Money market funds: life after Lehman

This publication has been discontinued on July 19, 2011.

Introduction

Abstract

Overview

Introduction

The failures of Lehman Brothers and other financial institutions have raised questions about the inviolability of money market funds and put many Europeans off investing in this defensive fund category. These concerns are unjustified; money market funds are a safe haven, and Datamonitor expects inflows into this category to increase markedly going forward.

Scope

• Quantifies total funds and net inflows for money market funds in 12 major European countries from 2000 - Q3 2008.
• Assesses the factors behind the sharp drop in inflows into European money market funds, and analyzes their merits.
• Discusses the increasingly defensive nature of European investors and Datamonitor' s outlook for the markets.
• Identifies the key messages which asset managers need to communicate to investors and how best to do this.

Report Highlights

The brief analyses the current performance of money market funds across Europe, and evaluates the concerns that investors have about this category. It considers relevant drivers and restraints, and predicts that net inflows are likely to pick up markedly going forward.

To encourage take-up of money market funds, asset managers need to engage in smart marketing, both at an individual and collective level. Datamonitor identifies what messages asset managers need to be communicating and provides examples of where this is being done effectively.

Reasons to Purchase

• Gain insights into the challenges facing the money market funds industries across Europe.
• Learn what key messages need to be communicated to investors, in order to encourage take-up of funds.
• Discover how leading asset managers are successfully communicating these messages to investors

Table of Contents

• DATAMONITOR VIEW
  • CATALYST
  • SUMMARY
• THE FAILURE OF LEHMAN BROTHERS HIT EUROPEAN MONEY MARKET FUNDS HARD
  • Investor fears around money market funds have stifled inflows into European funds during 2008
    • The money market sector in Europe suffered a €66 billion outflow in September
    • Most European countries have seen net outflows during the course of 2008
• INVESTOR CONCERNS ABOUT MONEY MARKET FUNDS ARE UNJUSTIFIED, AND MONEY WILL RETURN IN FUTURE
  • The fears that investors have about money market funds are unfounded
  • Money market funds have the qualities that investors are looking for
  • The money market fund industry will bounce back, as it has done in the US
• ASSET MANAGERS SHOULD BE ACTIVELY COMMUNICATING WITH INVESTORS TO SPEED UP THE RETURN TO MONEY MARKET FUNDS
  • Company communication regarding money market funds should stress differentiation and reassurance
    • Address investor concerns right away: DWS funds steer clear of toxic assets
    • If worrying events occur, companies should step up their communication with investors: HSBC reached out to its money market funds investors after the collapse of Lehman Brothers
    • Immediate reactions to events are stabilizing; delays make customers nervous at best, and angry at worst
    • Meet investors' concerns head-on; glossing over issues in this market will not win clients
    • Frank disclosure of investment strategies will reassure clients
      • Question to Credit Suisse Asset Management' s money market funds team: How is exposure on asset-backed securities? Is there US sub-prime exposure?
      • Question to Credit Suisse Asset Management' s money market funds team: What can you tell us about future strategy?
    • Recognize that investors are looking for extra protection and capitalize on it: Barclays Global Investors launched Euro Government Liquidity Fund
  • Industry associations provide an excellent vehicle through which to communicate general messages about money market funds
• APPENDIX
  • Bibliography
  • Further reading
  • Ask the analyst
  • Datamonitor consulting
  • Disclaimer
  • List of Tables
• Table 1: The key messages and relative merits of company and industry communication
  • List of Figures
• Figure 1: Investors normally choose money market funds in times of market volatility, but not in 2008
• Figure 2: The French resumed their love affair with money market funds in 2008, propping up the entire industry
• Figure 3: What are HNW customers most interested in today?
• Figure 5: DWS' s ABS fund addresses investor concerns straight away
• Figure 5: HSBC took the initiative after the Lehman Brothers shock
• Figure 8: Schwab seeks to assure investors by acknowledging that there is credit risk, but that it is mitigated
• Figure 7: Barclays Global Investors offers low risk euro cash fund
• Figure 8: The IMMFA tried to allay investor fears following the Lehman Brothers collapse
• Figure 9: In the US, ICI has also worked to maintain open communications

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