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The Investment Company Institute recently updated a document entitled, "Frequently Asked Questions About Money Market Fund N-MFP Data." It explains, "The Securities and Exchange Commission's 2010 money market fund amendments require such funds to file detailed portfolio information with the agency monthly, on SEC Form N-MFP. The data in this monthly report comes from that form, which ICI members also send directly to ICI. The Institute has been tracking this data since firms began filing it in December 2010, and is now making a summary of the data publicly available in a monthly report, beginning in January 2014. The summary report is intended to provide aggregated insights into the holdings of taxable money market funds, which includes both prime and government money market funds.... Form N-MFP provides detailed information about the nature and maturity of money market funds' holdings of securities and repurchase agreements. ICI's data release provides aggregated data for funds holding roughly 94 percent of the assets in taxable money market funds, as well as insights on the: Types of securities in government and prime money market funds' portfolios; Home countries and regions of issuers of securities and repurchase agreements held in money market funds' portfolios (based on the home country of the issuer's parent company); Maturity of funds' portfolios, expressed as weighted average maturity (WAM) and weighted average life (WAL); Liquidity of funds' portfolios; and Maturity distribution of securities in money market funds' portfolios, by type of securities and by home country of issuers. The monthly press release that will accompany ICI's report will focus on daily and weekly liquidity, WAM and WAL, and the home regions of issuers of securities held by prime and government taxable money market funds. The release will include a link to additional tables for the rest of the data.... When significant trends emerge or when economic or political developments focus attention on money market funds and their holdings, ICI intends to offer its insights through its blog, ICI Viewpoints. In 2014, ICI published a series of ICI Viewpoints pieces examining the N-MFP data and explaining what insights it can yield about money market funds." (Note: Crane Data publishes a collection of Money Fund Portfolio Holdings each month too, and produces a summary of trends in a "Reports & Pivot Tables" version of our holdings info. Contact us if you'd like to see our latest cut. Note too that the SEC will be making changes to Form N-MFP beginning in April 2016, when new disclosure reforms go into effect.)

Money market fund assets were up last week, breaking back above the $2.6 trillion level, according to ICI in its latest weekly "Money Market Mutual Fund Assets" report. The release says, "Total money market fund assets increased by $20.61 billion to $2.61 trillion for the week ended Wednesday, May 20, the Investment Company Institute reported today. Among taxable money market funds, Treasury funds (including agency and repo) increased by $2.02 billion and prime funds increased by $16.91 billion. Tax-exempt money market funds increased by $1.68 billion. Assets of retail money market funds increased by $2.16 billion to $862.72 billion. Among retail funds, Treasury money market fund assets increased by $10 million to $189.61 billion, prime money market fund assets increased by $2.15 billion to $493.58 billion, and tax-exempt fund assets decreased by $10 million to $179.53 billion. Assets of institutional money market funds increased by $18.45 billion to $1.75 trillion. Among institutional funds, Treasury money market fund assets increased by $2.01 billion to $777.03 billion, prime money market fund assets increased by $14.76 billion to $903.31 billion, and tax-exempt fund assets increased by $1.69 billion to $66.56 billion." MMF assets are up $28 billion month-to-date, but down $123 billion, or 4.5%, year-to-date. In other news, a press release entitled, "SEC Proposes Rules to Modernize and Enhance Information Reported by Investment Companies and Investment Advisers," tells us, "The Securities and Exchange Commission [Wednesday] proposed rules, forms and amendments to modernize and enhance the reporting and disclosure of information by investment companies and investment advisers.... "These recommendations will vastly improve the type and format of the information that funds provide to the Commission and to investors," said SEC Chair Mary Jo White." The investment company proposals would enhance data reporting for mutual funds, ETFs and other registered investment companies. The proposals would require a new monthly portfolio reporting form (Form N-PORT) and a new annual reporting form (Form N-CEN) that would require census-type information.... The proposals would also require enhanced and standardized disclosures in financial statements, and would permit mutual funds and other investment companies to provide shareholder reports by making them accessible on a website. The proposals will be published on the Commission’s website and in the Federal Register. The comment period for the proposed rules will be 60 days after publication in the Federal Register." See too the SEC's "Fact Sheet" that accompanied the release. ICI commented on the proposal, saying, "We welcome the SEC's efforts to modernize and enhance the data it collects from investment companies and investment advisers. We look forward to reviewing the details of these proposals and will assist the SEC with our input through the public notice and comment process. Providing fund communications in ways that best meet shareholder needs and preferences has long been a priority for the industry. We therefore are very pleased that the SEC's proposal would permit funds to provide investors with shareholder reports on their websites rather than via paper mailings." Crane Data looks forward to standardized and more frequent Bond Fund Portfolio Holdings disclosures. Our new Bond Fund Intelligence XLS includes links to holdings, but building a database and listings of standardized holdings is near impossible with the various formats and reporting periods that exist today.

