Chris Geeson, managing director of Geeson Financial Services says he would like to hope the new definition will help matters.
"It is not about the proposed rules, it is more to do with the fund managers’ remits and what they chose to invest in. Morally, you do not expect fund managers to be lying to you," he says.
But managers feel the new rules for money market funds set out by CESR will help to boost confidence in the sector. The rules intend to sharpen up the definition of such funds according to factors such as the instruments they are allowed to hold, liquidity and risk.
Tony Andrews, manager of the Henderson Cash and Henderson Money Market funds says: "It is an important pointer that is giving investors help and signposting us towards what type of funds there are available."
Performance over 3-yrs
Source: Financial Express Analytics
"All the while it is helping investors to understand a product, understand what it is about, and help to understand the risk. Anything like this is always going to help but the caveat that any investor must do is look at the portfolio, look at what the manager is investing in and ensure they are comfortable that that is the portfolio that they wish to buy into."
Jonathan Cocks and Ben Goodsell, portfolio managers of the Aberdeen money market funds, believe investors are better placed going forward.
"We think the industry has learnt an awful lot, not all money market funds are the same, and people’s risk appetites and pain thresholds are different," says Cocks.
"We think there is a good chance that the end investor actually now has the ability to get clarity and transparency."
However, even managers' opinions are still mixed as to whether the new definitions will help to avoid issues like those seen in 2007, when funds were found to be less liquid and taking on higher risk than investors thought.
Andrews says the thrust of CESR’s work is about investing in only high quality instruments.
"What brought the other money funds down to their knees was that they were all investing in this rotten asset backed paper, which was supposed to have an AAA rating," he says.
"I regret to say I think that some of the money funds are continuing to make the same old tired mistakes, although I think funds are investing in a lot lower quantity than before."
Yet Cocks disagrees: "We believe it will make a difference because of the introduction of the weighted average life which is a new means to control credit risk. The introduction is one of the key new controls," he says.
However, he admits some of those in the industry might not have changed but says this is because they have not yet needed to. Opinion is also divided on whether the changes will bring a new wave of funds to the sector with Andrews believing it will.
"I see there being a few new entrants into the market. The main issue with cash funds is that because of the nature of the fund it is not one that traditionally charges high fees," he says.
Andrews believes the main constraints will be due to the amount it costs to launch a fund. Meanwhile, Cocks does not see a significant increase in new providers, but believes existing providers might make changes to their fund ranges.
"We do see money market funds expanding across the globe because of lower relative returns from traditional liquidity strategies," he says.
"I think historical investors might get a lower return relative to what they have managed in the past and therefore they might look for a slightly higher return to what they are going to be getting. If we are wrong on growth it is because investors want more yield and are prepared to take on a little bit more risk and therefore the growth in money market funds will be slower, but I still think there will be growth."
However, despite this he says there are still inconsistencies in the way that money markets funds are placed.
"I think one of the small disappointments is that CESR failed to adopt a common pricing policy for money market instruments," he concludes.