number of issuers offering extremely high volumes, with France leading with almost double the volume of CD programmes issued in contrast to the next highest issuers (respectively Ireland and the United Kingdom). have held significant volumes of EUR CDs, reaching a plateau of of market share in 29 before leveling to a relatively stable 8% since that time, although this should be seen in the context of an ever-growing market size. Portfolio exposure of to EUR denominated CDs in percentage terms has been in the mid- to low-twenties since the end of 28, with GBP denominated CDs averaging in the mid-thirties. Figure 17: Outstanding amount of EUR certificates of deposit and Euro short-term notes and share held by Euro CD & Euro short-term notes 4, 35, 3, 25,, 2 15, 1, 5, Euro CD and Euro short-term notes Source: Euroclear and IMMFA Q4-5 Q1-6 Q2-6 Q3-6 Q4-6 Q1-7 Q2-7 Q3-7 Q4-7 Q1-8 Q2-8 Q3-8 Q4-8 Q1-9 Q2-9 Q3-9 Q4-9 Q1-1 Q2-1 2% 15% 5% % % held by 3.4 The contribution of to the Repo market 6 The Repo market is a liquid, efficient, tested and generally secure way for firms to participate in a shortterm financing arrangement that allows them to obtain funds for their day-to-day business requirements. Repos are a sale of financial assets combined with a promise to repurchase those assets in the future (mainly the following business day). These arrangements have the economic characteristics of a secured loan - cash versus collateral - and are used by short-term institutional cash investors as a secured money market instrument and by dealers as a way to finance long positions in securities. The Repo market presents significant advantages to both cash providers such as MMFs and those who require financing such as primary dealers or market makers. Cash investors have flexibility as to the term of their investment (mainly overnight); are fully collateralised, usually with additional margin, by the financial assets subject to repurchase; and receive competitive money market rates of return. Hence, Repos allow MMFs to manage excess cash balances safely and efficiently. In the US In the US, the Repo market is well developed, having grown in line with the development of other money market instruments, and has an increasing volume of US Treasury bonds, notes, and bills. Operational access for market participants such as banks, corporate treasurers and investment funds is also widening. At the end of 28, the US Repo market size was EUR 4.6 tn. However the market contracted sharply immediately after. Haircuts (discounts applied to collateral to bring Repo deposits to market valuation) were considered mainly responsible as creditors sought to minimise their risk positions. The Repo market has not yet recovered from its contraction, having declined by 28% to about EUR 3.3 tn as at March Market data include Repo and reverse Repo 14 PwC

15 invested heavily in US Repos in 27 and 28, increasing their holdings from EUR 9.9 bn in 26 to EUR 48 bn in 28 while the market only grew by 15% during the same period, leading to holding of outstanding US Repos at this point. After this peak, reduced their US Repo exposure by half to EUR 23 bn, however this decrease was proportionate to the overall market contraction, and so the contribution to market share decreased by only.3% to.7% by the first quarter of 21. It should also be noted that, despite some peaks and troughs, US denominated have had a relatively stable exposure to Repos, averaging at 14.6% of portfolio value between the fourth quarter of 25 to the second quarter of 21. In Europe According to the latest ICMA Survey 7 as at June 21, the size of the European Repo market stood at EUR 7 tn, a 25% growth when compared to December 29 level of EUR 5.5 tn. This figure takes the size of the market above the previous high point of EUR 6.7 tn achieved in June 27, confirming the strong recovery of this sector. Until the end of 27, EUR denominated had limited exposure to Repo markets. However, in a context of downgraded