The Federal Reserve Bank of New York published a new "Statement Regarding Term Reverse Repurchase Agreements," which extended the Fed's Term repo programs at quarter-ends through Jan. 29, 2016. The statement says, "The Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York has been working internally and with market participants on operational aspects of tri-party reverse repurchase agreements (RRPs) to ensure that this tool will be ready to support the monetary policy objectives of the Federal Open Market Committee (FOMC). The Federal Reserve continues to enhance operational readiness and increase its understanding of the impact of RRPs through technical exercises. In further support of its objectives, the FOMC instructed the Desk to examine how term RRP operations might work as an additional supplementary tool to help control the federal funds rate. In support of this goal, on March 17, 2015, the FOMC approved a resolution authorizing the Desk to conduct a series of term RRP operations to span each quarter-end through January 29, 2016. For the June quarter-end, the Desk plans to offer at least $200 billion in term reverse repurchase agreement transactions that cross the quarter-end date. These operations will be conducted in addition to the authorized overnight RRPs, which remain subject to a separate overall size limit authorized by the FOMC [currently $300 billion]. A tentative schedule of the term operations spanning the June quarter-end follows below. This schedule will be updated on or around June 22 with additional information, including the amounts offered and the maximum offering rates." The first Operation/Settlement Date is June 25 with a Maturity Date of July 2. The next Operation/Settlement Date is June 29 with a Maturity Date of July 1. It continues, "Each of these operations will be conducted from 9:30 a.m. to 10:00 a.m. (ET), and each bidder will be limited to two bids per operation." In other news, the Federal Reserve also released the Minutes from the April 28-29 FOMC meeting. It says, "The Open Market Desk conducted two term RRP operations over the March quarter-end. The combination of term and ON RRP operations continued to provide a soft floor for money market rates over the intermeeting period, including around quarter-end. Based on experience around recent quarter-ends, the deputy manager discussed possible plans for June test RRP operations." It adds, "Many participants, however, thought it unlikely that the data available in June would provide sufficient confirmation that the conditions for raising the target range for the federal funds rate had been satisfied, although they generally did not rule out this possibility. Participants discussed the merits of providing an explicit indication, in post-meeting statements released prior to the commencement of policy firming, that the target range for the federal funds rate would likely be raised in the near term. However, most participants felt that the timing of the first increase in the target range for the federal funds rate would appropriately be determined on a meeting-by-meeting basis and would depend on the evolution of economic conditions and the outlook."

Asia Asset Management published a story, "China looks to tighten screws on MMFs." It says, "The China Securities Regulatory Commission (CSRC) is looking to further regularise the country's booming money market fund (MMF) sector by proposing greater risk control, liquidity and information disclosure measures, among other factors. The initiative comes as the country's MMF market has seen its total AUM explode from around 304 billion RMB (US$48.64 billion) in mid-2013 to 2.5 trillion RMB as of the end of April 2015. That upward trajectory coincided with Chinese e-commerce giant Alibaba Group pairing up with Tianhong Asset Management (Tianhong AM) to launch the online platform Yu'e Bao in 2013. In June of that year, Yu'e Bao launched its first online MMF, the Tianhong Zenglibao Monetary Fund. The product has helped the firm to increase its total AUM to around 580 billion RMB as of May 2015. Given the sector's momentum, the CSRC has proposed measures to prevent the market from derailing, outlining a number of new controls and regulations. These include broadening the funds' investment scope, strengthening risk control and liquidity management systems, and tightening information disclosure, stress testing, and supervisory requirements. Public consultation on the new rules is being carried out until June 14. Dai Hongkun, chief analyst at Shanghai Securities, told Asia Asset Management that the CSRC is aware of potential liquidity and credit risks relating to MMFs, despite recent high levels of growth. The proposed guidelines will help to mitigate the risk of systemic collapse in the event of large-scale redemptions, he believes. "China's MMF industry landscape remains highly centralised going forward and will continuously be dominated by a few of the largest players such as Tianhong and China Universal Asset Management. The economies of scale of their business means they can stave off competition from newcomers," he added. Asian Investor also carried the news in the article, "Securities Watchdog to Overhaul China MMF Rules." In other news, U.K.-based Standard Life Investments announced that it has renamed the Ignis Liquidity Funds, which it purchased it in March 2014, as the Standard Life Investments Liquidity Funds.

