Fund Management
Money Market Funds Get More Automated, Pandemic Highlights Virtues

Money market funds are an important part of the financial sector, if not a particularly exciting one. This area hasn't, until recently, been particularly highly automated. A firm that provides part of the "plumbing" for the funds world spoke recently about what it is seeing in this space.
The global pandemic is accelerating digital technology and the
money market funds space is no exception, with demand for
cash-like investments gaining more prominence as equity markets
become more volatile.
At the end of May, JP Morgan
Asset Management partnered with funds network organisation
Calastone, to
automate the asset manager’s money market funds business.
Ed Lopez, chief revenue officer at Calastone, told this
publication in a recent call, that the need for automation and
increased efficiency is only going to increase
“Automation and speed in this market has greatly increased and a
lot of that is down to Calastone,” Lopez said. COVID has greatly
accelerated the shift towards automation – along with so many
other parts of financial services," he said. “We are about taking
the manual friction out of the industry.”
As reported in late May, JP Morgan AM said that initially it
would use Calastone to enhance its entire settlements process,
starting with its Morgan Money offering. Calastone digitalises
the investment and reporting process for money market portals,
fund providers and investors.
A business such as Calastone has a front-row seat seeing what
investors are doing with their money, because its network
processes the fund-buying and selling flows that form part of the
financial “plumbing” of the global funds market. Lopez said
there have been inflows into money market funds from investors
deciding to manage risk exposures.
“Recent fund flows showed some profit-taking on equity funds and
movement into cash,” Lopez said.
Among other shifts, Lopez said that there has been growth, but
also a shift within the MMF industry. In particular, recent
volatile times have seen a big move to constant net asset value
funds and away from prime/low volatility net asset value and
volatile NAV funds. (In the US, LVNAV funds are called prime
funds. Such funds hold government securities that are low-risk,
and can hold short-term instruments issued by corporations, such
as certificates of deposit.
The money markets funds sector has been relatively slow to
embrace automation, Lopez said, and his business has been pushing
into the space.
However, the macro-economic environment is not friendly to money market funds in certain ways. Yields on money market funds have been squeezed by central banks’ rate cuts. Recently, firms such as Fidelity and Vanguard have started to waive fees on these funds because, without doing so, returns could drop to zero. In March, the US Federal Reserve cut the target range for federal funds to a corridor between 0.00 per cent and 0.25 per cent.