Fitch: Money Fund Managers Show Varied Appetite for ABCP

U.S. money fund investments in asset-backed commercial paper (ABCP) conduits have been declining in line with outstanding supply in the market, according to Fitch Ratings. During the 12 months ended January 2015, U.S. ABCP outstandings fell $22.5 billion to a total of $234.6 billion. During the same stretch, money fund investments in ABCP shrank by $1.8 billion to a total of $91 billion, representing a 1.9% drop, smaller than the 8.8% decline in the ABCP market broadly.

Despite the overall reduction in money fund holdings of ABCP, there are clear differences in ABCP appetite among fund managers. While Fidelity and Vanguard, two of the largest U.S. prime money fund managers, held only negligible amounts of ABCP as of January 2015, other large managers reached double-digit allocations to this asset type. Among the 10 largest U.S. prime money fund managers, Wells Fargo had the greatest allocation to ABCP as a percentage of total assets at 21% and in fact continued to increase its allocation over the past few months.

Individual fund allocations to ABCP reflect the respective managers' preferences, but across a wider spectrum, ranging from 0% - 33% of assets for U.S. prime funds. As of January, 56 individual prime money funds placed more than 10% of their assets in ABCP conduits, with 25 surpassing 20% of exposure, and 30 holding no ABCP at all.

Money funds continue to represent a large portion of ABCP investors, at 39% of total outstandings as of January 2015, and can have a significant impact on the market. Individual fund managers' ability to sway the ABCP market is a factor of the size of their assets under management and appetite for ABCP. Managers such as BlackRock and Wells Fargo have sizable money fund portfolios and large allocations to ABCP, each controlling more than 5% of the ABCP market.

Strategies for allocations to ABCP vary across fund managers and reflect varying degrees of risk appetite, sensitivity of key clients, available resources, and other qualitative factors. Despite the strong features and performance of ABCP conduits post-crisis, the sector retains a negative reputation with some money fund investors based on their precrisis experience.

For additional detail see the special report titled 'Money Fund Managers Show Varied Appetite for ABCP' on the Fitch Ratings web site at www.fitchratings.com.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research: Money Fund Managers Show Varied Appetite for ABCP

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=862594

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE '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 ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.