With the October 2016 implementation of the pending money fund reform rules a little over a year away, money market fund managers have been busy this year making plans to adapt to the new environment. We have reported extensively on the announcements that have come to our attention over the past six months, including the most recent, this week's announcement by Deutsche and filings from State Street. Of the 20 largest money market fund complexes, almost all have issued updates, including the 5 largest -- Fidelity, JP Morgan, BlackRock, Federated, and Vanguard. Only 4 of the top 20 companies have not made their plans known publicly, including Northern, BofA, Franklin, and American. Here is a recap of the changes announced so far, including links to our original "News" stories.
First, we look at the changes from the top 5 firms (based on assets). 1. Fidelity will shift about $130B from Prime Retail to Government, including the world's largest money market, Fidelity Cash Reserves, and will merge MMFs with similar strategies. The company has not yet commented on its plans for Institutional MMFs, but an Operational Update issued on April 14 revealed some details, including some new share classes for some existing funds.
2. JP Morgan said JP Morgan Prime, the largest Institutional Prime fund, will remain as such and will be subject to Floating NAV, while JP Morgan Liquid Assets will shift to Retail. JPM's release is one of the few to detail which funds will be retail and which will be institutional among its lineup. 3. BlackRock said its largest money market fund, TempFund, will remain a Prime Institutional fund, subject to floating NAV. The Prime Institutional $2.4B TempCash will remain Prime Institutional, but will be converted to a 7-day maximum maturity fund while some Muni funds will also be converted to 7-day funds. Also, some Prime Retail funds may be converted to Government funds, although no details have emerged yet.
Also, 4. Federated will convert some of its Prime Institutional Funds to 60-day maximum maturity funds. Details on which funds or amount of assets converted have not been released. In June, Federated issued a second update, announcing it will have 6 Prime Retail and Muni funds and will merge away 7 funds, including 3 Retail and 4 Government funds. 5. Vanguard's announcement says that it won't offer any Prime Institutional or Municipal floating NAV funds but instead will be pure Retail. Specifically, Vanguard Prime MMF will be designated a Prime Retail fund with the Institutional Shares being changed to Admiral (retail) Shares. Also, it reopened its Federal MMF, designated 6 muni funds as retail, and renamed the Vanguard Admiral Treasury Fund the Vanguard Treasury MMF.
Here is what the 6-10 largest MMF managers have announced. 6. Dreyfus is considering offering 60-day maximum maturity Prime Institutional funds. Dreyfus will offer all types of money funds and same-day settlement on floating NAV MMFs. 7. Charles Schwab will not implement fees and gates on its government, and will have a range of options, including Floating NAV funds. A spokesperson for Schwab tells Crane Data, "We are committed to providing our clients a wide array of choices in how they manage their portfolios. Clients in Prime or Municipal MMFs who will be eligible for "Retail" funds and who continue to meet Schwab's MMF Sweep Feature criteria will stay in the Cash Feature they have selected.... You should expect to see filings designed to ensure all of our existing Prime and Municipal funds remain "Retail," as well as filings for new "Institutional" funds, as appropriate."
8. Goldman Sachs said it will start complying with the new definition of Government MMFs early, converting 4 Government MMFs to the 99.5% requirement. It also said it won't have fees and gates. 9. Morgan Stanley won't impose fees and gates on government funds, and anticipates adapting its current funds to the new rules. However, the company is planning on developing new products that meet the needs of investors in this space. 10. Wells Fargo designated which funds will be Institutional, Retail, and Government. It is also working on new products and won't impose fees and gates on Government Funds.
Next, we summarize the plans for the 11th through 15th largest money fund managers. 11. Northern. No announcement yet. 12. SSgA won't impose fees and gates on government funds, and the flagship State Street Institutional Liquid Reserves, a Prime Institutional fund, will adapt to reforms and offer the floating NAV. State Street also filed with the SEC to launch 3 new money market funds, including a 60-day maximum maturity fund, and 3 new ultra short bond funds, including one that looks like a money fund in disguise. 13. Invesco won't implement fees and gates on its Government Funds. 14. BofA Funds. No announcements yet. 15. Western Asset Management will adapt funds to new requirements, but won't have fees and gates on Government funds. It will also launch two Short-Term Bond Funds.
We also briefly look at the 16th through 20th largest MMF managers. 16. First American won't impose fees and gates on Government Funds and is also considering developing 60 day funds and Private funds. 17. UBS won't impose fees and gates on its Government funds. But it will have full roster of funds, including FNAV funds. It is working on Private Funds, SMAs, and Ultrashort Bond funds. 18. Deutsche Asset and Wealth Management will convert 5 Prime Institutional portfolios into Government funds and will keep just one Prime Institutional Fund, the $113 million Deutsche Variable NAV Money Market Fund. It will also offer Retail funds, Separately Managed Accounts, and is considering new products as well. 19.Franklin. No announcement yet. 20. American Funds. No announcement yet.
Finally, the SEC reforms have prompted several managers to get out of the money fund business, including Reich & Tang, which sold its MMF assets to Federated; Touchstone, which sold the bulk its MMF assets to Dreyfus and Federated; and Alpine, which announced its liquidation in March.
