U.S. money-market funds have been buying more European bank debt, according to the Wall Street Journal's Fund Track column on Thursday.

The piece noted a study by Capital Advisors Group, which found an increase in foreign exposure, especially to European debt. The study found that 44 percent of a typical U.S. prime money-market fund is in non-U.S. financial debt, a figure that jumps to 69 percent for larger prime funds. This suggests that European deposits are the single-biggest part of money-market funds' holdings.

Debbie Cunningham, head of money-markets funds at Federated Investors [see profile], was quoted in the article as saying that the collapse of Bear Stearns and Lehman Brothers Holdings coupled with the tough economic climate and the lesser roles assumed by banks has made Europe the current flavor of the month.

Federated's funds have responded to market conditions not by abandoning Europe, but by shortening the duration of their holdings.  

Edited by: Hung Tran


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