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OREANDA-NEWS. The assets of money market funds (MMFs) in Brazil and India have increased significantly, compared with the decline seen in funds in Canada and Taiwan and stable asset bases of funds in South Africa and Mexico, says Fitch Ratings in a new report.
These "second tier" money fund domiciles - Korea, Mexico, Brazil, India, Taiwan, Canada and South Africa - collectively comprise 6% of global money fund assets under management (AUM). The diverging trends in these markets reflect differences in yields and importance in the broader fund sector.
AUM in money funds globally have shrunk 10% over the last five years to approximately USD4.5trn as of end-2014 (excluding Australia). The decline is approximately 5% after eliminating the appreciation effect of dollar against other currencies. MMFs are concentrated in few core markets: US (60%), Europe (25%) and China (7%).
AUM of money funds in China have surged eight-fold over the past five years, pushing it past Korea to become the third-largest MMF market. AUM of money funds in Brazil have almost tripled in the last five years and that in India have more than doubled. In contrast, AUM in US money funds have shrunk by around 18% since 2009, while Europe money funds have contracted about 3% over the same time period.
Money funds in Brazil and India offer investors the highest nominal yields, when compared to other jurisdictions. Nominal yields in Taiwan and Canada are near zero, more in line with the typical yield of US money funds. In Europe even nominal yields on money funds are currently negative.
The share of money funds' AUM relative to total mutual fund AUM has decreased across most jurisdictions over time. Money funds dominate the mutual fund market in Mexico and Taiwan, while in Canada money funds play a less important role. Korea is the only country among these "second tier" markets to have seen its money fund share expand since 2011.
Money funds are less utilised in terms of broad money supply in these "second tier" jurisdictions, unlike in the US where Fitch estimates that money funds account for over 20% of broad money supply (M2). Money funds represent less than 5% of broad money supply in India, Canada, Korea and Taiwan. The lower penetration rate of money funds could suggest potential for growth.
Fitch's special report titled "Paths Diverge for "Second Tier" Money Fund Domiciles" is available at www.fitchratings.com or via the link in this media release.
Note to readers: Australia is excluded from this analysis due to limited data availability and according to International Organisation of Securities Commission (IOSCO) "money market fund" is not a defined term under the Australian regulatory regime.
These "second tier" money fund domiciles - Korea, Mexico, Brazil, India, Taiwan, Canada and South Africa - collectively comprise 6% of global money fund assets under management (AUM). The diverging trends in these markets reflect differences in yields and importance in the broader fund sector.
AUM in money funds globally have shrunk 10% over the last five years to approximately USD4.5trn as of end-2014 (excluding Australia). The decline is approximately 5% after eliminating the appreciation effect of dollar against other currencies. MMFs are concentrated in few core markets: US (60%), Europe (25%) and China (7%).
AUM of money funds in China have surged eight-fold over the past five years, pushing it past Korea to become the third-largest MMF market. AUM of money funds in Brazil have almost tripled in the last five years and that in India have more than doubled. In contrast, AUM in US money funds have shrunk by around 18% since 2009, while Europe money funds have contracted about 3% over the same time period.
Money funds in Brazil and India offer investors the highest nominal yields, when compared to other jurisdictions. Nominal yields in Taiwan and Canada are near zero, more in line with the typical yield of US money funds. In Europe even nominal yields on money funds are currently negative.
The share of money funds' AUM relative to total mutual fund AUM has decreased across most jurisdictions over time. Money funds dominate the mutual fund market in Mexico and Taiwan, while in Canada money funds play a less important role. Korea is the only country among these "second tier" markets to have seen its money fund share expand since 2011.
Money funds are less utilised in terms of broad money supply in these "second tier" jurisdictions, unlike in the US where Fitch estimates that money funds account for over 20% of broad money supply (M2). Money funds represent less than 5% of broad money supply in India, Canada, Korea and Taiwan. The lower penetration rate of money funds could suggest potential for growth.
Fitch's special report titled "Paths Diverge for "Second Tier" Money Fund Domiciles" is available at www.fitchratings.com or via the link in this media release.
Note to readers: Australia is excluded from this analysis due to limited data availability and according to International Organisation of Securities Commission (IOSCO) "money market fund" is not a defined term under the Australian regulatory regime.
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