assets and decreasing interest rates from end 28 onwards, reallocated part of their liquidity pocket into overnight Repos. From end 28, have held between 12% and 2 of their portfolio in EUR denominated Repos. Moreover, the level of guarantee offered by the collateral has improved over the years, increasing the amount of instruments suitable for the triple-a MMF market. According to the latest ICMA survey, 51.4% of the collateral on Repo operations as at June 21 was triple-a rated compared to 46.4% in June In June 21, held.2% of outstanding EUR Repos after a peak at.44% in mid-29 (although it should be noted that at this point the market for outstanding EUR Repos was at one of its lowest levels since 25). Figure 18: Outstanding amount of USD Repo and reverse Repo and share held by US Repo 5,, 4,, 3,, 2,, 1,, Q4-5 Q4-6 Q4-7 Q4-8 Q4-9 Q1-1 USD Repo % held by Source: Federal Reserve Bank of New York and IMMFA Figure 19: Outstanding amount of EUR Repo and reverse Repo and share held by Euro Repo 8,, 7,, 6,, 5,, 4,, 3,, 2,, 1,, Source: ICMA and IMMFA Q4-5 Q2-6 Q4-6 Q2-7 Q4-7 Q2-8 Q4-8 Q2-9 Q4-9 Q2-1 EUR Repo % held by 5% 4% 3% 2%,5% % 7 See Appendix 8 See Appendix IMMFA 15

16 In the UK, the current size of the Repo market stands at EUR 779 bn, a drop of 3% since the peak at end 29 (EUR 83 bn) and quite stable since late 25. Regarding the contribution of GBP denominated IMMFA funds to the GBP Repo market, the same trend as EUR denominated is observed. started reallocating their liquidity in GBP denominated Repos as early as 27 and in the third quarter of 29 they accounted for 1.6% of outstanding Repos. As at the second quarter of 21 accounted for.9% of outstanding GBP Repos. Figure 2: Outstanding amount of GBP Repo and reverse Repo and share held by 1,2, 1,, 8, 6, 4, 2, UK Repo GBP Repo Source: Bank of England and IMMFA Q4-5 Q1-6 Q2-6 Q3-6 Q4-6 Q1-7 Q2-7 Q3-7 Q4-7 Q1-8 Q2-8 Q3-8 Q4-8 Q1-9 Q2-9 Q3-9 Q4-9 Q1-1 Q2-1 % held by 4.5% 4% 3.5% 3% 2.5% 2% 1.5%.5% % 16 PwC

17 3.5 The contribution of to the TD market Along with Repos, time deposits at banks are another alternative for fund managers to manage the liquidity of their MMF on a daily basis. TDs have an advantage over Repos as being operationally more straightforward (essentially they are a savings account), they do not require any minimum investment and do not carry the operational burden associated with other financial product transactions. However, as TDs expose investors to increased counterparty risk, the attractiveness of this instrument has decreased somewhat. In the US In the US, the outstanding amount of TDs declined by 22% from end 28 (EUR 1,392 bn) to June 21 (EUR 1,85 bn). Consequently, the share held by in TDs is currently at its highest level (2.4), having risen both with the increasing size of AUM for, and with the overall decrease of the US TD market. Additionally, in the first half of 21, increased the level of cash held in TDs by 28%. At the same time the money allocated into the Repo market declined by 12%. Both trends exhibit a greater overall confidence in banking sector stability. In Europe The trend has been similar in Europe. While the outstanding amount of TDs declined by from end 28 (EUR 4,155 bn) to June 21 (EUR 3,759 bn) the share held by in TDs rose to close to its highest level (.46%). However, unlike the US market, the decline in outstanding TDs has not been trending down as rapidly, making the increased investment by more significant, albeit from a small base. In the UK the current outstanding amount of TDs as at mid-21 is EUR 1,853 bn, a drop of 2% compared to the last quarter when the level of outstanding TDs reached their peak of EUR 1,891 bn. The contribution of to the GBP market increased from 1.2% in the first quarter of 21 to 1.45% in the second quarter. Overall, the experience of in all three markets has been broadly the same, as can be seen by the similar trend in each of the graphs displayed. Figure 21: Outstanding amount of USD time