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Fund and Asset Manager Rating Group

Money Market Funds / Global

2014 Outlook: Money Market Funds


Planned Regulatory Changes Pose Challenges, But Would Take Time to Implement
Outlook Report
Rating Outlook Conservative Portfolios Underpin Outlook: Fitchs stable rating outlook for money market funds (MMFs) globally is underpinned by the funds conservative, active management of credit, market, and liquidity risks. It also reflects the status quo in the near term with respect to MMF regulations globally, as Fitch believes that any regulatory reform will take time to implement. High Liquidity: Short-term liquidity remains high compared with historical norms, although MMFs continue to lengthen portfolio durations in response to the low-yield environment. Regulatory Changes Ahead: Regulations proposed for MMFs, if enacted, would have farreaching implications, both in the US and Europe. Unexpectedly high investor redemptions from MMFs in response to regulatory changes could pressure certain funds. In preparation for potential changes, managers have been reviewing their offerings and discussing alternative liquidity products with clients. Treasurers Need Liquidity Options: Corporate cash holdings are at record high levels. While European cash holdings are expected to decrease and US corporate cash could grow at a lower rate than previously, absolute amounts are expected to remain high. As such, treasurers and other short term investors will continue to look for convenient and diversified investment solutions, whether through pooled options like MMFs or through segregated mandates. MMFs Seek New Supply: Regulatory and political changes are causing the supply of eligible investments for MMFs to decrease. For example, evolving assumptions on sovereign support for banks may reduce further the number of Tier 1 rated banks. In response to reduced supply from traditional issuers, MMFs are venturing into newer markets and approving new issuers. MMFs are also increasingly investing in innovative money market products, such as callable commercial paper (CP), collateralised CP and repo backed by non-government collateral. Further Consolidation Expected: The low interest environment is expected to persist in 2014, and will continue to present MMF managers with operational challenges. Given the importance of scale in this market, we expect additional industry consolidation, particularly in Europe. MMFs Important Globally: While MMF assets under management predominantly reside in the US and Europe, MMF products continue to grow in other markets. Portfolio guidelines for MMFs in these markets are converging with current US and European standards. Nevertheless, emerging market MMFs can exhibit greater volatility.
Figure 1 Figure 2

S TABLE
(2013: S T A BL E )

Related Research
Other Outlooks
www.fitchratings.com/outlooks

MMF Research
Evolving Bank Support: Impact on Money Market Funds (November 2013) Money Market Funds (MMF) Snapshot - EndOctober 2013 (November 2013) U.S. Money Market Funds Dashboard 3Q13 (November 2013) European Money Market Fund Quarterly Euro - 3Q13 (November 2013) European Money Market Fund Quarterly Sterling - Q313 (November 2013) European Money Market Fund Quarterly US Dollar - Q313 (November 2013)

Liquidity in Prime MMFs


(% of portfolio)
US MMFs - Daily EU MMFs - Daily 50 40 US MMFs - Weekly EU MMFs - Weekly

Rating Mix Prime MMFs


(% of Portfolio)
US MMFs - F1+
70 60 50 40 30 20 10 0
Jan 13 Jun 13 May 13

Analysts
Greg Fayvilevich +1 212 908-9151 gregory.fayvilevich@fitchratings.com Charlotte Quiniou, CFA +33 1 44 29 92 81 charlotte.quiniou@fitchratings.com Alastair Sewell +44 203 530 1147 alastair.sewell@fitchratings.com Gwen Fink-Stone, J.D. +1 212 908-9128 gwen.fink-stone@fitchratings.com

EU MMFs - F1+

30
20 10 0

Aug 13

Sep 13

May 13

Sep 13

Aug 13

Jan 13

Apr 13

Jun 13

Jul 13

Mar 13

Feb 13

Feb 13

Mar 13

Jul 13

Nov 12

Dec 12

Nov 12

Dec 12

Source: Fitch

Source: Fitch

www.fitchratings.com

12 December 2013

Oct 13

Apr 13

Oct 13

Fund and Asset Manager Rating Group


Rating Outlook Stable
Fitchs stable rating outlook for MMFs globally is underpinned by the funds active, conservative management with respect to credit, market, and liquidity risks. The current outlook also reflects the status quo in the near term with respect to MMF regulations globally, as Fitch believes that any regulatory reform will take time to implement. Nevertheless, Fitch recognises that MMF reforms, if adopted, would have far reaching implications for funds and investors in the US and Europe. The regulatory uncertainty faced by MMFs and developments in the political and short-term market environments will pose important challenges for MMFs in 2014.

