In May, JP Morgan surveyed a group of money market mutual funds with questions designed to help understand the frequency, scope and resources industry members anticipated utilizing as part of their stress testing program. JP Morgan has released a summary of the survey results giving an interesting look at how money funds are implementing the SEC's recent rules requiring stress testing.
A substantial majority, 64%, indicated they planned to stress test their portfolios monthly. Daily and weekly testers together made up about a quarter of the responses (a combined 23%, 15% weekly and 8% daily). A small minority, 13%, indicated they planned to stress test less frequently than monthly. After we launched our stress testing survey, the SEC Staff issued responses to questions about the money market fund rule reforms which indicated, among other things, that the Staff would not object if a U.S. Treasury Money Market Fund was not subjected to stress testing. This may partially explain the results obtained in our survey on this question with 13% indicating planned stress testing would occur less than monthly.
The primary approach, based on your responses, would stress the portfolio with a combination of factors simultaneously (71.2%). Price Shock was the single most popular specific test respondents intended to use (46.2%) recording nearly double the number of votes than Decreases in Market Liquidity (28.8%) or Diminished Access to Eligible Securities (25%). Replication of Historical Events as a stand-alone choice recorded the lowest total, 17.3%, but, as one respondent noted, could easily be utilized in a combination of factors approach.
An overwhelming majority of firms responding indicated that they would be conducting the stress testing without the assistance of a service provider (76.6% no, 23.4% yes).
The summary document provides additional explanations of the survey's results, as well as illustrative graphs.
The summary document is available here.
Questions about the methodology, sample population, and other inquiries may be directed to JP Morgan via this link: http://www.surveymonkey.com/s/BQ95H8S