Saudi Arabia’s Capital Market Authority (CMA) has directed money market fund managers to limit assets and cash held or invested outside the Kingdom to 5% of a fund’s net asset value (NAV).
The measure, issued through a circular to capital market institutions, gives funds currently above the threshold up to two years to comply. During that period, managers must stop making investments or entering into transactions that would increase or extend the breach.
Funds with foreign investments above 20% of NAV face a faster adjustment process. They must reduce exposure to below 20% within six months, then continue rebalancing until they meet the 5% limit.
The CMA also requires all foreign investments to be made with counterparties holding an investment-grade credit rating from a licensed credit-rating agency. Funds with existing investments that do not meet this requirement will have up to two years to take corrective action.
The new rules add to existing requirements covering concentration risk, counterparties and certain investment instruments. Managers will need to review their portfolios, monitor foreign exposure as NAV changes and reassess the credit quality of overseas counterparties, according to the announcement.
Source: EntArabi