deposits and share held by 1,6, 1,4, 1,2, 1,, 8, 6, 4, 2, US time deposits Q4-5 Q1-6 Q2-6 Q3-6 Q4-6 Q1-7 Q2-7 Q3-7 USD time deposits % held by Source: Federal reserve and IMMFA Q4-7 Q1-8 Q2-8 Q3-8 Q4-8 Q1-9 Q2-9 Q3-9 Q4-9 Q1-1 Figure 22: Outstanding amount of EUR time deposits and share held by 5,, 4,5, 4,, 3,5, 3,, 2,5, 2,, 1,5, 1,, 5, EUR time deposits EUR time deposits with maturity < 2y Source: European Central Bank and IMMFA Q2-1 Q4-5 Q1-6 Q2-6 Q3-6 Q4-6 Q1-7 Q2-7 Q3-7 Q4-7 Q1-8 Q2-8 Q3-8 Q4-8 Q1-9 Q2-9 Q3-9 Q4-9 Q1-1 Q2-1 5% 4% 3% 2% %.5% % % held by Figure 23: Outstanding amount of GBP time deposits and share held by UK time deposits 2,, 1,8, 1,6, 1,4, 1,2, 1,, 8, 6, 4, 5% 4.5% 4% 3.5% 3% 2.5% 2% 1.5% 2,.5% Q4-5 Q1-6 Q2-6 Q3-6 Q4-6 Q1-7 GBP time deposits Q2-7 Q3-7 Q4-7 Q1-8 Q2-8 Q3-8 Q4-8 Q1-9 Q2-9 Q3-9 Q4-9 Q1-1 % held by Q2-1 % Source: Bank of England and IMMFA IMMFA 17

18 3.6 The contribution of IMMFA funds to the FRN market FRNs are debt obligations with variable interest rates that are usually fixed at a specified spread over one of the interbank rates, such as the London or European interbank offered rates (LIBOR or EURIBOR). While the outstanding amount of FRNs has increased over the last five years, the credit quality of the issuers has deteriorated. It was stated in interviews that, for, FRNs are not generally the most suitable products to comply with a short-term asset allocation since maturities range from 12 to 24 months. However, before 28, did invest in FRNs closer to maturity dates in order to bring diversification to the portfolio. FRNs were likely to add an additional level of yields to the portfolio when compared to a strategy of rolling over comparably rated short-term instruments and paying the related costs associated with each transaction. Moreover FRNs have the advantage of protecting the portfolio against a rise in interest rates. However, since 28 and the advent of decreasing interest rates, FRNs have lost their attractiveness. In the US The contribution of to the USD denominated FRN market has trended downwards close to their lowest level (.7%) since a peak in June 27 of 3%. While the volumes of outstanding FRNs in the US market have grown somewhat from mid-27 onwards (the point when began to divest themselves of FRNs) this would only partially alleviate the downward pattern of IMMFA portfolio allocation to this sector. In Europe For the EUR denominated, the contribution currently stands at.27% after a peak at.6 in September 25, reflecting a mostly downward trend, although there has been fluctuation in the market share. The volume of outstanding FRNs in the EUR market has, like the other FRN markets we have considered, increased, but like the US market experience, this increase does not alleviate the drop that much. Figure 24: Outstanding amount of USD floating rate notes and bonds and share held by 2,, 1,8, 1,6, 1,4, 1,2, 1,, 8, 6, 4, 2, Source: Bank of International Settlements and IMMFA Figure 25: Outstanding amount of EUR floating rate notes and bonds and share held by 3,5, 3,, 2,5, 2,, 1,5, 1,, 5, US FRNs and bonds EUR FRNs and bonds Q4-5 USD floating rate bonds and notes EUR floating rate bonds and notes Source: Bank of International Settlements and IMMFA Q1-6 Q2-6 Q3-6 Q4-6 Q1-7 Q2-7 Q3-7 Q4-7 Q1-8 Q2-8 Q3-8 Q4-8 Q1-9 Q2-9 Q3-9 Q4-9 % held by Q4-5 Q1-6 Q2-6 Q3-6 Q4-6 Q1-7 Q2-7 Q3-7 Q4-7 Q1-8 Q2-8 Q3-8 Q4-8 Q1-9 Q2-9 Q3-9 Q4-9 Q1-1 Q2-1 % held by Q1-1 Q2-1.8%.6%.4%.2% % 5% 4% 3% 2% % 18 PwC

