RBC is the latest in a string of managers to announce plans to abandon Prime money market funds. A press release issued Monday, entitled, "RBC Global Asset Management Announces Planned Changes to U.S. Money Market Funds." RBC, the 20th largest money fund manager with $16.5 billion in total MMF assets, will close its roughly $8 billion RBC Prime Money Market Portfolio (with Prime Retail and Institutional shares) in September 2016 and force investors to shift into either the $6.5 billion RBC US Government MMF, ultra-short bond fund options or separately managed accounts. In other news, BlackRock sent a note to clients yesterday, which further detailed their MMF restructuring plans and laying out which money funds will be categorized as Retail and Institutional.
Yesterday's press release says, "RBC Global Asset Management-US announced today actions of the RBC Funds Trust Board of Trustees regarding changes to its money market funds in response to amendments to regulations governing money market mutual funds. Mike Lee, CEO and CIO of RBC GAM-US, comments, "RBC Global Asset Management has a long history of offering liquidity and fixed income strategies as part of our investment platform. With money market reform on the horizon, many investors are rethinking their approach to cash management and looking for alternative solutions. Following close consultation and discussion with our clients, we feel that our lineup of cash management options is well positioned to serve the long term interests of investors as they navigate these changes."
RBC's release explains, "The U.S. Government Money Market Fund will continue to be offered to all investors. The fund currently invests 99.5% or more of its assets in U.S. Government securities or repurchase agreements and plans to continue to operate in accordance with money market reform amendments, including seeking to maintain a stable $1.00 net asset value per share (NAV). The Board of Trustees also stated its intention to not currently implement liquidity fees or redemption gates for the U.S. Government Money Market Fund.” RBC US Government Money Market Fund has about $6.5 billion in assets, according to our MFI XLS.
It continues, "The Prime Money Market Fund will no longer be offered to institutional or retail investors after September 30, 2016 and will be closed to new investments at a date to be determined, pending final Board approval and appropriate notice to shareholders. Shareholders invested in the fund will be notified of their options, including eligibility to exchange shares of the Prime Money Market Fund for shares of the U.S. Government Money Market Fund. Under the amendments to Rule 2a-7, effective October 14, 2016, institutional prime and municipal money market funds are required to price and transact shares of such funds at a floating NAV. Retail and U.S. government money market funds may continue to seek a stable $1.00 NAV. In addition, both prime and municipal money market funds may be subject to liquidity fees and redemption gates in the event weekly liquid assets fall below a designated threshold."
John C. Donohue, Managing Director and Head of Liquidity Management, says, "This is an opportune time for investors to review their cash management strategies as they look to maintain liquidity and flexibility in their investment portfolio. Government money market funds address that need by seeking to offer safety, liquidity and a competitive yield."
Finally, RBC's release adds, "In addition to several cash management options, including the U.S. Government Money Market Fund, RBC GAM-US also offers short term fixed income products such as the RBC Short Duration Fixed Income Fund and RBC Ultra Short Fixed Income Fund, which can serve to assist our shareholders who have shorter investment horizons. RBC Global Asset Management has over $28 billion in global institutional cash management assets, including over $19 billion in the U.S., as of September 30, 2015."
BlackRock's latest note to clients says, "As previously communicated in April and July, we continue to make progress on evolving our money market fund platform in preparation for full compliance with the amendments to Rule 2a-7 under the Investment Company Act of 1940 announced by the Securities and Exchange Commission in 2014. We are pleased to bring you the latest news on this front, dealing specifically with the designation of certain of our funds as retail and others as institutional."
On their Retail designations, it explains, "The funds' board of trustees has approved the designation of the following as retail money market funds effective September 1, 2016. To qualify as a retail money market fund, the funds must have implemented policies and procedures reasonably designed to limit the beneficial owners of the fund to natural persons." The Retail funds are: BlackRock Liquidity Funds MuniFund, BLF California Money Fund, BLF New York Money Fund, BlackRock Cash Fund: Municipal & Municipal Money Market Master Portfolio, BlackRock Money Market Portfolio, BlackRock Municipal MMP, BlackRock Ohio Municipal MMP, BlackRock Pennsylvania Municipal MMP.
On its Institutional funds, BlackRock says, "The funds' board of trustees has also approved the designation of the following as institutional money market funds. These funds have been operating as institutional money market funds so this does not reflect a change. They will not be adopting a floating NAV or liquidity fees and gates at this time, but will comply with these requirements by October of 2016." The Institutional funds are: BLF TempFund; BLF TempCash; BLF MuniCash; BlackRock Cash Funds: Prime & Prime Money Market Master Portfolio; and BlackRock Cash Funds: Institutional & Money Market Master Portfolio.
The letter concludes, "We are proud to serve a variety of clients who use money market funds for many different reasons. Our platform is reflective of the types of clients we serve and the varying needs which drive their use of these investment vehicles, both now and in the future." (See also our April 7 News, "BlackRock Announces Changes, Keeps Options Open; TempFund Floats" and our July 31 News, "BlackRock to Liquidate 3 Muni MMFs, Convert Old Merrill Primes to Govt.")
With RBC's plans to close its $8 billion Prime MMF next Sept. 30, we now count over $257 billion in total money fund assets that will convert (or has already converted) from Prime to Government. Among the major conversions to date: Franklin converted over $25 billion and Dreyfus converted $2.2 billion (Inst Reserves) on Nov. 1; Fidelity converted its $16.1 billion CMF Prime Fund on Nov. 13; and the $115 billion Fidelity Cash Reserves, the $12 billion Fidelity MMT: Retirement Port II, and $1.4 billion American Century Premium MMF will all convert today. Note: Deutsche will also rename its $3.8 billion Daily Assets Fund Institutional as Daily Assets Fund Capital today (Dec. 1).