Fitch Ratings released "European MMF Quarterly – 1Q15," which is subtitled, "Yields Turn Negative in Euro MMFs; Rise in Sterling and US Dollar Funds." Fitch writes, "Euro MMF yields declined in 1Q15 and some funds started to pass on negative yields to investors. This practice is likely to become more widespread as the European Central Bank's quantitative easing program will likely keep euro short-term yields very low for a prolonged period. Sterling and US dollar denominated MMFs have had, in contrast, a modest yield uptick." Under the section, "Unsecured Financials at New Historical Lows," it says, "Money funds are adjusting their sector mix, reducing unsecured exposure to financial issuers in response to changing supply dynamics and the search for yield. Euro funds were able to find investment opportunities in non-financial corporates, while US dollar- and sterling-denominated funds reallocated towards government agencies and secured financial exposure, respectively.... European constant net asset value (CNAV) funds attracted new assets in 1Q15, including in euros, reaching total assets of EUR581bn. Asset flows have been more volatile at fund level over the past six months and particularly so in April for the first funds that turned negative. These funds were nonetheless able to service redemptions.... Maintaining high portfolio liquidity is particularly sensitive for euro funds in the current yield environment that may trigger large and sudden outflows." Under "Corporates Doubled in a Year," Fitch writes, "Collectively, corporate issuers continue to grow in euro funds, now at 14% on average, more than twice their level a year ago. This was at the expense of unsecured financials, which fell below 60% in the average portfolio asset mix for the first time. Yield and Supply Push Diversification: Overall issuer diversification expanded in 1Q15 with more than 150 issuers across rated funds at end-March compared with 120 a quarter earlier. Fund'’ search for yield and reduced bank supply are the key driving factors for this change. US Issuers Still Up: For the fourth quarter in a row, US exposure increased (up 6% yoy), driven by corporates and financials. It is now at the same level as UK issuers at 12%, behind France (32%) but above other core European countries. Lengthened Maturities: Portfolios' average weighted lives (WAL) lengthened in 1Q15, returning to November's high level of 59 days, as MMFs have increased longer-dated, higher-yielding assets.... Weighted average maturities (WAM) have been more stable, ending the quarter at 46 days. Increased Use of Repo: Repo exposure reached 6.1% at end 1Q15, which is the highest level seen in sterling-denominated MMFs since end-2012 highs of 8%." In other news, Seekingalpha.com posted commentary entitled, "Federated Investors Inc.: An Interest Rate Speculation Proxy." It says, "Due to the prevailing low interest rate environment, asset managers specializing in money market funds have not only seen outflows in assets under management (AUM), but have also been forced to waive fees in order for certain money market funds to maintain positive or zero net yields.... The implicit assumption of this article, which the reader should view with appropriate skepticism, is that, for the asset manager under consideration, a rise in short term interest rates will be a significant positive."

Barclays' money market strategist Joseph Abate latest "US Weekly Money Market Update" says, "In the Quarterly Refunding Announcement, the Treasury announced plans to increase its minimum daily cash balance to $150bn. This is about $100bn larger than last year's average balance and the average balance during 2009-2014. The Treasury plans to finance this extra cash cushion with increased bill issuance. Accompanying the announcement, the TBAC recommended the Treasury consider (re)introducing a 2m bill maturity -- at a weekly frequency. Front-end investors like the idea of a 2m bill. But, it is unclear if the 2m maturity is what short-term investors find most attractive -- or just the prospect of more supply in any bill maturity." Abate continues, "Demand for a 2m bill could be quite strong from money funds that have been scrambling to find sufficient supply amid dealer repo balance sheet reduction and declining bill issuance. Much of the focus of this potential demand has been on prime institutional funds with plans to limit the maximum maturity of their holdings to 60d, thereby preserving their ability to use historical accounting. But our sense is that demand might be stronger from government-only money funds as they have few investment alternatives and, given upcoming money fund reform, their balances could surge in the next 18m. One issue we expect the Treasury to wrestle with in the coming months as it considers a 2m bill tenor is the extent to which a new bill could crowd out demand for its 2y FRN.... Money fund demand for 2y FRNs has been weaker than expected at the launch of the program in January 2014. As of April, money funds held $52bn of these issues or 23.5% of the outstanding amount. Although we suspect that a 2m bill would have an even lower yield than the 2y FRN, government-only money funds may prefer the bill as it would consume less WAL.... While we expect the Treasury to auction 2m bills, we do not expect it will reach a decision this year. Instead, it will probably modestly increase auction sizes -- across all the weekly tenors -- to raise the extra cash needed for its daily buffer (assuming this average buffer is $150bn)."