19 In the GBP denominated portfolios the downward trend both in allocation and market share can also be observed, however it should be noted that the volume of outstanding GBP FRNs has doubled since mid-28. Bearing this in mind, IMMFA fund exposures to this market over the last two years have been relatively constant, ranging from to 6% of allocation. However the overall trend is a downward one over a five-year period, with IMMFA market share decreasing by almost three quarters, standing at 1.4% after a peak of 5.7% in September 25. Figure 26: Outstanding amount of GBP floating rate notes and bonds and share held by 8, 7, 6, 5, 4, 3, 2, 1, GBP FRNs and bonds Q4-5 Q1-6 Q2-6 Q3-6 Q4-6 Q1-7 Q2-7 Q3-7 Q4-7 Q1-8 Q2-8 GBP floating rate bonds and notes % held by Source: Bank of International Settlements and IMMFA Q3-8 Q4-8 Q1-9 Q2-9 Q3-9 Q4-9 Q1-1 Q2-1 8% 6% 4% 2% % 3.7 The contribution of to the T-Bill market The outstanding amount of T-Bills in the US, UK and Eurozone has increased due to a combination of two factors. On the one hand, many western governments face a need to finance deepening public debts while on the other hand a flight to quality by investors has increased market demand. Consequently the yields on T-Bills dropped sharply as the following statistics on the yield of three-month T-Bills show: In the US the yield has fallen from 3.36% as at end 27 to.18% as at June 21; In Eurozone the yield has dropped from 3.7 in September 28 to.34% as at June 21; and In the UK the yield has fallen from 4.5 in September 28 to.49% as at June 21. Over the last three years the demand for quality from investors led a number of promoters to propose T-Bills Only funds that were mainly invested in triple-a rated sovereign paper to give investors the safety and the level of liquidity they demanded. As an example JP Morgan (one of the first players to offer this type of fund) launched their Euro Government Liquidity fund (an IMMFA fund) at the end of 27 with the simple objective of delivering the yield of T-Bills and preserving investor capital. The fund ranked as one of the best sellers in 28, with about EUR 11 bn of net sales 9. 9 Feri-FMI figures Figure 27: Evolution of the yield of three-month T-Bills in US, Europe and in the UK 6% 5% 4% 3% 2% % Dec-5 Mar-6 Jun-6 US Sep-6 Dec-6 EUR Mar-7 Jun-7 Sep-7 Dec-7 UK Source: US Treasury, ECB, Bank of England Mar-8 Jun-8 Sep-8 Dec-8 Mar-9 Jun-9 Sep-9 Dec-9 Mar-1 Jun-1 IMMFA 19

20 In the US The contribution of to the USD T-Bill market remains modest at.38% of outstanding amount as at June 21 after a peak at.64% in September 29. Over a fouryear period from the third quarter of 25 to the third quarter of 29, exposure to USD T-Bills has trended relatively closely to overall market volumes, until diverging sharply at the end of 29, exactly the time that yields effectively flat-lined in these three markets. In Europe A similar trend to the USD market is in evidence in the EUR T-Bill market, with IMMFA fund portfolio exposures generally trending with the upswing in market volume until late 29 when yields collapsed. For the EUR denominated portfolio, the market share strongly declined in 21 (.4% in June 21) after a peak recorded as at end 29 (.2). Unlike the USD and EUR markets, the GBP T-Bill market over the last five years saw market share held by peaking twice at the end of 26 and 28, with the remainder of that period quite low (persistently less than ). As at June 21 the market share was.23% of outstanding GBP T-Bills. Figure 28: Outstanding amount of USD treasury bills and share held by 2,, 1,8, 1,6, 1,4, 1,2, 1,, 8, 6, 4, 2, Figure 29: Outstanding amount of EUR treasury bills and share held by 8, 7, 6, 5, 4, USD treasury bills EUR treasury bills T-Bills Source: US Treasury Direct and IMMFA Q4-5 Q1-6 Q2-6 Q3-6 Q4-6 Q1-7 Q2-7 Q3-7 Q4-7 Q1-8 Q2-8 Q3-8 Q4-8 Q1-9 Q2-9 Q3-9 Q4-9 Q1-1 Q2-1.8%.6%.4%.2% %.3%.25%.2%.15% 3,. 2, 1,.5% Q4-5 Q1-6 Q2-6 Q3-6 Q4-6 Q1-7 Q2-7 Q3-7 Q4-7 Q1-8 Q2-8 Q3-8 Q4-8 Q1-9 Q2-9 Q3-9 Q4-9 Q1-1 Q2-1 T-Bills Source: Eurostat and IMMFA Figure 3: Outstanding amount of GBP treasury bills and share held by 9, GBP treasury bills 9% 8, 8% 7, 7% 6, 6% 5, 5% 4, 4% 3, 3% 2, 2% 1, Q4-5 Q1-6 Q2-6 Q3-6 Q4-6 Q1-7 Q2-7 Q3-7 Q4-7 Q1-8 Q2-8 Q3-8 Q4-8 Q1-9 Q2-9 Q3-9 Q4-9 Q1-1 Q2-1 % T-Bills Source: Eurostat and IMMFA 2 PwC

