Debt crisis prompts currency move by European money market funds

EU euro notes 450

The European sovereign debt crisis and concerns over the US and UK economies has seen European money market funds reallocate almost 20 per cent of portfolios by geography, according to Fitch Ratings.

The move during the past two years has seen around €100bn shifted away from peripheral Europe, the UK and the United States to core Europe and Nordic countries.

There has also been some shift to Asian and Middle East issuers, although this has been seen to a lesser extent, reports Fitch.

However, the ratings agency reports that European money market funds still have, on average, a 75 per cent exposure to Europe.

It adds: “Fitch believes that further adoption of issuers from non-traditional geographies will be slow, driven by investment manager and investor preferences and volumes of issuance in the funds’ base currency, rather than credit considerations.”

The agency found just 12 per cent of the funds invest in Middle Eastern issuers and 25 per cent in Asian ex-Japan issuers, at the end of September 2012.