A recent study by Moody's Investors Service found that from 2007 to 2011, money market funds' holdings of asset-backed commercial paper ("ABCP") have decreased from 25% to 8.3%. Moody's found three main reasons for this decline:
1) There has been a general aversion to structured finance securities after the financial crisis;
2) Some managers have concerns about ABCP hurting a fund's ability to maintain daily liquidity; and
3) Some managers do not feel they have the resources, or information, to fully analyze the underlying risks of ABCP.
There has also been a decline in the availability of ABCP that meet the quality criteria of money market funds. Nonetheless, many managers of larger money market funds still invest in ABCP as a way to reduce risk. These managers believe that any fund losses on ABCP would be minimized by associated collateral.
Moody's analysis was based on 82 European and 77 U.S. Moody's-rated money-market funds, with total assets under management of $1.2 trillion.