The 10th largest money market fund complex in the U.S., Wells Fargo Advantage Funds, became the latest to lay out its plan to comply with pending SEC money market reforms. In a statement entitled, "Wells Fargo Advantage Funds Announces Changes to Money Market Fund Lineup," the company, with $110.5 billion in MMF assets (as of March 31), categorizes which funds will be Retail, Institutional, and Government. To date, 7 of the 10 largest US money fund managers have announced money fund lineup changes. The release says, "Wells Fargo Advantage Funds today announced that its Board of Trustees preliminarily approved changes to its money market fund lineup to address the regulatory changes adopted by the U.S. Securities and Exchange Commission (SEC) in July 2014. These changes will become effective on or prior to October 14, 2016."
Karla Rabusch, President of Wells Fargo Advantage Funds, says, "We aim to offer a broad money market fund lineup that best meets the cash management needs of both our retail and institutional clients. After speaking at length with clients, we are confident that we are offering them the right mix of options, without wavering from our long-standing investment approach that combines a rigorous credit analysis with steadfast attention to preservation of capital and liquidity." (Note: Rabusch is also the keynote speaker at the upcoming Crane's Money Fund Symposium, June 24-26, in Minneapolis, where she will address the issue of navigating the post-reforms money fund landscape. Click to see the full conference agenda or to register .)
Wells' statement outlines which funds will be classified as "Retail prime and municipal money market funds." It says, "Under the new SEC regulations, retail prime and municipal money market funds are required to maintain policies and procedures that are reasonably designed to limit all beneficial owners of the fund to natural persons. These funds are permitted to continue to use amortized cost to transact at a stable $1.00 net asset value (NAV) but may be subject to liquidity fees and/or redemption gates in the event that their weekly liquid assets fall below 30%. Wells Fargo Advantage Funds intends that the following funds will take steps to qualify as retail money market funds: Wells Fargo Advantage California Municipal Money Market Fund, Wells Fargo Advantage Money Market Fund, Wells Fargo Advantage Municipal Money Market Fund, Wells Fargo Advantage National Tax-Free Money Market Fund."
Three of these funds -- California Muni MMF ($1 billion in assets); Advantage Muni ($1.5 billion); and Advantage National Tax-Free ($2.6 billion) -– are currently classified by Crane Data as "Muni Retail" funds. Only one -- Wells Fargo Advantage MMF ($2.7 billion) -– is considered "Prime Retail." (Asset totals are from Crane Data's May 2015 XLS, with data as of April 30, 2015, and combine all share classes.)
The release says of the new "Institutional prime and municipal money market funds," "These funds will no longer be permitted to maintain a stable $1.00 NAV but will instead be required to transact at their market-based NAVs, rounded to four decimal places. They may also be subject to liquidity fees and/or redemption gates in the event that their weekly liquid assets fall below 30%. Wells Fargo Advantage Funds intends to offer the following funds as institutional money market funds: Wells Fargo Advantage Cash Investment Money Market Fund, Wells Fargo Advantage Heritage Money Market Fund, Wells Fargo Advantage Municipal Cash Management Money Market Fund."
Advantage Cash Investment MMF ($11.1 billion) and Advantage Heritage ($41.0 billion) are currently classified as Prime Institutional. But both of these funds have "Prime Retail" share classes in Crane Data's categorization of funds. Advantage Municipal Cash Management ($1.2 billion) is listed as Municipal Institutional.
Wells also discusses its new "Government money market funds." The release says, "Under the new SEC regulations, government money market funds are permitted to continue to maintain a stable $1.00 NAV. However, such government money market funds will be required to invest at least 99.5% of total assets in government securities, cash, and/or repurchase agreements that are fully collateralized by government securities or cash. The Wells Fargo Advantage 100% Treasury Money Market Fund, the Wells Fargo Advantage Government Money Market Fund, and the Wells Fargo Advantage Treasury Plus Money Market Fund invest exclusively in these securities and thus already comply with this new requirement. Additionally, the new SEC regulations do not mandate liquidity fees and redemption gates for government money market funds. The Board has determined that it has no current intention of adopting liquidity fees or redemption gates on the government money market funds."
They explain, "Wells Fargo Advantage Funds intends to continue offering the following funds as government money market funds: Wells Fargo Advantage 100% Treasury Money Market Fund, Wells Fargo Advantage Government Money Market Fund, Wells Fargo Advantage Treasury Plus Money Market Fund." Advantage 100% Treasury has $10.2 billion in assets in all its share classes, Advantage Government has $22.2 billion, and Advantage Treasury Plus has $13.2 billion.
Rabusch adds, "`We also continue to evaluate opportunities for new product development. We remain actively engaged in discussions with our distribution partners and clients in an effort to understand how our investors' liquidity and cash management needs will change as a result of the new regulations. These discussions are helping us gather information so that we may better adapt to these regulatory changes and offer our clients the optimal mix of liquidity management solutions."
For more on Wells Fargo's MMF strategy, read our April Money Fund Intelligence profile of Jeff Weaver, Head of Money Funds at Wells Fargo Capital Management, "Wells Fargo's Jeff Weaver Says Clients Still Want Yield Too." In the interview he says, "When looking at money fund reform through a portfolio management lens, however, the news rules won't prompt a dramatic change from what we've done before. For example, consider our government funds -- we've always complied with them being at least 99.5% invested in government securities."
Weaver adds, "We remain committed to offering retail and institutional prime, government, and municipal funds -- particularly if that's what our clients want -- and we believe they do. Many of our clients are in a wait-and-see mode until that October 2016 deadline approaches. Right now, we're evaluating our product lineup. We're speaking with clients with the goal of developing product solutions that best meet their needs. Our client base is largely institutional -- 90% institutional versus 10% retail -- so that is always front of mind as we're making these changes."