Money market fund assets were down slightly this week, explains ICI in its latest weekly "Money Market Mutual Fund Assets" report. The release says, "Total money market fund assets decreased by $1.44 billion to $2.59 trillion for the week ended Wednesday, May 13, the Investment Company Institute reported today. Among taxable money market funds, Treasury funds (including agency and repo) increased by $4.44 billion and prime funds decreased by $3.86 billion. Tax-exempt money market funds decreased by $2.02 billion. Assets of retail money market funds decreased by $1.12 billion to $860.56 billion. Among retail funds, Treasury money market fund assets decreased by $720 million to $189.60 billion, prime money market fund assets increased by $690 million to $491.43 billion, and tax-exempt fund assets decreased by $1.09 billion to $179.53 billion. Assets of institutional money market funds decreased by $320 million to $1.73 trillion. Among institutional funds, Treasury money market fund assets increased by $5.16 billion to $775.02 billion, prime money market fund assets decreased by $4.56 billion to $888.55 billion, and tax-exempt fund assets decreased by $930 million to $64.88 billion <b:>`_." Year-to-date, money market fund assets are down $143 billion, or 5.2%. In other news, Reuters writes, "U.S. Commercial Paper Supply at Lowest Level Since February." It says, "The amount of U.S. commercial paper outstanding fell below $1 trillion to its lowest level since mid-February, suggesting weaker corporate demand to finance payrolls and inventories, Federal Reserve data showed on Thursday. Recent economic data showed domestic business activity has remained sluggish due to weak global demand. U.S. seasonally adjusted commercial paper outstanding fell $24.3 billion, its biggest weekly drop in 10 weeks, to $992.4 billion in the week ended May 13. Appetite from money market funds, which are major buyers of these ultra short-dated corporate IOUs, may have slipped on the week as their assets fell."

Bloomberg wrote, "`SEC's Gallagher to Resign as Commissioner After Four Years." The article says, "Daniel Gallagher is resigning his post as a Republican member of the U.S. Securities and Exchange Commission after four years, a time marked by partisan battles over the regulatory response to the 2008 financial crisis, according to three people familiar with the matter. The White House will now need to replace him as well as Luis Aguilar, the Democratic commissioner whose term expires next month. The departures herald a transformation at the agency, which has struggled to write dozens of new regulations arising from the 2010 Dodd-Frank Act. Gallagher, 42, plans to remain on the five-member commission until a successor is confirmed, a process that could take several months, the people said. The White House has already identified candidates to fill both his and Aguilar's seats. A securities lawyer and ex-agency staff member, Gallagher has been a critic of many of the rules required by Dodd-Frank. Known for his forceful dissents and speeches, he frequently rapped the Federal Reserve for trying to impose its oversight on firms traditionally regulated by the SEC. While Gallagher clashed with former Chairman Mary Schapiro on policy matters, he has a less-strained relationship with current SEC chief Mary Jo White. He was instrumental in negotiating a compromise overhauling rules for money-market mutual funds in July 2014, passed during White's tenure." It adds, "It's unclear when Aguilar will leave the agency. While his term expires in June, he also could remain until his successor is confirmed by the U.S. Senate. The candidates being reviewed by the White House to replace Aguilar include former SEC attorneys Keir Gumbs and Philip Khinda, according to the people, who asked not to be named because the matter wasn't public." In other news, a press release entitled, "Moody's withdraws the money market fund ratings of 3 Russell Investment Company Funds" says, "Moody's Investors Service, ("Moody's") has today withdrawn the ratings of three funds managed by Russell Investment Ireland Limited named: RIC Euro Liquidity Fund, rated Aa-mf; RIC Sterling Liquidity Fund, rated Aaa-mf; and US Dollar Liquidity Fund II, rated Aaa-mf <b:>`_."

