While most of the major lineup changes were announced in 2015, money fund managers continue to fine tune their lineups in 2016. The most recent update is from Wells Fargo Funds, who posted a release Friday entitled, "Wells Fargo announces effective dates for changes to certain money market funds." It lays out Wells' latest fund lineup plans, official change dates, and "strike times" for its floating NAV funds. (For other recent updates, see our Feb. 17 News, "Invesco, Dreyfus Detail Added Lineup Tweaks; BofA Shareholder Vote.") We also review recent European money market funds developments, including the European Securities and Markets Authority's "Follow-up Peer Review Money Market Fund Guidelines," which updates an April 2013 report that detailed countries not compliant with ESMA's money fund guidelines. In addition, a Reuters article, "Goodbye capital preservation, hello damage limitation, money funds say," discusses how European MMF assets have stabilized despite negative rates.
The new Wells Fargo release explains, "In May 2015, Wells Fargo Funds announced its plan to restructure its money market fund lineup in response to the new U.S. Securities and Exchange Commission (SEC) regulations that take effect in October 2016. The Wells Fargo Funds Board of Trustees has now approved the restructuring and related effective dates, and this product alert explains the upcoming changes." (See our May 22, 2015 News, "Wells Fargo Announces Money Fund Lineup Changes; Splits Retail, Inst.")
The update says of, "Retail Prime and Municipal funds," "Effective September 1, 2016, the Wells Fargo Funds listed immediately below will be offered as retail money market funds. These funds will continue to transact at a stable $1.00 net asset value (NAV) but will be limited to beneficial shareholders who are natural persons." These include: Wells Fargo California Municipal Money Market Fund, Wells Fargo Money Market Fund, Wells Fargo Municipal Money Market Fund, and Wells Fargo National Tax-Free Money Market Fund.
Wells says, "Institutional investors must redeem their shares of these retail funds by September 1, 2016. Any institutional investors remaining in the funds on September 1, 2016, will be redeemed automatically. Intermediaries should enforce these retail fund requirements and redeem institutional investors from these funds by September 1, 2016. Institutional investors will continue to have several money market fund options available, including our variable NAV prime and municipal money market funds and our stable NAV government money market funds described below. You can find more details in the Product Comparison Guide."
The alert says about "Variable NAV prime and municipal money market funds," "Under the new SEC rules, prime and municipal money market funds that allow institutional investors will no longer be permitted to maintain a stable $1.00 NAV and must transact at their market-based NAVs, rounded to four decimal places. Effective prior to or on October 14, 2016, the funds listed immediately below [Wells Fargo Cash Investment Money Market Fund, Wells Fargo Heritage Money Market Fund, and Wells Fargo Municipal Cash Management Money Market Fund] will be offered as variable NAV money market funds. We anticipate finalizing an effective date for the funds' conversion to variable NAV pricing by the end of March 2016."
Wells Fargo Funds continues, "Effective on conversion, the funds will implement the following multiple intraday price times in order to continue providing same-day settlement and intraday liquidity to our investors. We will calculate the NAV at the following times each business day." The Cash Investment MMF and Heritage MMF will calculate same-day settlement NAVs at 9am, 12pm, and 3pm, and a next day settlement at 5pm. Municipal Cash Management will calculate its NAV at 9am and 12pm, and next day settlement at 5pm. They add, "Also effective on their conversion to variable NAV pricing, the funds will no longer support the following features: National Securities Clearing Corporation (NSCC) trading, Automated Clearing House (ACH) trading, Checkwriting, and Exchanges."
The 10th largest MMF manager with $107.9 billion in assets also says of its Government funds lineup, "The Wells Fargo government money market funds are not subject to either the liquidity fees or redemption gates described under the new SEC rule. We will continue to offer the following government money market funds to retail and institutional clients: Wells Fargo 100% Treasury Money Market Fund; Wells Fargo Government Money Market Fund; and Wells Fargo Treasury Plus Money Market Fund."
The release concludes, "As we implement the new rules required by the SEC, we do not anticipate broad changes to the way we manage our money market portfolios. For more than 25 years, the Wells Fargo Money Market Funds have maintained a discipline of rigorous credit analysis and steadfast attention to preservation of capital and liquidity.... We look forward to continuing to work with our clients and delivering a variety of money market funds that meet their needs."
Finally, it adds, "In addition to money market funds, Wells Fargo also offers various types of liquidity solutions, including short-duration bond mutual funds, separate accounts, and individual securities that may further augment our clients' investment choices. Wells Fargo Funds offers the following short-duration bond funds to clients seeking cash management solutions: Wells Fargo Adjustable Rate Government Fund, Wells Fargo Conservative Income Fund, Wells Fargo Ultra Short-Term Income Fund, and Wells Fargo Ultra Short-Term Municipal Income Fund."
In other news, ESMA's "Follow-Up Peer Review" says, "In December 2011, the ESMA Board of Supervisors mandated the Review Panel to carry out a peer re-view on the application of the CESR Guidelines on a common definition of European money market funds.... In particular, the Guidelines distinguish between two categories of money market funds: a) Short-term Money Market Funds, and b) Money Market Funds. For both categories, CESR has established a list of criteria with which funds must comply if they want to use the label "Money Market Fund"."
It continues, "The Peer Review Report was published on April 15, 2013. The Report sets out the result of the assessment by peers on the level of compliance with the Guidelines by those national competent authorities (NCAs) which had implemented the Guidelines as of August 2012. In 14 Member States (AT, CZ, DE, DK, EL, ES, FR, IE, IT, LV, RO, SI, SK, UK) the Guidelines had been implemented into national legal systems by means of mandatory provisions."
ESMA adds, "This Follow-up Peer Review Report provides an update on the findings of the first peer review and sets out the result of this second assessment by peers. The review period is from 1 May 2014 to 1 May 2015.... Fourteen NCAs, which did not implement in full or in part the Guidelines at the time of the first peer review are listed in the following table with their country codes and acronyms." These countries include: Bulgaria (BG), Cyprus (CY), Estonia (EE), Greece (EL), Hungary (HU), Iceland (IS), Liechenstein (LI), Lithuania (LT), Latvia (LV), Malta (MT), Norway (NO), Poland (PL), Portugal (PT), and Sweden (SE).
Finally, Reuters writes "Goodbye capital preservation"," which says, "Money market funds in Europe that can no longer return all your cash remain popular with companies due to a lack of alternatives, even if an era of increasingly negative interest rates may demand a broader rethink of cash management. Outflows from the money market funds that keep the financial system flowing have stabilized, allaying concerns that their withdrawal could seed a banking crunch like that in the United States eight years ago." "Investors pulled out of money market funds originally and looked for different solutions to find a positive yield but ultimately, not finding suitable alternatives, they chose to come back," the piece quotes Alastair Sewell of Fitch Ratings."
It adds, "Data from the Institutional Money Market Funds Association (IMMFA), which offers a snapshot of 20 of the most conservative money fund managers, shows that when the first euro funds recorded negative returns last year there was a rush of redemptions. The money invested in these funds, which stood at 88 billion euros ($98 billion) in March 2015, declined by more than 20 percent in the space of three months. Yet despite a further ECB rate cut at the end of 2015 and the fact that all IMMFA's euro funds lost money over the course of the year, assets have remained stable at around 70 billion euros in the eight months since."
