ABI unveils new strict money market sector

The ABI will create a new investment sector called Deposit & Treasury, which will carry stricter limits than the existing money market category.

Its creation has followed a review of all ABI sectors in the wake of the financial crisis, with the trade body conducting industry-wide consultation, including with the FSA.

The ABI says the industry required a classification where the principal and overriding objective is in the stability of capital.

To be launched on 1 November 2009, the new Deposit & Treasury sector will contain money market funds which are only allowed to invest in relatively simple instruments, such as time deposits or Government bonds. All instruments held by funds in the new sector must be denominated in Sterling and have a maximum duration of 12 months.

"This move is good news for consumers. It will make it easier for people seeking stability during the current volatility," ABI director of life and savings Maggie Craig says.

"Whilst no fund is risk free, the new sector will only contain the simplest funds available."