The New York Fed posted a piece, "Financial Innovation: The Origins of the Tri-Party Repo Market," on its Liberty Street Economics blog. It says, "The conventional wisdom about financial innovation is that it is typically undertaken as a way to increase profits. However, financial innovation can also occur as a response to the need to reduce risk. Tri-party repo is an example of such innovation. While tri-party repo ultimately evolved in ways that created and amplified systemic risk (as we will describe in our next post), its origin was as a solution to inefficiencies and risks associated with the repo settlement arrangements prevailing at the time." In other news, the Wall Street Journal's Vipal Monga wrote in the CFO Journal, "Verizon Taps CP Market in Rare Move for M&A Financing." He writes, "Verizon Communications Inc. is taking a rare step by financing its $4.4 billion acquisition of AOL Inc. by issuing commercial paper. "Most companies have been trying to push out acquisition financing in the [long-term] bond market," said Chris Conetta, head of global commercial paper trading at Barclays PLC. "A lot of that [financing] has bypassed the commercial paper market." Verizon, which had $550 million of commercial paper outstanding at the end of March, has been ramping up issuance in that market in recent months. It only had $19 million outstanding at the end of December. A company spokesman said the company increased issuance "in the context of normal cash movements to fund our operations." Although a company spokesman declined to give rationale for tapping the CP market to finance part the deal (Verizon will also be using cash on hand), it's likely the telecommunications company feels that it can't go to the long-term bond markets for the time being." It continues, "The company has a relatively mediocre commercial paper rating as well, at A2/P2, below the highest AA rating.... Borrowing rates in the commercial paper market are very low, but they have been trending up. Companies rated A2/P2 can expect to pay 0.54% for securities maturing in 90 days, according to the Federal Reserve. That's up from 0.27% a year ago. "Rates are still ridiculously low," said Peter Crane, CEO of money-market fund tracker Crane Data LLC."

Bloomberg writes, "The $900 Billion Influx That's Wreaking Havoc in U.S. Bills." The article says, "For all the anxiety over the global selloff in bonds, the big worry in money markets is the havoc being created by a dearth of U.S. Treasury bills. The magnitude of the problem was on display last week, when not even the Treasury Department's surprise announcement to boost sales could do much to lift bill rates. Over the past two weeks, some of those rates have turned negative, reaching levels last seen during the financial crisis. With supply at multi-decade lows, investors are signaling alarm as regulations intended to shore up banks and prevent a run on money-market funds exacerbate the bill shortfall. JPMorgan Chase & Co. expects an extra $900 billion of demand for government securities during the next 18 months, putting pressure on a sizable chunk of the $1.4 trillion bill market. "You have all this money that wants to be in liquid, safe assets that is overwhelming the supply," said Alex Roever, the Chicago-based head of U.S. interest-rate strategy at JPMorgan. The consequences extend well beyond the fixed-income market as depressed rates in the $2.5 trillion money-market fund industry stand to deprive savers of income long after the Federal Reserve starts raising interest rates. The mismatch between supply and demand has been so acute that four-week bill rates fell to minus 0.0304 percent on April 29, the lowest on a closing basis since December 2008. Yields on three-month bills also turned negative. The Treasury responded by saying at its quarterly refunding announcement on May 6 it would increase issuance to meet growing demand." In other news, Tech in Asia wrote the article, "Xiaomi's Money Market Fund Rolls Out of Beta, to Take on Alibaba and Tencent." It says, "Like Baidu and Alibaba, Xiaomi is eyeing China's finance industry and seeing dollar signs. Today the company is officially launching a money-market fund called Huoqibao inside a new standalone app called "Xiaomi Finance". Like the Alibaba-affiliated Yu'ebao, Xiaomi's Huoqibao lets consumers save excess cash and earn interest from it.... The fund is managed by China's E Fund Management and currently offers an annual return rate of 4.26 percent. Compared to China's other internet giants, Xiaomi is slightly late to the money market game. As of late 2014, Yu'ebao had over 185 million users and a fund size of RMB 578.93 billion (about US$93 billion). Yu'ebao's deep integration with Alipay Wallet, which is also tied to Alibaba's mobile ecommerce properties like Tmall and Taobao, make it tough for new customers to miss. Tencent and Baidu also have mobile money-market funds of their own."

