Fitch has placed three institutional money market funds managed by Matrix-owned Prime Rate Capital Management on review due to its financial resources.
The ratings agency has placed the prime rate euro liquidity fund, prime rate sterling liquidity fund and US dollar liquidity fund that are rated AAA, on negative rating watch. This means the investment is placed on a review that could result in a downgrade.
The AAA rating denotes extremely strong capacity to achieve a money market fund’s investment objective of preserving principal and providing shareholder liquidity through limiting credit, market, and liquidity risk. At the this rating level, Fitch says a fund sponsor typically would be rated, or deemed to be rated, investment grade and demonstrate an appropriate level of financial resources.
A statement from Fitch says: “The sponsor’s financial resources are no longer consistent with a ’AAAmmf’ rating, even after taking into consideration the funds’ conservative investment guidelines.”
It adds: “The review does not reflect any negative development in the funds’ investment portfolios, which continue to be conservatively managed and fully meet the ’AAAmmf’ portfolio guidelines set forth in Fitch’s rating criteria for money market funds.”
Fitch confirmed the AAA rating on the three funds in December last year. It said in its statement: “In Fitch’s opinion, the fund sponsor would not be able to support the funds during a period of market stress. However, consistent with Fitch’s rating criteria, this risk is mitigated by the conservative investment strategy implemented.”
Matrix Group chief executive officer Angus Woolhouse says: “We have always made it clear to Fitch that the parent was never going to stand by the funds to maintain the NAV.”
He adds: “Their insistence that the sponsor is investment grade and therefore able to stand by the fund is clearly a change in their position. We are in continued dialogue with Fitch about this.The requirement for the parent to be investment grade will make it very difficult for small asset manager businesses going forward.”
Matrix Group has over £4bn assets under management and offerings in the retail space include alternative funds, VCTs and property funds.