SEI Investments and Wilmington Trust are the latest firms to make a major retreat from the money fund space and "go government". SEI, the 24th largest manager of MMFs with $14.6 billion, has filed to liquidate its 3 Prime funds -- the $6.3 billion SEI Daily Income Trust Prime Obligations, the $1.6 billion SEI Liquid Asset Trust Prime Obligation Fund, and the $271 million SEI Daily Income Trust Money Market Fund. Wilmington, the 27th largest money fund family with $8.7 billion, is merging its $3.9 billion Wilmington Prime Money Market Fund and its $546 million Wilmington Tax-Exempt MMF, into the $3.4 billion Wilmington US Government MMF. We've also uncovered two more Prime variable annuity money funds -- Lincoln LVIP MMF and Ivy Funds VIP MMF -- that are converting from Prime to Government. We review these latest changes below and recap the total Prime to "Govie" conversions to date. As of this Friday, April 1 (when 5 more funds totaling $20.1 billion will switch), $211.9 billion will have converted from Prime to Government, or 77% of the now $288 billion declared to date.
SEI Prospectus Supplement filing explains on the "Liquidation of the Money Market and Prime Obligation Funds," "At a meeting of the Board of Trustees of SEI Daily Income Trust held on January 27, 2016, the Board approved the closing and liquidation of the Funds, each a portfolio of the Trust. The U.S. Securities and Exchange Commission recently adopted amendments to the rules that govern money market funds, several key provisions of which are scheduled to go into effect later in 2016. These amendments will substantially change the way in which many money market funds operate and accordingly have resulted (and likely will continue to result) in significant changes to the money market fund industry as a whole. In general, any money market fund that does not limit its investors to natural persons and does not limit its investment portfolio to government securities (and equivalent instruments) will be required to incur significant compliance and operational costs. This changing regulatory environment was one of several factors that led SEI Investments Management Corporation (SMIC), the Funds' adviser, to recommend to the Board of the Trust that the Funds be closed and their portfolios be liquidated."
SEI continues, "Accordingly, each Fund is commencing the orderly liquidation and distribution of its portfolio pursuant to a plan of liquidation approved by the Board. Each shareholder will receive its pro rata portion of the applicable Fund's liquidation proceeds. It is currently expected that the liquidation proceeds of the Money Market Fund will be distributed to shareholders on or about June 24, 2016 and that the liquidation proceeds of the Prime Obligation Fund will be distributed to shareholders on or about July 22, 2016. In anticipation of the Funds closing, each Fund will convert all or substantially all of its assets to cash or cash equivalents. Therefore, each Fund may not be managed in accordance with its stated investment strategy going forward, pending the distribution of the liquidation proceeds. SIMC will be available to consult with the current shareholders of the Funds regarding alternative investments."
In February, SEI also filed to liquidate the Liquid Asset Trust Prime Obligation Fund. It says, "Liquidation of the Prime Obligation Fund. At a meeting of the Board of Trustees of SEI Liquid Asset Trust held on January 27, 2016, the Board approved the closing and liquidation of the Fund, a portfolio of the Trust." This filing cites the same reasons as above. It adds, "Accordingly, the Fund is commencing the orderly liquidation and distribution of its portfolio pursuant to a plan of liquidation approved by the Board. Each shareholder will receive its pro rata portion of the Fund's liquidation proceeds. It is currently expected that the liquidation proceeds of the Fund will be distributed to shareholders on or about July 22, 2016."
With these liquidations, SEI will no longer offer any Prime funds. It does still have the SEI Daily Income Trust Government and Government II, and SEI Daily Income Trust Treasury and Treasury II funds as options. SEI also has a Short Duration and an Ultra Short Bond fund in its lineup.
The Wilmington move involves merging both a Prime and a Tax-Exempt fund into a Government fund. Their Prospectus update says, "At a meeting of the Board of Trustees of the Wilmington Funds on March 15, 2016, the Board determined that each of the Wilmington Prime Money Market Fund and the Wilmington Tax-Exempt Money Market Fund, each a series of the Trust, should be merged into the Wilmington U.S. Government Money Market Fund.... Shareholder approval of the proposed merger of the Prime Fund into the Acquiring Fund is NOT required."