Liquidity Reflects Potential Political and Regulatory Changes


MMFs are positioned conservatively against a potential liquidity stress that could stem from political or regulatory events. The next US debt ceiling deadline may arise between March and June 2014, and could again create liquidity pressure on MMFs denominated in US dollars. MMFs will likely implement strategies similar to those they applied ahead of the October 2013 debt ceiling deadline prior to its resolution, primarily by building up liquidity buffers. It turned out that investor redemptions were relatively muted in September and October, resulting in limited liquidity pressures on the funds. In a similar vein, new regulations in the US and in Europe, if adopted, have the potential to significantly change the nature of MMFs, with unknown investor reaction. While proposed implementation timelines for the reforms are lengthy, investors can behave in unexpected ways ahead of the final rules, including redeeming large amounts of money from MMFs.

Credit Quality Declines Modestly in the Face of Shrinking Availability of Eligible Investments
MMFs rated AAAmmf by Fitch invest only in securities rated at least F1 or its equivalent and maintain diversified portfolios to limit credit risk to investors. However, further regulatory, political, and market developments may continue to shrink the universe of eligible investments for MMFs, forcing funds to search for suitable replacements and limit portfolio concentration in existing investments (see Supply section). This trend was observed in the rating mix of European and, to a lesser extent, US MMFs where the proportion of F1+ exposure declined in 2H13 after French bank downgrades (see figure 2).

Lengthened Average Portfolio Maturities


The persistent low-yield environment in the US and in Europe is pushing MMF managers to slowly but consistently lengthen the weighted average life (WAL) of portfolios to earn incremental yield (see figure 4), although still staying well within Fitchs and regulatory limits of 120 days. This increase in WAL reflects MMFs more barbelled maturity management approach in the current ultra-low yield environment, which translates to an increased allocation towards longer dated assets, while maintaining high short-term liquidity. MMFs weighted average maturity (WAM; figure 3) is still being managed prudently as the interest rate environment is evolving. The US Federal Reserve has indicated that it may soon begin reining in some of its quantitative easing, although the prospect of higher short-term interest rates may still be some time away.

2014 Outlook: Money Market Funds December 2013

Fund and Asset Manager Rating Group


On the other hand, the ECB has recently cut its refinancing operations rate from 50 bp to 25 bp to fight deflation fears in the eurozone. Some market participants believe that the ECB may further reduce its deposit facility rate in 2014, below its current 0% level. Additionally, a potential second long-term refinancing operation (LTRO) to European banks could rebuild liquidity in markets and put further pressure on short term rates. Both could cause market yields to fall low enough to trigger the activation of flexible share class mechanisms in Europe, effectively causing some European money funds to have negative yields.
Figure 3 Figure 4

MMF WAM (Days)


US Prime MMFs EU MMFs - GBP 70 60 50 40 30 EU MMFs - EUR EU MMFs - USD

MMF WAL (Days)


US Prime MMFs
EU MMFs - GBP 70

EU MMFs - EUR
EU MMFs - USD

60
50 40

30
Jan 13 Jun 13 Aug 13 May 13 May 13 Sep 13 Aug 13 Sep 13 Jan 13 Jun 13 Feb 13 Mar 13 Mar 13 Jul 13 Nov 12 Dec 12 Feb 13 Nov 12 Dec 12 Oct 13 Apr 13 Oct 13

Jul 13

Source: Fitch

Source: Fitch

Regulatory Changes on the Horizon


In both the US and Europe, regulatory proposals are on the table which, if adopted, would have far reaching implications on the terms and investment strategies of MMFs. Fitch believes that the implementation timeframe for regulatory reform would be relatively long and hence its MMF outlook for 2014 is based on a continuation of the status quo. Whichever reform alternative is adopted, it is likely that certain current users of MMFs will reallocate cash to other investments that better match their needs. In preparation for potential changes to MMFs, fund managers have been reviewing their offerings and discussing options with clients. Examples of new or growing alternative liquidity products include separately managed accounts, short term bond funds, hybrid prime/government MMFs and unregistered commingled funds. Many larger investors may ultimately adapt to the new market paradigms in the US and Europe, assuming MMFs continue to offer the same level of security, liquidity and transparency. By contrast, some of the less sophisticated and smaller constant net asset value (CNAV) investors may determine that the required changes to their internal processes to adapt, notably to variable net asset value (VNAV), are disproportionately expensive and abandon MMFs as a cash management tool.