21 Conclusion The IMMFA contribution The role that MMFs play in financing the economy is substantial. We are the ones that swallow all the shortterm paper senior industry figure, FTfm. In addition to deepening the market for certain money market instruments, we can also see significant opportunity for expansion of the MMF industry in Europe. Benchmarking against the US economy, we can see that the European MMF industry has the potential to provide even more liquidity and credit to the broader European economy. Regarding the macroeconomic contribution we estimate that the global MMF industry contributes: EUR 2.5 tn, or 22.5% of M3 to the US economy; EUR 1.2 tn, or 13.5% of M3 to the Eurozone economy. Of this we estimate that alone contribute: 6.5% of M3 to the UK economy; 1.8% of M3 to the US economy; and 1.5% of M3 to the Eurozone economy. From the data we have gathered it appears likely that, already significantly deepening the market for certain instruments, are likely to be an integral component of any such money market expansion. On an instrument-by-instrument basis we can see that the CP market, including asset-backed paper, is the most positively affected by activity. The combined outstanding amount of EUR denominated CP reached EUR 21 bn (approximately EUR 23 bn when including EUR ABCP) by mid-21 with over 16% of this total held by. In the USD denominated CP market at the same period, worth approximately EUR 1 tn (EUR 1.3 tn if including US ABCP), approximately 5% was held by, close to the peak share of 5.5%. also contribute important volumes of depositary instruments. For US denominated TDs and CDs, were holding 2.4 and 6.23% respectively by mid-21. However, the maximum market share was as high as 14.6% for USD CDs alone at one point. For EUR denominated TDs and CDs the share is.46% and 8.29% respectively, with market share just exceeding for EUR denominated CDs at its peak. Summary table market share from end 25 to Q2-1 USD Portfolio (EUR million) Commercial paper Certificates of deposit Market Size IMMFA Assets Market share Min Mkt Max Mkt Share Share 998,293 5, % 998,9 62, % 3.14% 14.63% T-Bills 1,46,138 5,529.38%.5%.64% Repos* 3,27,8 26,669.74%.23% 1.3% Time deposits 1,85,295 26, % 2.4 Floating rate notes 1,827,829 12,847.7%.6% 2.96% Total 9,639, , EUR Portfolio (EUR million) Commercial paper Certificates of deposit Market Size IMMFA Assets Market share Min Mkt Max Mkt Share Share 21,469 32, % 7.33% 16.23% 347,14 28, %.8% 1.6% T-Bills 672, % -.2 Repos 6,979, 14,277.2% -.44% Time deposits 3,758,673 17,254.46%.12%.5% Floating rate notes 3,223,316 8,637.27%.13%.6 Total 15,182,41 11,754.67% - - GBP Portfolio (EUR million) Commercial paper Certificates of deposit Market Size IMMFA Assets Market share Min Mkt Max Mkt Share Share - 36, , T-Bills 8, % - 2.2% Repos 779,217 6,612.85% % Time deposits 1,852,751 26, %.64% 2.7% Floating rate notes 734,947 1, %.85% 5.67% Total - 123, * Q1-1 Source: PwC Analysis based on Bank of International Settlement, Debt Management office (UK Treasury), Euroclear, European Central Bank, Eurostat, FDIC, Federal Reserve, Federal Reserve Bank of NY, IMMFA and the US Treasury data. IMMFA 21

22 While the Repo market has not been deepened as such, it has benefited from IMMFA fund activity, with IMMFA funds holding of the outstanding US Repo market in late 28, declining to a slightly lower share of.7% by mid-21. Slightly greater market share was achieved in GBP denominated Repos by mid-21, when accounted for.9% of outstanding GBP denominated Repos after a peak of 1.6% in late 29. have also held.2% of outstanding EUR denominated Repos after a peak at.44% in mid-29. have not deepened the FRN or T-Bill markets thus far, despite some relatively robust activity. Although, trending downwards to their lowest level (.7%) recently, in June 27 held almost 3% of the USD denominated FRN market. Over the last five years, have held between.27% and.6 of EUR denominated FRNs and between 1.4% and 5.7% of the GBP denominated FRNs. While have held persistently less than of the USD, EUR and GBP denominated T-Bill markets, it should be noted that the market for outstanding T-Bills has doubled in USD and EUR denominations and trebled for GBP denominations over the last two years. Overall the impact of is significant, even in larger instrument markets where a deepening has not occurred as such. The impact is even more noteworthy when we consider that the market share of has almost doubled in the last five years, a trend that has held strong despite a general contraction of the money markets in recent years. 22 PwC

