LONDON (Reuters) – Sterling money market funds saw a significant rise in inflows during the turbulence in British government bond markets following last month’s mini-budget, a development that was likely driven by pension funds, Fitch Ratings said on Friday.
Fitch said it believed most of the increase was down to pension funds building up cash given an increase in collateral requirements from many liability-driven investment (LDI) funds.
The maximum daily inflow at a fund level among Fitch-rated sterling short-term money market funds (MMFs) peaked at 17% of assets under management on Sept. 30 compared with a usual level of around 5%, the ratings agency said in a note.
“The maximum daily outflow was relatively stable at the time, although outflows have increased for some funds more recently,” Fitch said, added it expected inflows and outflows to be volatile given uncertainty over the Bank of England’s willingness to further support the gilt market.