2014 Outlook: Money Market Funds December 2013

Apr 13

Fund and Asset Manager Rating Group


Figure 5

Summary of Key Regulatory Proposals in the US and Europe


US Timeline Proposed by SEC June 2013 Comment period ended September 2013 Uncertain timeline for final rule Implementation period of up to two years Exempted from floating NAV Additional disclosure and reporting Alternative 1: floating NAV with retail prime MMFs exempted Alternative 2: CNAV with redemption fees and liquidity gates Potential for combination of both Greater diversification requirements Additional disclosure and reporting Proposed by European Commission (EC) September 2013 Review by the European Parliament has started Council of Ministers to review the European Commission proposal Three parties (EC, Parliament, Council) to agree on a final text Final vote in Parliament currently expected I April 2014 Uncertain timeline for final regulation No amortised cost valuation regardless of assets residual maturity Unless the fund uses the CNAV method and maintains a 3% capital buffer Greater diversification and liquidity requirements Restrictions on eligible repo collateral and securitised assets Issuers and counterparties must be assessed through an internal credit quality assessment and rating mechanism except when the issuer or guarantor is a European sovereign or a European supranational entity Procedures for stress testing and investor base monitoring Greater reporting and disclosure requirements MMFs must not be rated on a solicited basis

Government MMFs Prime MMFs

Europe Timeline

Proposed Valuation Portfolio rules and asset eligibility Public disclosure and information

Source: Fitch, SEC, European Commission

MMF Investment Options Reflect Changing Environment


MMF Bank Exposures Likely to be Adjusted Amid Evolving Bank Support and Regulation
Fitch believes that MMF exposures to banks are likely to be adjusted as a result of changing political, regulatory and economic climates affecting the banking sector. As of October 2013, Fitch-rated MMFs had an average allocation of 77% to the banking sector, in secured and unsecured forms. The evolving dynamics of sovereign supports for banks are likely to result in some credit deterioration among banks held by MMFs. The level of extraordinary sovereign support that may be forthcoming in times of stress is a key factor underpinning Fitchs bank ratings. This factor is reflected in a banks Support Rating Floor. A banks Issuer Default Rating (IDR) is set as the higher of its Support Rating Floor and Viability Rating, which reflects the entity s standalone financial strength. Excluding offsetting fundamental improvements, bank IDRs that are most at risk of being downgraded are those anchored at the level of their Support Rating Floor, in jurisdictions with political initiatives aimed at reducing the risk of government-backed bank bailouts in the future. Such downgrades may also impact related Short-Term Ratings. As a result, some banks held by MMFs may see their Short-Term rating falling below the F1 level that is generally required for prime money fund investments (See related reports: Evolving Bank Support: Impact on Money Market Funds, The Evolving Dynamics of Support for Banks , and Bank Support: Likely Rating Paths). Bank downgrades below F1 would put pressure on MMFs to find suitable high-quality replacements and avoid excessive portfolio concentration. This will be a key challenge for MMFs in 2014, particularly since Basel III regulations are already constraining money market supply from banks. Although the new Basel III capital and liquidity rules do not take full effect

2014 Outlook: Money Market Funds December 2013

Fund and Asset Manager Rating Group


until 2019, banks have been under pressure to achieve compliance much sooner. As a result, banks may continue to scale back their short-term borrowings in 2014 to comply with the Basel III coverage ratio (a banks short-term liquid assets relative to its potential net cash outflows over a 30-day period under stress conditions).

Basel III Prompts Innovation in Money Market Instruments


Banks are responding to the unfavourable treatment of short-term financing under Basel III by issuing instruments that extend the duration of their liabilities beyond 30 days while maintaining eligibility for MMFs. Callable and putable CPs are examples of such new products. The entity issuing a callable CP is expected to call the CP before the critical 30-days-to-maturity boundary is reached and higher liquidity fees are due to the bank providing a guarantee. Likewise, putable CP typically requires an advance notice from CP holders of at least 30 days prior to payment. Some MMFs have already been active buyers of such securities, mostly issued in US dollars thus far. Fitch believes such assets are likely to gain more traction in the market and may ultimately grow in MMFs.

