Northern Trust’s asset management arm has launched a variable net asset value (VNAV) fund as part of its money market fund range in response to the continued negative yield environment.
The Euro Liquidity Fund has been designed to operate in both negative return environments and positive yielding markets and supports institutional investors requirements for liquid, diversified and high quality cash management products.
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"We anticipate the current negative Euro cash investment rate environment will persist for some time and the effect this has on interest accrual does not support a constant net asset value fund or structure particularly well," said David Blake, director of international fixed income at Northern Trust Asset Management.
"By launching our VNAV fund, we offer investors greater transparency whilst meeting their objectives for security and liquidity, despite the lower return environment."
In contrast to constant net asset value (CNAV) accounting, VNAV accounting enables the price of the fund to move each day to reflect its valuation.
Earlier this year, the US Securities and Exchange Commission ruled that institutional money market funds will be required to convert to VNAV fund accounting within two years. In Europe, the European Commission is deliberating a similar proposal.
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By GlobalData"Regardless of the return environment, we believe VNAV is the future structure for money market funds due to their ability to allow continued access to high quality, same-day liquidity," said Wayne Bowers, chief investment officer for Northern Trust Asset Management in Europe, Middle East, Africa and Asia-Pacific.
"Northern Trust’s VNAV Euro fund offers transparency, an unchanged investment philosophy and a long term structure that satisfies investor demand as well as regulatory concerns."
