Investors in Europe risk losing a haven as Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley break a taboo that’s stopped 88 billion euros ($113 billion) of money-market funds from ever losing principal.
The banks are preparing to abandon the policy that investors get one euro back for every one they put in as government bond yields near record lows make it harder for the funds to generate returns.
JPMorgan, the largest U.S. bank by assets, said in October it was replacing two constant NAV euro money-market funds, with about 16.2 billion euros under management, with new structures which have shares that can be canceled. All investors will have their holdings cut if total assets drop, an action that isn’t allowed under current fund rules.
“We are now in a position where we can manage through potential negative yields,” Jonathan Curry, global chief investment officer of liquidity at HSBC Global Asset Management with more than $428 billion under management, said in an e- mailed statement. The changes were put in place on Feb. 22, an HSBC spokesman said.
About 51 percent of European funds use variable asset values, according to the European Fund and Asset Management Association in Brussels. Europe’s money market fund industry had 1.02 trillion euros under management in December, according to EFAMA data in euros, pounds and dollars.