MMFs Explore New Types of Repo Collateral


The ultra-low yield environment, combined with a scarce supply of high quality collateral, notably in euro and sterling, may encourage more MMFs to invest in repo backed by collateral other than high-quality sovereign assets. Such repo practices are currently more common in the US than in Europe, but the trend may spill over to the European market as well. Fitch views exposure via non-government collateral as unsecured for diversification purposes under its MMF rating criteria, given the potential for wrong way risk in times of stress. Collateralised CP (CCP) has emerged in the US as an attractive alternative to issuing banks and MMFs. CCP is backed by collateral in the form of repo, allowing the issuing bank and MMFs to transact in term repo.

Diversification into New Markets and Issuers


MMFs continue to selectively consider investments in financial issuers from the Asia-Pacific and the Middle East regions, and to a lesser extent Latin America. These non-traditional issuers for US and European MMFs still represent small portfolio allocations (3.2% in Asia exJapan, 0.6% in the Middle-East and 0.1% in Latin America on average). They primarily include issuers from Singapore, China, South Korea, the United Arab Emirates, Qatar and Chile. These are detailed in Appendix B. Further adoption of such issuers will likely be slow and selective, driven by volumes of issuance in the funds base currency, credit considerations and investment managers level of confidence in the markets being considered.

Supply-Driven Allocation to Quasi-Sovereigns and Corporates Rises


MMF allocations to non-US sovereigns and quasi-sovereign entities, such as supranationals and government agencies, have been rising, but remain a function of available supply and the level of yield offered. Volumes of short-term assets issued by quasi-sovereign entities have not significantly developed since 2011 and yields are low. Investment constraints arising from the short-term issuance activity of high-quality quasi-sovereigns are particularly acute for sterling and euro denominated funds. The high credit quality of sovereigns and quasi-sovereigns typically held in MMF portfolios will allow fund managers to favour relatively longer-dated assets from these issuers to compensate low yields. MMFs continue to have appetite for high-quality non-financial corporates, particularly since supply is limited. Factors that could nevertheless encourage corporates to issue more shortterm paper include attractive market financing costs and funding diversification benefits. US and euro corporate CP outstanding amounts increased a little in 2013. Should they continue to rise, even at a slow pace, they will likely fuel new MMF investments.

2014 Outlook: Money Market Funds December 2013

Fund and Asset Manager Rating Group


Figure 6 Figure 7

US CP Outstanding
Non-financial (USDbn) 700 600 500 400 Financial ABCP

Euro CP Outstanding
(EURbn) 80
60 40 Corporates (LHS) Sov, Supra, Agencies (LHS) ABCP (LHS) Financials (RHS)

(EURbn) 500
400 300

300
200 100 0 Nov 11 Jul 12 Mar 13 Nov 13

200
20 0 Nov 11

100
0 Nov 13

Jul 12

Mar 13

Source: Federal reserve

Source: ECB STEP Market, Market AFME

US Treasury Floaters to Materialise in 2014; Fed Reverse Repo Facility


The Feds new reverse repo program (RRP) was well received by MMFs as a source of new supply. The RRP is a fixed-rate, overnight repo facility wherein market participants, including certain MMFs, may lend cash to the Fed, collateralised by securities held by the Fed. Demand for the RRP so far has been most robust at quarter- and month-ends, when banks typically reduce repo and other borrowings, but has otherwise been weak due to the low interest rate paid by the Fed. Lower market repo rates or a higher rate paid by the Fed may lead to more regular participation. Although the RRP is scheduled to end at end-January 2014, it is possible that the Fed may extend the end date. Also, the US Treasury will conduct its first auction of floating rate notes (FRN) in January 2014. It will be the first new US Treasury product in 17 years, a major development adding a sizable high-quality and liquid asset pool to the market. Treasury FRNs will be issued with a 2-year maturity and a daily reset of their floating rate, which make them eligible to MMFs. MMFs will likely buy such Treasury floaters, given the potential yield pickup it could offer relative to Treasury bills. However, MMFs ability to allocate large portions of their portfolios to these floaters will likely be limited given the relatively long maturity of the instruments.

Low Yields Perpetuate Waivers and Consolidations


Low Yields Persist
Fitch expects the low interest rate environment to persist in 2014, with only limited increases in 2015 (see Global Economic Outlook, December 2013). Fitch would therefore expect MMF gross yields to remain low for the foreseeable future, barring any event-driven spike in interest rates. Fee waivers continue to be endemic in certain fund classes and Fitch would expect these to persist, notably for government and prime euro MMFs. In Europe 100% and 85% (respectively) of euro and US dollar government MMFs had fee waivers1 in place and 45% of prime euro MMFs. In the US 100% of institutional government funds, and 95% of prime institutional funds had fee waivers in place as of end-September 2013. The waivers reflect the low yield environment.

