Yet another round of money fund liquidations, prime-to-government conversions and fund lineup change announcements surfaced over the last several days. Among the latest batch: PNC Funds filed with the SEC to liquidate its Prime and Tax-Exempt money funds; PIMCO filed to convert its Prime MMF to Government; and, First American Funds announced a series of changes to its fund lineup, including the launch of a new Prime Retail MMF. With the PIMCO and PNC changes, we now count $272 billion in Prime money funds that have liquidated or converted to Government MMFs, or plan to convert prior to October 2016. (About $100 billion of this total still hasn't converted, though about $25 billion will convert in April and over $20 billion in May.) Though the vast majority of these have been conversions from Prime into Govt funds, PNC joins RBC in liquidating its Prime funds instead of converting them. We also report on a new filing from the Schwab Variable Share Price Money Fund.
PNC's filing explains, "On February 25, 2016, the Board of Trustees of PNC Funds and PNC Advantage Funds approved plans of liquidation for each of PNC Money Market Fund, PNC Tax Exempt Money Market Fund, and PNC Advantage Institutional Money Market Fund, with such liquidations expected to take place on or about May 31, 2016. Effective as of the close of business on March 31, 2016, the Funds' shares will no longer be available for purchase by new investors. The proceeds per share to each shareholder on the Liquidation Date will be the net asset value per share of the relevant class of shares of such Fund after all expenses and liabilities of the Fund have been paid or otherwise provided for." PNC Advantage Institutional MMF has $1.2 billion in assets, while PNC MMF has $1.5 billion. PNC Tax-Exempt fund has $589 million.
PNC still will offer its PNC Govt MMF, which has $1.8 billion in assets, and its PNC Treasury MMF, which has $544 million. PNC also filed to lower the management fee on its Treasury fund. The Prospectus Supplement states, "Effective February 26, 2016 the Board of Trustees of PNC Treasury Money Market Fund approved a reduction in the Fund's Management Fee from 0.25% of the Fund's average daily net assets to 0.15% of the Funds average daily net assets. Due to, among other things, the recent low interest rate environment, PNC Capital Advisors, LLC has been waiving a portion of its Management Fee over recent periods so that the Fund has not recently paid a Management Fee greater than 0.15%. Accordingly, this change in the Fund's contractual management fee rate is not expected to have a short-term effect on the Fund's net expense ratio."
Also, PIMCO filed with the SEC to reorganize the $908 million PIMCO Money Market Fund into the $207 million PIMCO Govt Money Market Fund. The filing says, "The Board has approved the reorganization of the PIMCO Money Market Fund into the PIMCO Government Money Market Fund. Under the Reorganization: (1) the assets of the Acquired Fund will be transferred to the Surviving Fund in exchange solely for shares of the Surviving Fund and the assumption of the Acquired Fund's liabilities; and (2) the shares of the Surviving Fund received by the Acquired Fund will be distributed by the Acquired Fund to its shareholders in complete liquidation of the Acquired Fund and in cancellation of all of the Acquired Fund's shares. The Reorganization does not require shareholder approval."
It continues, "The Board considered multiple factors, including, but not limited to, the Funds' substantially similar investment objectives, principal investment strategies, principal risks, policies, restrictions and distribution schedules and the fact that the Funds are managed by the same portfolio manager. In addition, while the fees and expenses for the Funds are mostly identical, the Surviving Fund currently has lower supervisory and administrative fees as compared with corresponding share classes of the Acquired Fund, resulting in a lower total expense ratio for the Surviving Fund as compared with the Acquired Fund. The Reorganization is expected to occur on September 23, 2016, or on such other date as determined by appropriate officers of the Trust."
In other news, US Bancorp's First American Funds, the 15th largest money fund manager with $40.2 billion in assets, has made additional changes to its money fund lineup, launching a new Prime Retail fund and changing the names of two others. A press release entitled, "First American Funds to Offer New Retail Prime Obligations Fund, Designates Tax Free Obligations Fund as Retail, says, "The First American family of mutual funds today announced that it intends to launch a new money market mutual fund, First American Retail Prime Obligations Fund. The new fund is tentatively scheduled to launch July 18, 2016 and will be open to eligible retail investors. The new fund will seek to maintain a stable $1.00 per share net asset value. Beginning October 14, 2016, the new fund will be subject to the possibility of liquidity fees and redemption gates, as required by the money market fund reform rules adopted by the Securities and Exchange Commission in July 2014."
It continues, "The current First American Prime Obligations Fund will be renamed First American Institutional Prime Obligations Fund, likely at the time of the launch of the new fund. Beginning October 14, 2016, the current fund will be subject to the possibility of liquidity fees and redemption gates and will transact at a floating NAV which will be calculated out to four decimal places, as required by the SEC Rules. Retail shareholders invested in the current fund will be able to exchange into the new fund at the time of the new fund's launch. More information will be provided to retail shareholders as the launch date approaches."
The release adds, "First American today also announced the intention to designate First American Tax Free Obligations Fund as a retail fund, open only to natural persons. It will be renamed the First American Retail Tax Free Obligations Fund and will continue to seek to maintain a stable $1.00 per share NAV. Beginning October 14, 2016, it will also be subject to the possibility of liquidity fees and redemption gates, as required by the SEC Rules."
Finally, we previously reported on a money fund launch by Charles Schwab. (See our Nov. 10 News, "Schwab Files Variable NAV Money Fund; Invesco Announces Changes.") At the time, we said that Schwab will launch a new floating NAV money market fund, Schwab Variable Share Price Money Fund. On January 20, the new fund's Prospectus appeared, and it reveals plans for Ultra Shares (SVUXX), Premier Shares (SVRXX, Select Shares (SVCXX), and Investor Shares (SVOXX). (The fund is not live yet though.)
Under "Principal Investment Strategies," Schwab says, "The fund is a money market fund that is designed to serve as a complementary product to traditional stable share price money market funds. Unlike a traditional stable share price money market fund, the fund will not use the amortized cost method of valuation or round the per share net asset value (NAV) to the nearest whole cent and does not seek to maintain a stable share price. As a result, the fund's share price, which is its NAV, will vary and reflect the effects of unrealized appreciation and depreciation and realized losses and gains."
