BNY Mellon Asset Servicing and Investor Analytics have been selected by Reich & Tang Asset Management to provide money market stress tests that will model the impact of interest rate shocks, credit risk shocks and liquidity risk shocks on its funds.
The new service, available through BNY Mellon's alliance with Investor Analytics, will help money market funds comply with Rule 2a-7 issued by the US Securities and Exchange Commission.
The rule, which becomes effective on 5 May, requires money market funds to examine combinations of potential stresses.
"Our selection of BNY Mellon Asset Servicing was based on its ability to provide an objective, end-to-end solution that will facilitate both Reich & Tang and our fund directors in meeting their obligations under the new SEC and rating agency requirements," says Joseph Jerkovich, senior vice president and chief financial officer of Reich & Tang Asset Management. "The strength of our ten year relationship with BNY Mellon, the expertise of the Investor Analytics team, and the robustness of their product offering demonstrate that they really understand our business and are offering a solution that is optimised for money market funds, not adapted from longer-duration or equity strategies."
"The recent financial crisis demonstrates the need for money market funds to show their resiliency to shocks from a variety of factors," adds Joseph Keenan, managing director and head of relationship management for financial institutions at BNY Mellon Asset Servicing. "The stress test that we are providing can help money market funds protect themselves against these risks. This offering is a timely extension of the wide range of services that we provide to mutual fund complexes such as custody, fund accounting, fund administration, and performance and analytics."
US and European regulators increasingly require money market funds to test conditions that can depress the net asset value below one dollar during redemptions, a condition commonly called breaking the buck.
The stress tests were developed by Investor Analytics and are available through BNY Mellon's asset servicing technology platform. The tests will examine changes in fund NAV resulting from: parallel and non-linear shifts in yield curves; changes in credit spreads; increasing redemption requests; and combinations of the three.
Reich & Tang Asset Management provides cash management services to financial intermediaries.