Based on iMoneyNet data as of 31 October 2013, comparing gross and net yields. The net yield represents the yield realised by investors net of fees and charges, notably manager fees. Fitch assumes a fee waiver is in place where the difference between the gross and net yield is less than 10 basis points. However, there may be instances in which the fund manager charges fees outside of the fund, which would not be captured by this analysis

2014 Outlook: Money Market Funds December 2013

Fund and Asset Manager Rating Group


Figure 8 Figure 9

Base Rates Have Fallen


Bank of England ECB refinancing operations

European MMF Yields have Fallen Too


Euro US prime offshore
(Net yield, bp) 6 5

Sterling US prime onshore

Fed funds target rate


(Base rate, %) 6 5 4

4
3 2 1

3
2 1 0 Sep 08

May 10

Jan 12

Sep 13

0 Sep 08

May 10

Feb 12

Oct 13

Source: BoE, ECB, Fed

Source: iMoneyNet

Continued Consolidation and Innovation Expected


Fitch believes there is potential for further industry consolidation in 2014. The sustained low yield environment and resulting margin pressure, combined with potential corporate cash outflows (in Europe at least), may cause some, notably smaller, managers to reconsider their commitment to the cash management business. Bank deleveraging has been a factor in the M&A activity in Europe in 2013, notably the acquisition of the Royal Bank of Scotland MMFs by Goldman Sachs Asset Management and the acquisition of Scottish Widows Investment Partnership (owned by Lloyds Bank PLC), including its MMFs, by Aberdeen Asset Management PLC. Other banks may elect to sell their asset or MMF management businesses for structural reasons, for example to focus on core activities. In the US, consolidation activity has slowed in 2013, as some fund sponsors already exited the business in the years following the 2008 crisis.

Global MMFs
Global MMF assets under management (AUM) shrank between 2Q12 and 2Q13 by about 2% to just under USD4.5trn, according to ICI data. MMF AUM shrunk in most global regions, save for the Americas, driven by an increase in MMF AUM in the US. The vast majority of MMFs are domiciled in just five countries (the US, France, Ireland, Luxembourg and Australia), collectively accounting for almost 90% of total worldwide MMF AUM as of 2Q13. Of these jurisdictions, the US dominates at almost 60% of the total, followed by the European CNAV sector (primarily Ireland and Luxembourg domiciled funds, collectively representing 15% of the total) and French, predominantly VNAV, funds at 10% of the total. Australia is the last major MMF domicile, representing 7% of the global total. The remainder are domiciled in multiple other countries, notably Brazil, Mexico, South Korea and China (all at approximately 1% of the total). AUM shrunk overall in the larger MMF domiciles between 2Q12 and 2Q13, save for limited growth in the US (3%), Mexico (3%) and South Korea (5%). Fitch expects global MMF assets to continue to be dominated by the US and core European domiciles (France, Ireland and Luxembourg). However, the AUM of these funds may decline as investors seek higher yielding or bespoke cash management alternatives to MMFs or withdraw money in response to regulatory uncertainty or new regulation. MMF regulation continues to vary country-by-country. Nonetheless, Fitch sees some comparability and convergence towards US and European standards. For example, the maximum asset maturity prescribed by applicable regulations in China, Taiwan, South Africa and Thailand is 397 days, similar to US limits. Fitch regularly comments on MMFs in these markets, see, for instance Fitch: Rated Chinese MMFs Weather Volatility, dated 26 June 2013.

2014 Outlook: Money Market Funds December 2013

Fund and Asset Manager Rating Group


Figure 10 Figure 11

Global MMF AUM


Asia Pacific 11% Africa 1%

Percentage Change in Global MMF AUM 2Q12 - 2Q13


(Percentage change (%)) 10 8 6 4 2 0 -2 -4 -6 -8 -10 Americas Europe Source: ICI, Fitch

