The classification offers a revised, more robust single category of money market funds composed of two types – short-term and regular – defined to limit the main risks to which money market funds are exposed such as interest rate risk, credit/credit spread risk and liquidity risk.
EFAMA and IMMFA agree that all existing money market funds falling outside these definitions should be allowed to keep the money market fund label for a transitional period of three years.
During this time, these funds should be grouped in national fund classification systems in a separate category, under the name “other” money market funds.
By June 30 2012, any funds that continue to fall outside the proposed definition will no longer be classified as money market funds.
The IMA money market sector definition at present is: “Funds which invest at least 95 per cent of their assets in money market instruments, i.e. cash and near cash, such as bank deposits, certificates of deposit, very short term fixed interest securities or floating rate notes.”
The IMA is currently consulting its members about adopting the new short term money market funds definition as a replacement for the existing IMA definition.
The consultation runs until the end of August and if members agree to adopt the new definition it will be effective from January 1 2010.