"Money Funds Come Out of the Shadows" writes Bloomberg BusinessWeek. The article, written by Chris Condon, says, "Investors in U.S. money market mutual funds, whose shares they expect to stay steady at $1, will see something new beginning the week of Jan. 31 -- and it has fund companies nervous. Under rules passed last year, the U.S. Securities and Exchange Commission will disclose, with a 60-day lag, a measure of each fund's worth known as "shadow" net asset value, or shadow NAV. Money funds, unlike other mutual funds, book the value of holdings at the price paid for them. They also round collective holdings to the nearest penny, so even a realized loss of less than half a cent goes unnoticed. Beginning with data for last November, shadow NAVs will show holdings at market prices and to four places past the decimal, revealing fund values typically ranging from $0.9995 to $1.0005." It adds, "To educate consumers, fund companies such as Vanguard and BlackRock put articles on their websites and sent them to customers. Fund trade group Investment Company Institute also released a paper and held a press seminar. Their message: Don't worry -- a shadow NAV slightly above or below $1 is normal. According to [iMoneyNet's Mike] Krasner and Peter Crane, president of money fund research firm Crane Data, companies are right in most cases to tell investors not to fret." "Anything below $0.999 will be an outlier," Crane says.
"Fund companies brace for new SEC money fund data" writes Reuters. The article says, "The U.S. mutual fund industry is bracing for fallout from new data on money market funds that will be made available next week. Some in the industry expect they will need to reassure investors if they see funds valuing their shares at less than $1 apiece. The U.S. Securities and Exchange Commission on Monday will publish data showing shadow prices for money funds as of November 30, a new monthly disclosure required following the financial crisis. Changes in interest rates, inflows and other factors mean money market fund shares often have shadow prices worth just above or below the $1 per share 'net asset value' at which they sell shares to the public. Funds can claim $1 NAVs if their shadow prices are between $0.9950 to $1.0050." Reuters quotes Peter Crane, "The ICI is trying get ahead of the shadow NAV story.... We live in a world of two decimal points. `The third decimal point can concern you, but worrying about the fourth decimal point is ridiculous."
This Wednesday afternoon, weather permitting, Crane Data's Peter Crane, BofA Global Capital Management's Paul Quistberg, and Fidelity Investments' Michael Widrig will speak at the next meeting of the Treasury Management of New England in Providence at Citizen's Financial. The description says, "Money fund expert Peter Crane will give a presentation entitled, 'Money Market Funds, Cash Investing, and Regulatory Change,' and will give an overview of recent developments in money market mutual funds. Crane will discuss money fund asset trends, pending regulatory changes, and a number of other issues impacting the $2.8 trillion money fund marketplace. This will be followed by a Q&A with Paul Quistberg, BofA Global Capital Management MD & Head of Cash Investments and Fidelity Investments Institutional Portfolio Manager, Michael Widrig. Both money market veterans will provide an 'Update on Current Conditions in the Money Markets' and will discuss their money market investing strategies. Panelists will talk about what they're buying how they're adjusting to new regulations and the ultra-low yield environment, and how they're positioning themselves for possible rising rates in the future." Crane will also be speaking at the TMANE's Annual Conference May 4 in Boston with a session entitled, "Money Market Mutual Fund Update: Regulations, Rates & Risks." Finally, as we mentioned Friday, both ICI and BlackRock will be hosting Webinars on Tuesday discussing the pending disclosure of "shadow" NAVs. (See Friday's News and Link of the Day, or click here for info on the ICI webinar, at noon, and click here for info on the AFP/BlackRock webinar, at 3:30pm.)
A new Reuters article "Stern Advice: Don't toss that money fund out with the trash" says, "Wall Street hotshots have long disparaged money market mutual funds with a 'cash is trash' epithet. Their point: Money invested in these funds earned low returns and wasn't being put to use in more rewarding stocks and bonds. Money funds have seemed even less appealing in recent years. Their long-cherished and promoted practice of holding their share price steady at $1 got blown at the end of 2008, when the Reserve Primary Fund's inability to meet redemptions in a dysfunctional credit market caused it to drop the price to 97 cents a share. Since then, regulators and industry players have been talking about ways to make money funds more safe but, so far, most of that is still at the mulling-it-over stage." Writer Linda Stern asks, "Did I mention that money funds are now yielding between 0.03 and 0.07 percent, according to Crane Data?" They quote Publisher Peter Crane, "That means it would take between 600 and 900 years to double your money." The piece adds, "But, wait. Money market mutual funds have their purpose, and their rewards. It's just that you may have to think about them differently now than you did before." See also, Investment News' "What Eileen Rominger's appointment means for fund biz".