Europe 27%

Americas 61%

Asia Pacific

Africa

Source: ICI, Fitch

2014 Outlook: Money Market Funds December 2013

Fund and Asset Manager Rating Group


Appendix A
Figure 12

Top 30 Issuer Exposures in Fitch-Rated Prime MMFs


(As of 31 Oct 13, ratings as at 10 December 2013) Entity Societe Generale (SG) Credit Agricole BNP Paribas Rabobank Group Mitsubishi UFJ Trust and Banking Corp. Deutsche Bank AG Nordea Bank AB Sumitomo Mitsui Banking Corporation ING Bank NV Standard Chartered Bank Svenska Handelsbanken AB JPMorgan Chase & Co. Barclays plc Lloyds Banking Group plc Groupe BPCE Credit Suisse Group AG HSBC Holdings plc Royal Bank of Canada Skandinaviska Enskilda Banken AB Bank of Nova Scotia DNB Bank Mizuho Financial Group, Inc. Toronto-Dominion Bank (The) National Australia Bank Limited Banque Federative du Credit Mutuel Wells Fargo & Company FMS Wertmanagement General Electric The Royal Bank of Scotland Group plc Bank of Montreal
Source: Fitch

Country France France France Netherlands Japan Germany Sweden Japan Netherlands UK Sweden US UK UK France Switzerland UK Canada Sweden Canada Norway Japan Canada Australia France US Germany US UK Canada

Sector Bank Bank Bank Bank Bank Bank Bank Bank Bank Bank Bank Bank Bank Bank Bank Bank Bank Bank Bank Bank Bank Bank Bank Bank Bank Bank Gvt agency Corporate Bank Bank

Long-Term Rating A A A+ AAA A+ AAAA+ AAAAA+ A A A A AAAA A+ AAA+ AAAAAA+ AAAAA n.a. A AA-

Short-Term Rating F1 F1 F1 F1+ F1 F1+ F1+ F1 F1+ F1+ F1+ F1 F1 F1 F1 F1 F1+ F1+ F1 F1+ F1 F1 F1+ F1+ F1 F1+ F1+ n.a. F1 F1+

Viability Rating aa a+ aaa a aaaa aaaaa+ a bbb+ a a aaaa a+ aaa+ bbb+ aaaan.a. aan.a. n.a. bbb aa-

Support Rating Floor A A A A+ AA+ AAA+ AAA NF A A NF NF AAAA AAA A A AAA n.a. A A-

Portfolio average (%) 3.7 3.7 3.0 3.0 2.8 2.7 2.6 2.5 2.5 2.2 2.2 2.1 2.0 1.9 1.9 1.9 1.8 1.8 1.7 1.6 1.5 1.4 1.4 1.3 1.3 1.2 1.2 1.2 1.1 1.1

2014 Outlook: Money Market Funds December 2013

Fund and Asset Manager Rating Group


Appendix B
Figure 13

Issuers from New Markets in Fitch-Rated Prime MMFs


(As of 31 Oct 13, ratings as at 10 December 2013) Entity Country Singapore DBS Bank Ltd. Singapore Oversea-Chinese Banking Corp Singapore United Overseas Bank Limited China Bank of China China China Construction Bank Corporation China Petroleum & Chemical Corporation (Sinopec) China China Industrial and Commercial Bank of China South Korea Export-Import Bank of Korea (KEXIM) South Korea Korea Finance Corporation South Korea Korea Land and Housing Corporation Hong Kong Bank of East Asia Hong Kong Hong Kong Mortgage Finance Corp Latam Supranational Central American Bank for Economic Integration Chile Banco del Estado de Chile United Arab Emirates Abu Dhabi Commercial Bank United Arab Emirates Mubadala Development Company PJSC United Arab Emirates National Bank of Abu Dhabi Qatar Qatar National Bank Qatar State of Qatar Kuwait National Bank of Kuwait Saudi Arabia Islamic Development Bank
Source: Fitch

Long-Term Rating

Short-Term Rating

Support Rating Viability Rating Floor

AAAAAAA A A+ A AAAAAAn.a. n.a. A A+ A+ AA AAA+ n.a. AAAAA

F1+ F1+ F1+ F1 F1 F1 F1 F1+ F1+ n.a. n.a. n.a. F1 F1 F1 F1+ F1+ F1 n.a. F1+ F1+

aaaaaabb bb n.a. bb n.a. n.a. n.a. n.a. n.a. n.a. bbb bb+ n.a. aa n.a. a n.a.

AAAA A n.a. A AAAAn.a. n.a. n.a. n.a. A+ A+ n.a. AAA+ n.a. AAn.a.

