Europe funds seek money market fund liquidity plan

By Cecilia Valente

LONDON (Reuters) - European fund managers are lobbying the European Central Bank and national central banks seeking measures to inject liquidity into money market funds, a trade association chief said on Tuesday.

Peter de Proft, the secretary general of the European Fund and Asset Management Association (Efama), said fund houses are seeking ways to boost liquidity should the industry require it. He stressed that any action would be pre-emptive and is not an urgent requirement.

De Proft said his organisation is coordinating action on a European level, while members are approaching their national central banks with the same request.

De Proft told Reuters: "We are trying to see whether there are measures that the European central banks could (use to) bring liquidity to the market. How they can do it is up to them because this is all very new and in extremely difficult circumstances and everyone is talking to central banks."

The European Central Bank was not available for comment.

European money market funds have not so far experienced the stresses faced by their counterparts in the U.S. Despite money market funds' reputation as safe investments, the American Reserve Primary Fund last month "broke the buck" as the par value of its shares fell to 97 cents after asset prices slumped.

One senior fund industry source, who declined to be named, welcomed the Efama move.

"These funds in Europe typically have no problems covering flows, the funds are liquid and the underlying instruments are fine.