CMA Caps Offshore Holdings for Money Market Funds

Saudi Arabia's capital markets regulator has introduced a new cap limiting how much of their assets local public money market funds may hold outside the Kingdom, in a move aimed at keeping more liquidity invested in domestic assets.

Under the rule, public money market funds may hold no more than 5% of their net assets abroad. Any foreign counterparties used for these overseas investments must carry an investment-grade credit rating from a licensed credit rating agency, adding a layer of protection for investors.

The regulation includes transition arrangements for funds that currently exceed the limit. Funds holding more than 5% of assets offshore have a two-year window to bring their portfolios into line. Funds with heavier foreign exposure — above 20% — face a tighter deadline and must reduce that exposure to below 20% within six months.

Until they are compliant, fund managers are barred from making new investments or renewing transactions that would push their offshore holdings beyond the cap.

Why it matters

Money market funds are widely used by savers and institutions as a low-risk place to park cash. By capping offshore exposure, the regulator is steering more of that capital toward domestic assets, which supports local liquidity and financial market development. For everyday investors, the requirement that foreign counterparties hold an investment-grade rating is designed to reduce risk on any funds still invested abroad.

The phased timelines give fund managers room to adjust without forcing rapid asset sales, while ensuring the new limits take full effect over the coming months and years.

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