As regulators on both sides of the Atlantic look at ways to make money market funds more robust, one option they’ve focused on is moving from a stable, or constant, net asset value (CNAV) model to a floating or variable (VNAV) model.
Unlike stable NAV funds, floating NAV funds do not maintain a share price of $1 (or 1 euro or £1). Instead, the price fluctuates in line with mark-to-market valuations. While some believe this type of fund is less susceptible to redemptions during a liquidity crisis, the floating NAV model is unpopular among many corporate treasurers. But some funds in Europe already use this model.