Fitch: Rated Funds Performing Well Under Liquidity Stress.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of & LONDON -- Liquidity squeeze and credit developments in the global markets have brought into focus money market funds whose objective is to protect principal and offer daily liquidity to their shareholders. Investors perceive the U.S. money market funds as a safe haven for cash, according to Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. . Indeed, the assets under management Assets Under Management (AUM) is a term used by financial services companies in the mutual fund and money management or investment management business to gauge how much money they are managing. of the U.S. money market funds reached an all-time high of $2.7 trillion on Aug. 15, 2007 as reported by the Investment Company Institute. A variety of such funds investing in the U.S. Treasury U.S. Treasury Created in 1798, the United States Department of the Treasury is the government (Cabinet) department responsible for issuing all Treasury bonds, notes and bills. Some of the government branches operating under the U.S. Treasury umbrella include the IRS, U.S. and government securities benefited the most serving as 'ultimate flight to quality' vehicles. Fitch is actively monitoring the impact of structured credit markets liquidity stress on the money market funds it rates. Overall, Fitch is comfortable that its ratings adequately address the credit, interest rate and liquidity risks associated with the U.S. money market fund portfolios. Fitch's U.S. money market fund rating reflects fund's investment practices, its investment advisor's ability to manage interest rate exposure, and liquidity position of the fund's portfolio. Further, the rating incorporates Fitch's opinion as to investment guidelines and practices of the fund's advisor, resource commitment, operation controls, corporate governance Corporate Governance The relationship between all the stakeholders in a company. This includes the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy, and rule of law. , and compliance procedures. Fitch's rating surveillance is designed to attest that the investment quality of the rated fund portfolios is maintained at all times. The U.S. money market funds are managed to meet the requirements of the Rule 2a-7 under the Investment Company Act of 1940. In addition to these requirements, 'AAA'-rated funds by Fitch maintain the dollar-weighted average maturity of 60 days or less and only buy securities that have remaining maturities of 397 days or less as determined under Rule 2a-7 and Fitch rating guidelines. Those funds principally invest in the highest quality instruments that present minimal credit risk to the portfolio such as high quality commercial paper, asset-backed commercial paper (ABCP ABCP Asset-Backed Commercial Paper ABCP Associação Brasileira de Cimento Portland (Brazil) ABCP Associação Brasileira de Ciência Política ABCP American Board of Cardiovascular Perfusion ABCP Associate Business Continuity Planner ) and other short-term debt Short-term debt Debt obligations, recorded as current liabilities, requiring payment within the year. securities, including floating- and variable-rate demand notes of U.S. and foreign corporations, municipal obligations, securities issued or guaranteed by U.S. and foreign banks and by the U.S. Treasury and government agencies, as well as repurchase agreements. Fitch process for rating money market funds is described in detail in a Fitch report titled 'U.S. Money Marker Fund Ratings' published on March 3, 2006 and available on the Fitch Ratings web site at www.fitchratings.com. The report also describes the mechanics, history, and various types of the money market funds. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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