2014 Outlook: Money Market Funds December 2013

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Fund and Asset Manager Rating Group


Appendix B
Figure 14

Fitch-Rated Money Market Funds


(As of 31 Oct 13) Investment advisor US MMFs Prime Prime US Dollar Funds AllianceBernstein Exchange Reserves BMO Prime Money Market Fund BofA Money Market Reserves Daily Assets Fund Institutional Dreyfus Cash Management Dreyfus Institutional Cash Advantage Fund Dreyfus Institutional Reserves Money Fund Federated Prime Cash Obligations Fund Federated Prime Obligations Fund First American Prime Obligations Fund Goldman Sachs Financial Square Prime Obligations Fund JPMorgan Prime Money Market Fund Morgan Stanley Institutional Liquidity Fund - Prime Portfolio Short-Term Investments Trust Liquid Assets Portfolio Short-Term Investments Trust STIC Prime Portfolio SSgA Money Market Fund SSgA Prime Money Market Fund State Street Institutional Liquid Reserves Fund Virtus Insight Money Market Fund Western Asset Institutional Liquid Reserves Cayman Islands US Dollar Fund Western Asset Institutional Liquid Reserves, Ltd. US MMFs - Municipal Municipal US Dollar Funds Alpine Municipal Money Market Fund BofA Municipal Reserves Federated Municipal Obligations Fund Federated Tax-Free Obligations Fund Morgan Stanley Institutional Liquidity Fund - Tax Exempt Portfolio Wells Fargo Advantage Municipal Cash Management Money Market Fund Wells Fargo Advantage National Tax-Free Money Market Fund US MMFs - Government Government US Dollar Funds AllianceBernstein Government Reserves MMF BMO Government Money Market Fund BofA Government Plus Reserves BofA Government Reserves BofA Treasury Reserves Dreyfus Institutional Reserves Treasury Fund Dreyfus Institutional Reserves Treasury Prime Fund Federated Government Obligations Fund First American Treasury Obligations Fund First American US Treasury Money Market Fund JPMorgan U.S. Government Money Market Fund Short-Term Investments Trust Government & Agency Portfolio Short-Term Investments Trust Treasury Portfolio SSgA U.S. Government Money Market Fund SSgA U.S. Treasury Money Market Fund State Street Institutional Treasury Money Market Fund State Street Institutional Treasury Plus Money Market Fund State Street Institutional U.S. Government Money Market Fund The Milestone Funds Treasury Obligations Portfolio Western Asset Institutional U.S. Treasury Obligations Money Market Fund Williams Capital Government Money Market Fund Cayman Islands US Dollar Fund Western Asset U.S. Treasury Obligations Money Market Fund, Ltd. Fitch Rating Total AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf Assets (USDm) 395,995 1,556 3,778 15,482 5,109 26,658 27,109 2,944 19,111 42,406 10,187 17,399 117,311 25,723 21,980 2,889 5,418 6,906 38,392 373 5,261

AllianceBernstein Bank of Montreal BofA Advisors Deutsche IM Dreyfus Dreyfus Dreyfus Federated Federated First American Goldman Sachs JP Morgan Morgan Stanley Invesco Invesco State Street State Street State Street Virtus Legg Mason

Legg Mason

AAAmmf Total AAmmf AAAmmf Ammf AAAmmf AAAmmf AAAmmf AAAmmf Total AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf

67,183 16,115 170 1,291 2,800 7,246 213 1,198 3,197 189,561 377 581 928 6,701 9,425 1,160 1,055 31,290 8,340 833 59,504 6,561 20,144 5,402 7,786 17,432 2,752 8,194 289 6 801

Alpine BofA Advisors Federated Federated Morgan Stanley Wells Fargo Wells Fargo

AllianceBernstein Bank of Montreal BofA Advisors BofA Advisors BofA Advisors Dreyfus Dreyfus Federated First American First American JP Morgan Invesco Invesco State Street State Street State Street State Street State Street CLS Investments Legg Mason Williams Capital Group

Legg Mason

AAAmmf

2014 Outlook: Money Market Funds December 2013

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Fund and Asset Manager Rating Group


