If a CNAV
fund breaks the buck, you have to freeze the fund, lock all the cash in, liquidate the assets and pay investors on a prorata basis," Cookson points out.
The report proposed eight different options, including eliminating CNAV
funds in favor of VNAV; distributing large redemptions in kind rather than in cash; offering fund investors insurance; and regulating CNAV
funds as special-purpose banks.
Money market funds (MMFs) represent 25% of the value of European investments, and CNAV
funds represent 77% of the total value of MMF investments.
Another sizeable minority wants to ban CNAV
The committee was largely opposed to the elimination of CNAV
funds, and industry has been fiercely against the introduction of more punitive measures against CNAV
funds since the Commission first released its proposal.
The IMMFA - a trade association that represents the European triple A' rated CNAV
(constant net asset value) MMF industry - does not share this position.
Finally, the Commissioner for Justice, Fundamental Rights and Citizenship, Viviane Reding, had a question for her fellow commissioner when she brought up money market funds (MMFs) and specifically CNAV
(current net asset value) funds (4704).
In its public consultation on shadow banking, the European Commission explains that the risk of runs increases when MMFs value their assets through the amortised cost approach in order to maintain a stable NAV, even if the market values of the underlying investments fluctuate, as is the case for the so-called constant NAV MMF, the CNAV