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IPE special report May 2018

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ABN AMRO enters cash fund market

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ABN AMRO in Amsterdam is in the process of seeking authorisation for the launch of a global money market UCITS fund aimed at the institutional and retail market.

The ABN AMRO Global Liquidity Fund, which has a triple-A rating from Standard & Poors and Moody's, has been formed under an umbrella structure, comprised of five sub-funds denominated in dollar, sterling, deutschemark, french franc and guilder and the Dutch bank is planning to introduce a sub fund which will accomodate the Euro in time.

Jeroen Tielman, head of product development at the global asset management arm of ABN AMRO, expects institutions in particular will be the prime investors in the fund. We expect the larger investors to particpate more than anyone else," he says and adds that the fund will not be restricted to the Dutch or even European market.

"The product is designed for global distribution. We are keeping in mind Latin America, Europe, Middle East and as far as allowed by the US regulations, qualified investors in the US."

To date, the take up by institutions of money funds has been slow. Interest outside of the UK has been lacking, which is largely down to the reliance on bank deposits to take care of the cash allocation in a pension fund's portfolio. Though popular in the retail market, particularly in France, Europe's institutional in-vestors are yet to pick up on what service providers refer to as a 'no-lose' product, which is supported by its success in the US, with a total figure of $965bn invested in money market funds, compared to $5bn in the UK - less than 1% of the size of the US market. And according to a Fidelity re-port, pension funds make up only 3% of investors in UK money market funds in comparison to 25% in the US.

Tielman, however, sees potential in the European market. "We realise that first of all cash is considered more and more as a separate asset class, and that in Europe, the understanding of MMF is less widely spread and accepted than in the US and certainly to an extent in the UK, but we see that as changing." He adds: "There is a wide institutional audience for a product like this."

Within ABN AMRO's local market, although the current Dutch focus is less on cash than it is on fixed income products, the potential there is food for thought: "Dutch institutions have a lot of money under management and even a small portion of that is quite significant," says Tielman.

At a recent Fidelity-sponsored conference on money market funds in Dublin, Michael Mathison, vice president of product management and development for Fidelity Investments Institutional Services, Boston, pointed to the strength of western European banks as a possible barrier to success on the continent. "No regulations prohibit a competitive response to money funds", he said and referred to the aggressive nature of banks to defend their assets, yet warning that they would not always be able to cope with the settlement demands of their clients: "It's a risk that one day, redemption will be too large."

However, he pointed to Eastern Europe as perhaps a possible area of opportunity, offering an alternative to the "low confidence in their banking systems".

Fidelity itself has announced figures exceeding $1bn now invested in its Dublin-domiciled fund which strengthens its position as the largest institutional cash fund provider in Europe. IPE"

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