In recent years, regulatory changes and investment guidelines have assisted in the tracking and diversification of money market fund risk. This has been supported by a stable net asset value (NAV) of $1 per share which continued to ensure a high degree of diligence and discipline within the money market industry.
Outlined in this section is an overview of Rule 2a-7 guidelines for money market funds and triple-A rating guidelines for money market funds. Please note that this is not a comprehensive review of all Rule 2a-7 and triple-A rated guidelines.
Triple-A Rated Money Market Fund Guidelines
Money market funds can apply for the highest rating from the Nationally Recognized Statistical Rating Organizations (NRSROs), which can include Standard & Poor’s Ratings Group, Moody’s Investors Service, Inc., and/or Fitch Ratings. In addition to meeting Rule 2a-7 guidelines, money market funds must meet additional requirements in order to maintain the highest rating from the different NRSROs. The rating agencies also perform regular surveillance of top-rated funds to ensure a fund is complying with the more stringent guidelines. Below is a high-level overview of the rating agencies’ requirements, although it is important to note that this list is not exhaustive, and the requirements are always at the discretion.
Minimum Credit Rating
- Moody’s: No explicit limit. Rating is determined by Moody’s scorecard.
- S&P: Min A-1+ or A-1;*
- Fitch: F1+ or F1 (short term)
Maturity
- Moody’s: No explicit limit. Rating is determined by Moody’s scorecard.
- S&P: WAM: 60 Days; WAL 90-120 Days*
- Fitch: WAM: 60 Days; WAL 120 Days
*Based on additional S&P guidelines
- Standard & Poor’s AAAm rating:“Extremely strong capacity to maintain principal stability and limit exposure to principal losses due to credit market and/or liquidity risks.” (For further information on the rating criteria of Standard & Poor's, please follow thislink.)
- Moody’s Investors Service Aaa-mf rating:“Very strong ability to meet the dual objectives of providing liquidity and preserving capital..” (For further information on the rating criteria of Moody's Investor Services, please follow thislink.)
- Fitch RatingsAAA/mmfrating:“Extremely strong capacity to achieve money market fund’s investment objective of preserving principal and providing shareholder liquidity through limiting credit, market, and liquidity risk.” (For further information on the rating criteria of Fitch Ratings, please follow thislink.)
Ratings are subject to change and do not imply the elimination of risk
Note: Each NRSRO’s guidelines could be more or less restrictive.
Note: Standard & Poor’s Fund Ratings represent an opinion only, not a recommendation to buy or sell.
First and Second Tier Securities
What is a First Tier Security?*
An eligible money market security which receives the top short-term rating from any two Nationally Recognized Statistical Rating Organizations (NRSROs). If only one NRSRO has rated the security, it must receive the highest short-term rating from that NRSRO to be considered First Tier. U.S. Government Securities are considered First Tier Securities.
What is a Second Tier Security?*
An eligible money market security which is not a First Tier security and receives one of the top two short-term ratings from any two NRSROs. If only one NRSRO has rated the security, it must receive the second highest short-term rating from that NRSRO to be considered Second Tier.
Note: An unrated security can also be a First Tier security if it has comparable quality to a rated First Tier Security as determined by the Fund’s investment advisor.
Note: An eligible security is a rated security with a remaining maturity of 397 calendar days or less that has received a rating from an NRSRO in one of the two highest short-term categories or any unrated security of comparable quality.
*Source: iMoneyNet Money Fund Vision(98) and Goldman Sachs Asset Management
General Rating Guidelines
Independent rating agencies, such as Standard & Poor’s Ratings Group (S&P), Moody’s Investors Service, Inc.and Fitch Ratings, assign credit ratings to most corporate credit securities, indicating the agency’s view on the credit quality of the issuer or security. These ratings fall into two broad categories: investment grade and speculative grade (or high yield).
For further information on the rating criteria, please refer to the official websites ofStandard & Poor's Ratings Group (S&P),Moody's Investors Service, Inc andFitch Ratings.
Money market fund investments in rated securities continue to be restricted to those securities in the top rating category (or unrated securities of comparable quality). Money market funds are still required to perform an independent credit analysis of every security purchased.
External Resources
In addition to the resources provided by GSAM’s Liquidity Solutions, the following external resources may help you gain more in-depth information about other parts of the firm as well as gain access to additional market and industry insights.
Investment Company Institute
The Investment Company Institute (ICI) is the National Association of U.S. Investment Companies. ICI provides valuable information about the latest developments in the investment management industry, including on mutual funds, closed-end funds, exchange-traded funds (ETFs) and unit-investment trusts (UITs).
Financial Industry Regulatory Authority
Financial Industry Regulatory Authority
The Financial Industry Regulatory Authority (FINRA) Is an independent regulator for all securities based in the United States. It offers services ranging from registering and educating industry participants to examining securities firms. It also establishes rules and enforces those rules as well as informs and educates the investing public.
Institutional Money Market Funds Association
Institutional Money Market Funds Association
The Institutional Money Market Funds Association (IMMFA) is the trade association representing the European triple-A rated money market funds industry. The website educates investors on European money market funds and delivers timely data on members' funds.
Goldman Sachs & Co.
Visit our parent company's public website to learn about the firm, Goldman Sachs & Co., and get the latest information and answers about the firm and the industry.
Securities and Exchange Commission
Securities and Exchange Commission
Find the latest developments on financial regulation on the public website of the Securities and Exchange Commission (SEC).
