NEW YORK--(BUSINESS WIRE)--Fitch Ratings has assigned ratings to the following three money market funds advised by BofA Advisors, LLC (BofA), an indirect, wholly owned subsidiary of Bank of America Corporation (NYSE: BAC):
--BofA Treasury Reserves - rated 'AAAmmf';
--BofA Government Reserves - rated 'AAAmmf';
--BofA Government Plus Reserves - rated 'AAAmmf'.
KEY RATING DRIVERS:
The main drivers for the ratings assignment are:
-- The funds' overall credit quality and diversification;
-- Minimal exposure to interest rate and spread risks; and
-- The capabilities and resources of BofA as investment advisor.
The 'AAAmmf' money market fund ratings reflect the funds' extremely strong capacities to achieve their investment objectives of preserving principal and providing shareholder liquidity through limiting credit, market, and liquidity risk.
FUNDS' CREDIT PROFILES
BofA Treasury Reserves seeks to maintain a high credit quality consistent with Fitch's criteria for 'AAAmmf'-rated money market funds by investing at least 80% of its net assets in U.S. Treasury obligations and repurchase agreements (repos) backed by such obligations. BofA Government Plus Reserves invests at least 80% of its net assets in U.S. government obligations, including U.S. Treasury obligations and obligations of U.S. government agencies, authorities, instrumentalities, or sponsored enterprises, and repos backed by such obligations.
Counterparty risk in repos conducted by both funds is managed by transacting with entities rated 'F1' or higher, or those that are integrated members of financial institutions rated 'A/F1' or higher. As of Aug. 31, 2012, BofA Treasury Reserves and Government Plus Reserves had $8.3 billion and $0.5 billion in assets under management, respectively.
BofA Government Reserves seeks to maintain a high credit quality consistent with Fitch's criteria for 'AAAmmf'-rated money market funds by investing at least 80% of its net assets in U.S. government obligations. This fund does not invest in repos. As of Aug. 31, 2012, BofA Government Reserves had $6.5 billion in assets under management.
These three funds seek to manage interest rate and spread risk consistent with Fitch's ratings criteria for funds rated 'AAAmmf' by limiting their weighted average maturity (WAM) and weighted average life (WAL) to 60 days and 120 days, respectively. As of Aug. 31, 2012, BofA Treasury Reserves, BofA Government Reserves and BofA Government Plus Reserves had a WAM of 49 days, 51 days, and 49 days, respectively, and a WAL of 49 days, 81 days, and 92 days, respectively
The funds additional investment restrictions are aimed at maintaining sufficient levels of daily and weekly liquidity to meet investor redemption requests. In line with amended Rule 2a-7 under the Investment Company Act of 1940, which governs the investment activities and operations of U.S. money market funds, all three funds invest at least 10% of its portfolio in daily liquid assets and at least 30% of its portfolio in weekly liquid assets. As of Aug. 31, 2012, these funds met the liquidity requirements mandated by Rule 2a-7 and were also in line with the liquidity guidelines outlined in Fitch's rating criteria.
BofA, the funds' investment advisor is a subsidiary of BofA Global Capital Management, which is a cash investment management division of Bank of America Corporation (rated 'A/F1' by Fitch), and is one of the world's largest financial institutions. BofA Global Capital Management has over $77.3 billion in assets under management (as of June 30, 2012) and is focused solely on the management of short-term debt portfolios and has access to the extensive resources of Bank of America, including the insights of the bank's economists, market strategists and fixed-income specialists.
Fitch views BofA and BofA Global Capital Management's investment advisory capabilities, resource commitment, operational controls, corporate governance, and compliance procedures as consistent with the ratings assigned to the funds.
RATING SENSITIVITY AND SURVEILLANCE
The ratings may be sensitive to material changes in the credit quality, market or liquidity risk profiles of the funds. A material adverse deviation from Fitch guidelines for any key rating driver could cause the ratings to be lowered by Fitch, including adverse changes in shareholder concentration and/or increase in unanticipated cash outflows. Given the fund's primary investment focus on U.S. Treasury and government obligations, the fund ratings may also be sensitive to adverse changes in U.S. sovereign debt rating.
Fitch expects to receive weekly portfolio holdings information from the funds' administrator to conduct surveillance against ratings guidelines and maintain its money market fund ratings.
Surveillance and analytical information on these funds is expected to be available in the Funds Surveillance section of Fitch's website (www.fitchratings.com, Surveillance then Funds) in the near future.
Additional information is available at www.fitchratings.com. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
The sources of information used to assess this rating were the public domain and BofA.
Applicable Criteria and Related Research:
--'Global Money Market Fund Rating Criteria', March 29, 2012;
--'U.S. Money Market Funds Sector Update: First-Quarter 2012, April 16, 2012.
Applicable Criteria and Related Research:
U.S. Money Market Funds Sector Update: First-Quarter 2012