Attorney Stephen Keen of Perkins Coie published a comment entitled, "Why Intermediaries Can Stop Worrying About Money Fund Liquidity Fees -- Part One." Writes Keen, "I continue to hear about intermediaries fretting over whether and how to redesign their trading systems to accommodate the possibility of money market fund liquidity fees. This series of blogs will explain why this should be a problem only for the funds' transfer agents ("TAs"). An intermediary should never need to collect and remit a liquidity fee." Keen continues, "The Board's new ability to set liquidity fees has raised the specter of funds charging different fees and constantly changing their rates. Intermediaries are concerned that they must develop systems that can collect fees for different funds at different rates that may change on a moment's notice. The likelihood that funds may implement liquidity fees during a market meltdown heightens their concerns. While I am skeptical that directors would ever tweak fees in this fashion, the prospect of their doing so need not alarm anyone other than the TAs. The need for intermediaries to make major systems changes could be avoided if the TA collected all liquidity fees directly from redemption proceeds. Intermediaries' systems could then prorate the proceeds received from the TA by the dollar or share amount of each client's redemption. For example, assume an intermediary has three clients redeeming shares from funds that have imposed liquidity fees. Clients A and B each redeem $1 million from Fund X, and Clients B and C each redeem $1 million from Fund Y. Assume Fund X imposed a 1% fee and Fund Y imposed a 2% fee. This means the intermediary would receive $1,980,000 from Fund X and $1,960,000 from Fund Y. As each client redeemed equal amounts from each fund, the proceeds would be split evenly, with Clients A and B each receiving $990,000 from Fund X and Clients B and C each receiving $980,000 from Fund Y. Proration will produce the correct result, even if the intermediary does not know the percentage fee imposed by each fund. A proration algorithm could run all the time, insofar as it would allocate the correct amount of proceeds to each client even when the fund was not charging a liquidity fee. So, the intermediary would never need to modify its systems to implement a liquidity fee. What happens if other clients also purchase shares from the fund? There are at least three ways to address this question, which I will explore in the next two parts." Also, the SEC issued a release naming David Grim as Director of the Division of Investment Management, permanently replacing Norm Champ, who stepped down earlier this year.

After a rough April, money fund assets were back in black last week, according to ICI in its latest weekly "Money Market Mutual Fund Assets" report. The release says, "Total money market fund assets increased by $8.60 billion to $2.59 trillion for the week ended Wednesday, May 6, the Investment Company Institute reported today. Among taxable money market funds, Treasury funds (including agency and repo) increased by $5.30 billion and prime funds increased by $640 million. Tax-exempt money market funds increased by $2.65 billion. Assets of retail money market funds increased by $1.60 billion to $861.68 billion. Among retail funds, Treasury money market fund assets decreased by $200 million to $190.31 billion, prime money market fund assets increased by $730 million to $490.74 billion, and tax-exempt fund assets increased by $1.07 billion to $180.63 billion. Assets of institutional money market funds increased by $6.99 billion to $1.73 trillion. Among institutional funds, Treasury money market fund assets increased by $5.50 billion to $769.86 billion, prime money market fund assets decreased by $90 million to $893.11 billion, and tax-exempt fund assets increased by $1.59 billion to $65.81 billion." Year-to-date, MMF assets are down $143 billion, or 5.2%. In other news, Plan Sponsor magazine reports, "Money Market Reform Likely to Change Retirement Plan Investments." It says, "Money market fund reforms, which take effect in October 2016, will require retirement plan sponsors to review the money market funds in their lineups and possibly replace their funds, experts say. And this will affect nearly two-thirds of plans, as 63.5% have money market funds in their lineup, according to the 2014 PLANSPONSOR Defined Contribution Survey." It explains, "Institutional clients in endowments and pension plans are going to be greatly affected because of the floating NAV," says Jay Sommariva, vice president and senior fixed income portfolio manager at Fort Pitt Capital Group in Pittsburgh. "While on paper, retail clients in 401(k) plans will not be affected because the retail funds will maintain a constant $1 NAV -- just like in 2008, when the largest money market fund in the nation 'broke the buck' due to its holding of Lehman Brothers and some structured investment vehicles (SIVs) associated with distressed mortgages -- there is a chance assets in the retail funds can depreciate. They might also impose a redemption gate or a 2% penalty to take your money out. They have never been risk-free and should not be viewed as such."" The piece adds, "This is why Sommariva believes that advisers to 401(k) plans will recommend that the plans replace their retail money market funds with government money market funds, "which provide higher credit and liquidity standards" -- and will not have liquidity fees or redemption gates."

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