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New EU rules may cut number of money market funds

Tighter European Union regulations would result in 21 of the 30 existing Hungarian money market funds changing profile or opting out of the market, a survey carried by the financial site shows. The funds affected handle HUF 515 billion, or more than 85% of the total in money market funds.   

The nine funds that intend to stay money market funds manage a little over HUF 84 bln, state news wire MTI noted in a report, adding that they can continue after their amended regulations were approved by the market regulator, the National Bank of Hungary (MNB). 

The bulk of the funds will convert into short bond funds, and a few of them into absolute yield funds, while 2-3 funds will either cease to exist or will merge with another fund of the respective fund manager, the report said. Most funds leaving the segment cited as a reason the prospect of higher costs and reduced yields in an already low yield environment. 

The EU decree took effect with respect to newly established funds last summer, but existing funds also needed to abide by the new rules from Monday, noted. 

The tightened rules on the composition of portfolios, both by assets and by institutions, on risk management and information provided to investors, have been designed to defend the funds and their investors against liquidity shocks.