Late Friday, J.P. Morgan Asset Management, the largest manager of money market funds globally, published a press release entitled, "JPMorgan Money Market Funds Announce Intended Money Market Fund Designations In Response To SEC Reforms." It says, "J.P. Morgan Asset Management today announced that the Board of Trustees of the JPMorgan Money Market Funds approved the firm's preliminary recommendation regarding the intended designation of its publicly offered money market funds as "Institutional," "Retail" or "Government," in accordance with the criteria established by the Securities and Exchange Commission ("SEC") in July 2014. These determinations were reflected in a supplement to the money market funds' registration statements filed today. In the supplement, the Board also stated that it has no current intention of instituting liquidity fees or gates on the money market funds ("MMFs") designated as Government MMFs."
John Donohue, Head of Global Liquidity for J.P. Morgan Asset Management, comments, "The new rules include several significant structural changes. We are committed to providing shareholders with as much clarity and information as we can. We recognize that shareholders -- retail intermediaries, in particular -- need as much time as possible to adjust to these changes. As an industry leader, we look forward to continuing to meet investors' liquidity management needs in new and innovative ways."
Donohue adds, "We also want to reiterate that our MMFs' board has no current intention of utilizing fees and gates in our Government MMFs. Additionally, investors should know that our board does not currently plan to institute a floating net asset value ("NAV") in our Prime MMF, and fees and gates in our non-Government MMFs any sooner than the second half of 2016."
J.P. Morgan's statement lists "Funds seeking Retail qualification" as: JPMorgan Liquid Assets Money Market Fund, JPMorgan Tax Free Money Market Fund, JPMorgan California Money Market Fund, JPMorgan New York Municipal Money Market Fund, and JPMorgan Municipal Money Market Fund. "Funds seeking Government qualification" include: JPMorgan 100% U.S. Treasury Securities Money Market Fund, JPMorgan Federal Money Market Fund, JPMorgan U.S. Government Money Market Fund, and JPMorgan U.S. Treasury Plus Money Market Fund. Finally, "Institutional Prime" funds will include: JPMorgan Prime Money Market Fund, currently the 3rd largest MMF Portfolio (behind Vanguard Prime and Fidelity Cash Reserves) with $112 billion.
The release explains, "Under the recent amendments to the SEC rules that govern the operation of registered MMFs, those that qualify as "Retail" or "Government" will be permitted to continue to utilize amortized cost to value their portfolio securities and to transact at their existing $1.00 share price, as currently permitted. The JPMorgan Prime MMF, which will not qualify as "Retail" or "Government," will be required to price and transact in its shares at NAVs reflecting current market-based values of its portfolio securities (i.e., at a "floating NAV"). The floating NAV will need to be rounded to four decimal places for a MMF with a $1.00 NAV (e.g., $1.0000)."
It continues, "Additionally, each non-Government MMF must adopt policies and procedures to be able to impose liquidity fees on redemptions and/or redemption gates in the event that its weekly liquid assets were to fall below a designated threshold, subject to the actions of the MMF's board. Though compliance with these amended rules is not required until October 2016, the JPMorgan MMFs are providing these preliminary plans early in response to investor demand and to help ease the transition to new rules by allowing investors to plan their future investments."
Finally, JPMAM adds, "It is currently anticipated that the Board will consider both (i) the date of the transition of the JPMorgan Prime MMF to a floating NAV and (ii) the date after which the Board may consider the use of liquidity fees and gates for non-Government MMFs during the second half 2016 and that such changes will occur on, or prior to, October 14, 2016. Additionally, the retail MMFs and government MMFs will seek to meet the applicable new SEC requirements on, or prior to, October 14, 2016."
J.P. Morgan becomes the first money fund manager to designate which of its funds will be "Retail", "Institutional" or "Government". Earlier this month, Fidelity Investments announced that it was changing its flagship retail Fidelity Cash Reserves into a Government fund. (See our Feb. 2 News, "Fidelity Announces Major Changes to MMFs; Staying Stable, Going Govt".) And Thursday, Federated Investors published a press release detailing its preliminary reorganization plans. (See our Feb. 20 News, "Federated Announces Changes; Targets Floating MMFs That Won't Float".)
