More than half of the euro funds represented by the Institutional Money Market Funds Association are changing share structures so they can operate if yields fall below zero, Fitch Ratings said.
Funds with almost 50 billion euros ($67 billion) of assets have adopted, or said they will adopt, changes that allow them to pass losses to investors by reducing the number of shares they own, according to Fitch. Without the change, record-low yields on the debt the funds buy will threaten their fixed-share price and force them to shut.
JPMorgan Chase & Co. said in October it was replacing two stable net asset value euro money-market funds with variable share classes. RBS Asset Management Ltd. is adopting the changes for funds with 9.8 billion pounds ($15.4 billion) under management while Morgan Stanley has also announced similar structures.
“Investors have been accepting of this,” Fitch analysts led by Richard Woodrow wrote in a report. “We expect more fund complexes will follow suit.”
Money-market funds buy short-term, high-grade debt securities, and are designed to offer investors an alternative to holding cash.
The average seven-day yield on funds that buy euro-denominated government securities was at zero percent for the week ended Jan. 18, according to research firm iMoneyNet Inc. in Westborough, Massachusetts. The average yield on euro funds eligible to purchase corporate debt was 0.03 percent.
The Institutional Money Market Funds Association is a trade body based in London that has represented triple-A rated funds in Europe since 2000, according to its website.