It adds, "The proposed merger of the Tax Exempt Fund into the Acquiring Fund requires the approval of the shareholders of the Tax Exempt Fund, and a shareholder meeting is being called for that purpose. Acquiring Fund shareholders will NOT be solicited for approval of the proposed mergers. The closing for the Prime Fund merger is expected to occur on or about August 15, 2016. The closing for the Tax Exempt Fund merger is expected to occur on or about August 22, 2016."
We've also found out that two more variable annuity money funds are converting from Prime to Government, continuing a wholesale exodus from Prime in the VA segment. The Lincoln Financial Group's Money Market Fund, which has about $757 million in assets, says in its LVIP MMF filing," "Effective May 1, 2016, the name of the LVIP Money Market Fund will be changed to the LVIP Government Money Market Fund.... Effective April 14, 2016, the investment objective of the fund will be changed as follows: LVIP Government Money Market Fund: To seek current income while (i) maintaining a stable value of your shares (providing stability of net asset value) and (ii) preserving the value of your initial investment."
Also, Waddell and Reed's $543 million Ivy Funds VIP Money Market Fund will be converted to a Government fund. The Ivy VIP filing states, "At a meeting held on November 17-18, 2015, the Board of Trustees of Ivy Funds Variable Insurance Portfolios considered the effects of these rules on Ivy Funds VIP Money Market and approved a recommendation made by Waddell & Reed Investment Management Company, the Portfolio's investment manager, to convert the Portfolio to a government money market fund on or about October 1, 2016.... By converting to a government money market fund, the Portfolio will continue to seek to maintain a stable NAV per share. In addition, a government money market fund is not required to be subject to liquidity fees or redemption gates. While the Board may elect in the future to subject the Portfolio to liquidity fees or redemption gates, the Board has not elected to do so at this time and has no current intention to do so."
Among the 72 funds from 42 fund families "going Government" to date, almost 20 are variable annuity or insurance company related MMFs. These include: Columbia Variable Cash Mgmt Fund, Deutsche MM VIP, Fidelity VIP Money Market, Goldman Sachs VIT MMF, Great West MMF, Invesco VI MMF, John Hancock MMF, Lincoln LVIP MMF, MassMutual Premier MMF, Nationwide MMF, Nationwide VIT MMF, Oppenheimer Money Fund/VA, ProFund VP MMF, Prudential Money Mart Assets Fund, Putnam VT MMF, SunAmerica MMF, Transamerica MMF, and Voya Liquid Assets Portfolio.
As mentioned, when we include these latest changes, the total amount converting from Prime funds is $288.0 billion (and counting). The vast majority of this total is direct Prime to Govie fund conversions. But we've also included liquidating prime funds, since we believe most of these liquidated assets will find their way into these complexes' Government money funds. Among those funds officially converting from Prime to Govt later this week, or liquidating, are American Beacon Select MMF (liquidating), Prudential Money Mart Assets, BBH Money Market Fund, Cavanal Hill Cash Management Fund, and American Funds MMF.
For previous "Prime to Govt" stories, see our March 16 News, "Even More Prime to Govie: Great West; Columbia, ProFund, Rydex File," our March 15 News, "Harbor, Payden Convert from Prime to Govt; JPM on Flows; iTreasurer," our March 1 News, "More Exits: PNC Liquidates, PIMCO Goes Govt; First American Update," our Feb. 25 News, "Hits Keep Coming to Prime, Tax-Ex: UBS Sweeps Filings, Putnam T-E Exit," our Feb. 16 News, "BBH MMF Latest to Go Govt; Feb Bond Fund Intel; Schneider Gives Cash," our Jan. 25 News, "American Beacon Goes Govt; Crane's Money Fund University Sets Record," and our Jan. 6 News, "Rolling w/Reform Changes II: Recap of '15 Announcements, '16 Plans."
