Fitch Ratings has assigned 'AAAmmf' ratings to the following money market funds advised by BofA Advisors, LLC (BofA), an indirect, wholly owned subsidiary of Bank of America Corporation (NYSE: BAC):
--BofA Money Market Reserves;
--BofA Municipal Reserves.
KEY RATING DRIVERS:
--Overall credit quality and diversification;
--Short maturity profiles;
--Minimal exposure to interest rate and spread risks;
--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 Money Market Reserves seeks to maintain a high credit quality consistent with Fitch's criteria for 'AAAmmf'-rated money market funds by investing exclusively in short-term securities rated at least 'A/F1' by Fitch or equivalent. The fund's investments may include bank obligations issued by domestic and foreign issuers, commercial paper, corporate bonds, municipal securities and repurchase agreements collateralized by various types of collateral. Counterparty risk in repurchase agreements is limited by transacting with entities rated 'F1' or higher, or those that are integrated members of financial institutions rated 'A/F1' or higher.
As of May 18, 2012 BofA Money Market Reserves had $11.1 billion in assets under management. As of the same date the fund's Portfolio Credit Factor (PCF) met Fitch's 'AAAmmf' rating criterion of 1.50 or less. The PCF is a risk-weighted measure of the portfolio's assets that accounts for the credit quality and maturity profile of the portfolio's securities.
BofA Municipal Reserves seeks to maintain a high credit quality consistent with Fitch's criteria for 'AAAmmf'-rated money market funds by investing exclusively in short-term securities rated at least 'A/F1' by Fitch or equivalent. The fund also invests at least 80% of its net assets in securities that pay interest exempt from federal income tax although such securities could be subject to the federal alternative minimum tax. As of May 18, 2012 BofA Municipal Reserves had $3.2 billion in assets under management.
Both funds seek to limit interest rate and spread risk consistent with Fitch's ratings criteria for funds rated 'AAAmmf'. Both funds limit their weighted average maturity (WAM) and weighted average life (WAL) to 60 days and 120 days, respectively. As of May 18, 2012, BofA Money Market Reserves had a WAM of 46 days and a WAL of 60 days; BofA Municipal Reserves had a WAM of 29 days and a WAL of 34 days.
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, BofA Money Market Reserves invests at least 10% of its portfolio in daily liquid assets and at least 30% of its portfolio in weekly liquid assets. BofA Municipal Reserves invests at least 30% of its portfolio in weekly liquid assets.
As of May 18, 2012, both 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), one of the world's largest financial institutions. BofA Global Capital Management has over $78 billion in assets under management (as of Dec. 31, 2011) 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 portfolio's primary investment focus on domestic and foreign issuers in the financial sector, the ratings may also be sensitive to material adverse changes in the sector globally.
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' under the following headers in the near future:
Fund and Asset Manager Ratings >> Surveillance >> Funds
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.
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:
Global Money Market Fund Rating Criteria
U.S. Money Market Funds Sector Update: First-Quarter 2012
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Viktoria Baklanova, CFA