Fitch-Rated Money Market Funds (Cont.)
(As of 31 Oct 13) Investment advisor European MMFs - Prime Prime Euro Funds Amundi Money Market Fund - Short Term (EUR) BNP Paribas Insticash EUR Federated Short-Term Euro Prime Fund Global Treasury Funds plc - Euro Fund (RBS) Goldman Sachs Euro Liquid Reserves Fund Ignis Asset Management Euro Liquidity Fund JPMorgan Liquidity Funds - Euro Liquidity Fund LO Funds (CH) - Money Market (EUR) MS Liquidity Funds - Euro Liquidity Fund Natixis Cash A1P1 Short-Term Investments Co. (Global Series) plc - Euro Liquidity Portfolio State Street Global Advisors Liquidity PLC - SSgA EUR Liquidity Fund SWIP Global Liquidity Fund plc - Euro Liquidity Fund Prime Sterling Funds Aberdeen Liquidity Fund (Lux) - Sterling Fund Amundi Money Market Fund - Short Term (GBP) CCLA Public Sector Investment Fund - The Public Sector Deposit Fund Federated Short-Term Sterling Prime Fund Global Treasury Funds plc - Sterling Fund (RBS) Goldman Sachs Sterling Liquid Reserves Fund Ignis Asset Management Sterling Liquidity Fund Insight Liquidity Funds plc - ILF GBP Liquidity Fund JPMorgan Liquidity Funds - Sterling Liquidity Fund LGIM Liquidity Funds PLC - LGIM Sterling Liquidity Fund MS Liquidity Funds - Sterling Liquidity Fund Short-Term Investments Co. (Global Series) plc - Sterling Liquidity Portfolio State Street Global Advisors Liquidity PLC - SSgA GBP Liquidity Fund SWIP Global Liquidity Fund plc - Sterling Liquidity Fund Prime US Dollar Funds Aberdeen Liquidity Fund (Lux) - US Dollar Fund Amundi Money Market Fund - Short Term (USD) BNY Mellon U.S. Dollar Liquidity Fund Federated Short-Term U.S. Prime Fund Global Treasury Funds plc - US Dollar Fund (RBS) Goldman Sachs US Dollar Liquid Reserves Fund JPMorgan Liquidity Funds - US Dollar Liquidity Fund LGIM Liquidity Funds PLC - LGIM US Dollar Liquidity Fund LO Funds (CH) - Money Market (USD) MS Liquidity Funds - US Dollar Liquidity Fund Short-Term Investments Co. (Global Series) plc - US Dollar Liquidity Portfolio State Street Global Advisors Liquidity PLC - SSgA USD Liquidity Fund Aberdeen Liquidity Fund (Lux) - US Dollar Fund Prime Other Currency Funds Aberdeen Liquidity Fund (Lux) - Canadian Dollar Fund LO Funds (CH) - Money Market (CHF) European MMFs - Government JPMorgan Liquidity Funds - Euro Government Liquidity Fund JPMorgan Liquidity Funds - Sterling Gilt Liquidity Fund JPMorgan Liquidity Funds - US Dollar Government Liquidity Fund JPMorgan Liquidity Funds - US Dollar Treasury Liquidity Fund
Source: Fund administrators, fund advisors, Fitch

Fitch Rating Total AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf Total AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf Total AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf AAAmmf Total AAAmmf AAAmmf Total AAAmmf AAAmmf AAAmmf AAAmmf

Assets (m) 49,423 4,764 8,478 55 865 9,778 1,994 11,853 625 2,385 2,405 279 5,293 649 82,066 343 415 194 1,559 4,413 5,741 12,717 15,692 7,636 13,074 1,304 440 2,882 15,656 138,007 1,896 1,082 8,892 2,796 2,466 25,556 63,910 158 1,219 7,497 5,155 17,380 1,896 1,232 163 1,069 25,327 961 386 2,370 21,611

Amundi BNP Paribas IP Federated RBS AM Goldman Sachs AM Ignis JPMorgan AM Lombard Odier IM Morgan Stanley IM Natixis AM Invesco SSgA SWIP

Aberdeen Amundi CCLA Federated RBS AM Goldman Sachs AM Ignis Insight IM JPMorgan AM L&G IM Morgan Stanley IM Invesco SSgA SWIP

Aberdeen Amundi BNY Mellon Federated RBS AM Goldman Sachs AM JPMorgan AM L&G IM Lombard Odier IM Morgan Stanley IM Invesco SSgA Aberdeen Aberdeen Lombard Odier IM

JPMorgan AM JPMorgan AM JPMorgan AM JPMorgan AM

2014 Outlook: Money Market Funds December 2013

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Fund and Asset Manager Rating Group

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2014 Outlook: Money Market Funds December 2013

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