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You're listening to Strictly Business
Podcast with Lindsay Williams.

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Money markets are an essential part of the
global financial system.

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They provide liquidity, short-term
financing, and they've always been viewed,

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in my opinion,

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as rather boring and as safe havens.

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But is that the truth?

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With me now is Vivian Taber, Investment
Director at 91 in Cape Town.

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The safe haven status, Vivian, of money
market funds has been called into

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question.

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And that's very much the focus of the
piece that you sent me, very much focused

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on the regulatory environment,

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both in South Africa and internationally.

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Is that the case?

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Yes, that is the case.

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I think if you look at the importance of
the industry globally, there's around $10

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trillion in money market funds.

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So you can see what an important part of
the global financial system it is.

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And, you know, if we look at the South
African market and you look at our sort of

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surveys here.

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In the money market space, we have around
418 billion rands worth of money market

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funds.

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And then once you start looking at the
sort of short interest rate surveys as

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well,

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which moves slightly out of that very
conservative space into the next space,

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you've got around 400 billion there.

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So it's significant for South Africa.

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But you have people, when they're putting
their money in money market funds, they

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expect to preserve their capital.

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But they also want that extra little bit
of yields.

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And it's really about trying to find the
balance between the two.

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And regulators want to ensure, first and
foremost, that the capital is protected.

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And this is really where the regulation
has been going.

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And this has been on the back of the
Financial Stability Board,

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which is a global organization of which
South Africa is part,

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trying to ensure that the markets that
they operate in are financially stable.

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and a good environment for investment and
a safe environment for people.

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There must have been certain events that
have caused the regulator to prick up its

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ears, if you like.

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There must have been a couple of occasions
where they've said, well, that mustn't

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happen again.

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Has that been the case?

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Yes, that has been the case.

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And probably, you know,

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the one that we can highlight the most
really is what happened in 2008 with the

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collapse of

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Lehman Brothers and the stress that that
caused in the US.

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And then if we move a little bit closer to
home, you know, it's a long time ago now,

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but in 2014,

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we had the failure of African Bank in
South Africa, and that had impacts on the

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local market.

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So, you know, there are examples both
globally and in our own local markets.

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Can you give us, without getting too
technical, examples of what happened?

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For example, in the African Bank situation
where that bank collapsed, what happened

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to money market funds?

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What happened to the money market?

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So...

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In terms of money market funds, we
actually had a few money market funds

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where their one rand value,

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capital value that they held, it fell
below that stable one rand.

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And then managers have to use liquidity
management to ensure that they look after

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the investors that are still in the

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fund.

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So they'll put up redemption gates or
maybe side pockets.

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So ultimately, people did not lose capital
in money markets,

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but there were stresses in the market that
had to be taken.

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account of at that particular point in
time.

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Specifically, what is South Africa doing
regulatory-wise, Vivian?

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Because I know that Jai Bar and Zeronia
has been quite high profile,

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but there must be other things going on in
the so-called background.

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Yes.

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So it's all part of a broader framework
where the South African Reserve Bank is

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looking to strengthen financial

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stability in the country.

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So as you mentioned, the move from Jai Bar
to Zeronia is an important part of that.

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But we also have other things that are
going on.

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So at the beginning of last year,

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we had deposit insurance introduced for
retail investors at banks.

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So that's where South Africa followed what
was happening in terms of best global

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practice.

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We're a little bit behind some of the
markets there, but we moved in that

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direction.

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And then at the moment, there's a bill
under discussion that is called COFI,

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which is the Conduct of Financial
Institutions Act,

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which is going to regulate...

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and put a framework in place really for
financial institutions broadly.

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And that includes asset managers.

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It includes banks right across the
spectrum to ensure that customers are

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treated fairly,

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to ensure that the regulatory framework is
there to keep financial stability going

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forward in the country.

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Have you welcomed these changes?

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Yes, I think we do have to welcome these
changes.

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You know, we learn from past experiences.

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what was missing, what was wrong, how we
need to progress.

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And the response to that is important
because it looks after people's money and

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it looks after people's

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financial well-being.

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And perhaps most importantly, from a 91
perspective, has it changed the way you

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look at money market funds?

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Has it changed the way that your clients
and corporate investors look at money

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market funds negatively or

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favorably?

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I think it's going to make people look at
them more favourably.

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I think in terms of the way that we
actually manage our money market funds,

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there's not significant changes that need
to be put in place.

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I think there might be some benchmark
changes as we move to Zaronia and there

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might be greater disclosure coming

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forward.

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But in terms of the actual investments
that we invest into, those really high

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investment grade,

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conservative investments, there's really
going to be no change.

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What about this year, 2025?

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It's been an interesting year for all
markets concerned with the price of money,

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interest rates.

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There's been much made of the short end of
the curve and the long end of the curve

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going in different directions in the
United

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States of America.

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Does that affect the way that money market
investors look at money market funds and

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they become quite

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selective?

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in the type of money market fund that they
choose because of the moves that I've just

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mentioned?

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I think, yes, investors should be
selective in terms of what kind of fund

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they want,

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in terms of where you are in your interest
rate cycle,

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what the period of investment that you
intend to have the fund for is.

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So these are all considerations that need
to be taken into account.

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If you look at the very long ends of the
curve, you're not...

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really in the money market space.

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You're more moving into the bond space.

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But even in the money market space, if
you're expecting short-term interest rates

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to come down,

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then you would look to go a little bit
longer, take maybe a little bit more risk

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and take advantage of that.

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If you believe that the interest rate
cycle has bottomed, then you're likely to

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stay very short.

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If you're going to need your money in the
next few days or the next month or so,

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then you're going to a conservative money
market fund.

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If you're looking for a little bit more
return and you have that little bit longer

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investment time horizon,

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then it maybe makes sense to go into
something that doesn't have a stable one

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rand price,

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that has a little bit of variability in
terms of the capital movement,

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where you can get an extra pickup in yield
just from going that little bit longer and

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taking advantage of that term spread

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that you have across the yield curve.

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And certainly in South Africa, we do have
a steep yield curve.

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As you mentioned as well, in the US, the
yield curve has got steeper as well,

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where the longer end is driven more by
macro factors, by fiscal concerns, by risk

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premium,

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and the shorter end is really driven more
by inflation and growth considerations and

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what's happening to the short

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interest rates that are set by the central
banks.

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So Vivian, just to summarise, what we can
say is, I think,

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that a safe haven has become safer because
of regulations both overseas.

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and here.

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And it continues to be all about
understanding and aligning investment

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choices with corporate

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investors, liquidity needs, risk
tolerance,

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and being mindful of regulatory trends
remaining crucial.

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Is that the case?

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We're welcoming these moves.

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So I think we should welcome the changes.

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Anything that makes the environment safer
and looks after your money better and

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makes it more transparent in terms of what
you're

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investing in.

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is a good move, but money markets
investments have always been safe

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investments.

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Making them safer is a good thing though.

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Vivian, thank you very much for your
insight.

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Vivian Tabra is Investment Director at 91
in Cape Town.

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The views and opinions expressed in these
podcasts are those of Lindsay Williams and

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various contributors and do not reflect
the policy,

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position or opinion of any other agency,
organisation, employer or company

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associated

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with StrictlyBusinessPodcast.com.

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Assumptions made on the analyses are not
reflective of the position of any other

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entity other than the speaker or the
author

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and since we are critically thinking human
beings these views are always subject to

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change,

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revision and rethinking at any time.

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Please do not hold us to them in
perpetuity.