Skip to content

ESMA report finds EU MMF industry worth close to €1.5tn

Apr 26, 2023 12:19:46 PM

Update

EU financial markets regulator and supervisor ESMA has published its inaugural market report on EU Money Market Funds (MMFs). Based on supervisory information collected by the National Competent Authorities (NCAs) and by ESMA itself, the report provides the first comprehensive market-level view of EU MMFs.

The report’s main findings are as follows:

  • The EU MMF sector had €1.44tn of assets in 2021, with 89% of funds domiciled in France, Luxembourg, and Ireland
  • Low-volatility NAV (LVNAV) MMFs account for the largest share (46%) of the total assets, followed by Variable NAV (VNAV) MMFs (42%) and Constant NAV (CNAV) MMFs (12%). All MMFs domiciled in France are of the VNAV type and almost exclusively denominated in EURs. MMFs in Luxembourg and Ireland are mainly denominated in non-EU currencies and typically set up as CNAVs and LVNAVs. MMFs authorised in other EU jurisdictions are VNAVs denominated in other EU currencies and makeup only a small fraction of assets
  • The portfolio structure of EU MMFs has remained relatively stable over time. Between March and June 2022, average exposures to credit institutions accounted for 60% of total assets. Most EU MMFs’ government debt exposure is towards non-EU sovereigns. From March to December 2020, LVNAVs increased their share of government bonds, before beginning a slow readjustment back to their pre-Covid composition
  • The share of daily and weekly liquid assets remained above the regulatory minimum, steadily increasing for CNAVs from Q3 2020. As of Q3 2021, EU MMFs had significantly reduced their portfolios’ interest rate-risk sensitivity, measured as the weighted average maturity of assets (WAM) to improve their resilience to a rate rise
  • Professional investors hold more than 90% of EU MMFs. Financial corporations are the main unit-holders of MMF shares, with insurance firms, pension funds, and banks accounting for 25% of NAV, and other financial institutions, including collective investment undertakings, for 45% of NAV. Between December 2021 and March 2022, MMFs experienced substantial outflows, partially driven by investor expectations linked to increasing interest rates and a shift in investor sentiment away from fixed-income instruments in general, a trend that reversed itself later in 2022.

Link: https://www.esma.europa.eu/press-news/esma-news/costs-retail-investment-products-continue-slow-decline

https://www.esma.europa.eu/sites/default/files/library/ESMA50-165-2391_MMF_market_2023.pdf