Fitch Affirms Two BMO Money Market Funds at ‘AAAmmf’:
Fitch Affirms Ratings confirms the AAAmmf rating of two US money market funds (MMFs) managed by the BMO Asset Management Corp (BMO), in line with normal operating planning. The MMFs are BMO Government Money Market Fund and BMO Prime Money Market Fund.
PORTFOLIO DIVERSIFICATION / CREDIT QUALITY
In line with Fitch’s criteria for rating MMFs as ‘AAAmmf’, the funds have high credit quality portfolios, investing only in short-term securities invested by Fitch or its equivalent for at least ‘F1’.
FMMs such as “AAAmmf” seek to manage their portfolios to limit exposure to individual issuers to less than or equal to 10% of the Fund’s assets, with a maximum of 5% of the assets of that exposure exceeding seven days. From time to time there may be minimal and temporary deviations from these parameters, mainly due to cash outflow. The funds also aim to limit their exposure to individual counterparties of up to 25% of the total assets of a fund, provided that the counterparties reach ‘F1’ or higher and these repurchase agreements are fully supported by high-grade government bonds. . In repos with F2-rated counterparties, funds aim to limit their exposure to individual counterparties to 10% of the assets, provided the repo is capitalized within a week or less through high-quality government bonds. MMFs also seek to limit their exposure to government entities, with exposure of more than 35% of assets to a single entity and limited to short-term securities.
The fund’s portfolio credit factors (PCFs) met Fitch’s AAAmmf rating criteria of 1.50 or less at the time of this review. PCF is a risk-weighted measure that takes into account the credit quality and maturity of the securities in the portfolio.
MMFs with an ‘AAAmmf’ rating aim to reduce interest rate risk and diversification by keeping the weighted average maturity (WAM) and the weighted average life expectancy (WAL) below 60 and 120 days, respectively.
AAF-rated MMFs want to maintain sufficient daily and weekly liquidity to meet redemption requests. In particular, taxable MMFs “AAAmmf” invest at least 10% of their total assets in securities that provide daily liquidity and at least 30% of their total assets in securities that provide weekly liquidity according to Fitch’s valuation criteria.
According to Fitch’s FMM rating criteria, the degree of diversification of the shareholder distribution platform and risk management and management for investors are taken into account.
Fitch receives bi-monthly information on fund portfolios, including credit quality and maturity of individual securities, to monitor FMM’s rating criteria. Read the criteria below, available on the Fitch website, for more information on Fitch’s MMF rankings.
BMO acts as an investment advisor to the funds and is a wholly-owned subsidiary of the BMO Financial Group. As of October 31, 2020, BMO had $ 388 billion in assets under management.
Fitch believes that the investment adviser’s capabilities, resources, operational controls, corporate governance, and compliance procedures are consistent with the ratings awarded to the funds.
Factors that may individually or collectively lead to a positive review action/update:
–Not applicable as nominal ratings are the highest rating result on the MMF rating scale.
Factors that, individually or collectively, may lead to a negative rating/downgrade:
Significant changes in the funds’ credit quality or market risk profiles or material and persistent breach of any of Fitch’s AAAmmf criteria.
The sources of information used to assess these ratings were the investment adviser and/or fund manager and the public domain.