European Money Market Fund Investors Demand Liquidity

ABSTRACT We analyze the impact of the United Kingdom's “Growth Plan” announcement on European Money Market Funds (MMFs). EU MMF regulations allow fixed net asset value (NAV) with liquidity fees and redemption gates and floating NAV without liquidity restrictions. The new regulations are designed to make MMFs more resilient under financial market stress. We find that Pounds denominated and/or UK‐domicile fixed NAV MMFs experience fund outflows following the announcement. Our results suggest that the fixed NAV MMF liquidity fees and redemption gates prompted investors to move quickly in response to the market stress of the Growth Plan.