Two more Prime money market funds are converting to Government funds, and two more firms appear to be exiting the money market space, according to a series of recent S.E.C. filings. Specifically, Nationwide is converting its $1.0 billion Nationwide Money Market Fund, which has both Institutional and Retail shares, into a Government Fund. It's also converting the $1.8 billion Nationwide VIT MMF to Government. Also, Pioneer is converting the $280 million Pioneer Cash Reserves from Prime to Government. Further, William Blair filed to liquidate its $1.4 billion Ready Reserves Fund, and Delaware filed to convert its only money fund, the $169 million Delaware Cash Reserves to an Ultra Short Bond Fund, the Delaware Ultrashort Fund (as we first reported in yesterday's "Link of the Day"). These smaller players' "going Government" moves follow announcements by Fidelity, Deutsche, Franklin, American, and BlackRock (BIF and FFI) to shift major portions of their fund lineups to the safety and simplicity of the still stable NAV segment. To date, approximately $232 billion is slated to move from Prime funds to Government funds. (We've seen portions of portfolios shift to date, but the first full transitions occur next week with Franklin MMFs' official crossover date on Nov. 1 and next month with Fidelity Government Cash Reserves' official start date Dec. 1.)
The filing for the Nationwide Money Market Fund says, "Effective October 14, 2016, the Nationwide Money Market Fund will operate as a "Government Money Market Fund," as defined in Rule 2a-7(a)(16) under the Investment Company Act of 1940, as amended." The NVIT Money Market Fund filing includes the same language. Nationwide is the 46th largest money fund manager, according to our Money Fund Intelligence XLS as of Sept. 30, 2015. (Note: We do not track the NVIT MMF.)
Pioneer, the 59th largest money fund manager in our database, is converting the $260 million Pioneer Cash Reserves fund to a Government fund. Its filing says, "The Board of Trustees of Pioneer Cash Reserves Fund has approved changes to the fund's investment objectives and strategies that will allow the fund to operate as a government money market fund under amendments to Rule 2a-7 under the Investment Company Act of 1940. The fund's operation as a government money market fund will result in shareholders having continued access to a stable net asset value (NAV) money market fund that is not subject to liquidity fees or redemption "gates" (temporary suspensions of redemptions). Under amended Rule 2a-7, a government money market fund is a money market fund that invests 99.5% or more of its total assets in government securities, cash, and/or repurchase agreements that are fully collateralized by government securities or cash."
It continues, "Effective as of the close of business on or about November 13, 2015: The fund's name will be changed to Pioneer U.S. Government Money Market Fund. The fund's investment objectives and principal investment strategies as set forth in the "Fund summary" and "More on the fund's investment objectives and strategies" sections of the prospectus are revised as follows: Investment Objectives. Preservation of capital, liquidity, and current income.... The fund will invest at least 99.5% of its total assets in government securities, cash, and/or repurchase agreements that are fully collateralized by government securities or cash."
We also learned that William Blair, the 41st largest money fund manager, is liquidating its $1.4 billion Ready Reserves fund. Its Prospectus Supplement filing says, "Upon the recommendation of the Adviser, the Board of Trustees determined that it was in the best interests of the William Blair Ready Reserves Fund to redeem all the shares of the Fund outstanding on or about November 18, 2015 (the "Liquidation Date"), and then to terminate the Fund. Any shares of the Fund that have not been redeemed or exchanged prior to the Liquidation Date will be redeemed automatically at their net asset value per share (normally, $1.00) on the Liquidation Date."
In addition, as we reported in yesterday's LOTD, Delaware Investments filed a Prospectus Supplement to convert its $169 million Delaware Cash Reserves, a Prime Retail fund, to an Ultra Short Bond Fund, the Delaware Ultrashort Fund. The filing for the 65th largest MMF complexes' only money fund says, "The Fund's Board of Trustees has approved the conversion of the Fund from a money market fund with a stable net asset value of $1.00 per share into an ultrashort-term bond fund that will have a fluctuating net asset value. Following the conversion of the Fund into an ultrashort-term bond fund, the Fund will no longer operate as a money market fund and it will be renamed Delaware Investments Ultrashort Fund. In addition, check writing privileges will be discontinued in connection with the conversion of the Fund."
It adds, "We anticipate that the conversion will be effected by early January 2016. After the conversion, the Fund's new investment objective will be to seek total return to the extent consistent with relatively low volatility of principal. Although the current and new investment objectives of the Fund are different, the Fund will continue to invest its assets in short-term investment grade securities. Once converted, the Fund will maintain an average effective duration of less than 18 months, as compared with the Fund's current average maturity of 60 days or less."
These moves signal a continuing trend of consolidation in the money market fund industry. Currently we track 68 money fund managers in our XLS database, down from 74 on July 31, 2014, just after money fund reforms were adopted. Since then we have seen Reich & Tang, Touchstone, Williams Capital, Forward Funds, Alpine, Virtus, and Eaton Vance exit the space. When you add William Blair and Delaware, we're down to 66 money fund managers. (For more on money fund complex changes, read our story from July, "Managers Rolling with Reform Changes; Recap of Announcements So Far" and see the November issue of Money Fund Intelligence when it ships next Friday.)
There have also been a heap of money fund liquidations. In August, we wrote a story called, "Another Muni Money Fund Liquidates: A Recap of Recent Expirations that tracked recent liquidations and mergers. Looking at our MFI XLS as of Sept. 30, 2015, we tracked 1,191 money market funds -- 822 taxable and 369 tax-exempt. One year ago on Sept. 30, 2014, we tracked 1,257 MMFs -- 851 taxable and 396 tax-exempt. Regarding Prime to Govie conversions, so far we count $232 billion worth of Prime funds moving to Government funds, which includes the conversions of approximately 29 different portfolios by 11 different managers.
