The European market for triple-A rated institutional money market funds could grow to $200bn (E185bn) by the end of the year, according to the head of the Institutional Money Market Funds Association.
Peter Knight, the chairman of the IMMFA, said the European market for institutional money market funds grew 40% in 2002. He said it could grow to $200bn, from the current $140bn.
The European market is tiny in comparison to its US counterpart, Knight said. The US market is valued at $2.3trn.
Knight made the remarks at a presentation of the IMMFA’s new code of practice. He said the new code, which has the backing of 27 market participants, is a “significant step forward for the industry”. It will help to define exactly what an institutional money market fund is.
Unlike the US, the European market does not have specific regulation for such a market. The IMMFA is concerned to ensure “best practice” is adhered to by its members. Knight saw the European market becoming regulated eventually, though he said the regulatory process could be time-consuming.
Knight attributed the growth in the institutional money market funds market in the US to structural changes in the banking system. The European banking system is only just learning about the assets, he said.