23 Appendix 5.1 Objectives The following report was commissioned by the Institutional Money Market Funds Association (IMMFA), the representative body for the triple-a rated MMF industry in Europe, in order to broaden the understanding of the role of European MMFs within the money market. Since their inception in 2, IMMFA s MMFs have grown from approximately EUR 4 bn to over EUR 4 bn and increasingly, are used by institutional investors to manage liquidity and act as important alternatives to cash accounts. IMMFA seeks to promote the interests of its members by: Ensuring that IMMFA members offer a consistently high quality product to investors, in particular by maintaining a set of standards in its Code of Practice; Informing and influencing policy makers, regulators and authorities around Europe regarding MMF issues; Educating investors about the MMF industry and providing timely data on members funds. Amongst MMFs, only are held accountable to the highest quality standards set by the Code of Practice. must respect additional guidelines to manage credit, interest rate and liquidity risks. The objective of the present report is twofold: Identify the relative contribution of to the broader money markets in which they operate; Determine whether MMFs have resulted in any deepening of the money markets by virtue of the volume and proportion of assets held by the funds. 5.2 Scope of the report It was not our purpose to engage directly in the number of debates currently centered on MMFs, including the correct pricing, portfolio or liquidity strategies. While these subjects may be touched on occasionally, the objective of our study was to give context to those debates through factual data. In order to do this, we have relied on available data for the US, the Eurozone and the UK, given that are available in USD, EUR and GBP, thereby operating in three distinct markets which together account for over 9% of the global MMF industry. We have also focused on the total use of the following specific money market instruments which are generally used by MMFs: Commercial paper (CP); Asset-backed commercial paper (ABCP); Certificates of deposit (CDs); Repurchase agreements (Repos); Time deposits (TDs); Floating rate notes (FRNs); Treasury bills (T-Bills). 5.3 Methodology The first step consisted of collecting primary source data directly relevant to the evolution of the money market and the outstanding amount of key instruments (in USD, EUR and GBP denominations) held by MMFs over a four- to five-year period. This data was taken from a variety of sources, including central banks, government departments, intergovernmental organisations (IGOs), rating agencies, trade and bank associations and academic sources. The second step was to analyse the composition of the fund portfolios of IMMFA members and ascertain the respective market share cumulatively held by IMMFA members in the specific money markets of CP, ABCP, CDs, Repos, TDs, FRNs and T-Bills over a defined period of time. This allowed us to quantitatively assess the role of in the overall money markets, both in terms of contribution and the development of the triple-a rated funds as a standalone product. The third step was to provide a qualitative context to the statistical data. Based on a structured questionnaire we interviewed senior management figures in eight fund management teams at the following IMMFA member institutions: Deutsche Asset Management International GmbH, BNP Paribas IP, BNY Mellon AM International, HSBC Global Asset Management, Insight IMMFA 23