Capital Group's $144.4 billion American Funds Central Cash fund, the largest Prime Inst money market fund, has filed to convert to a Government MMF, making it the first major Prime MMF casualty of the latest round of the SEC's pending Money Fund Reforms. A Form N-1A filing for the Capital Group Central Fund Series' American Funds Central Cash M (CMQXX) tells us, "On or about June 7, 2024 (the 'Effective Date'), the fund intends to operate as a government money market fund pursuant to rule 2a-7 under the 1940 Act. Under rule 2a-7, a government money market fund is a money market fund that invests at least 99.5% of its total assets in cash, U.S. Treasury securities and other government securities guaranteed or issued by an agency or instrumentality of the U.S. government, and repurchase agreements that are fully collateralized by cash or government securities."

It explains, "As a government money market fund, the fund will no longer be subject to a liquidity fee. However, although the fund will operate as a government money market fund, the calculation of the fund's net asset value will not change. Accordingly, the net asset value of the fund's shares will continue to 'float,' fluctuating with changes in the value of the fund's portfolio securities."

The Capital Group filing says, "Beginning on the Effective Date, the fund's investment objective and investment strategies and risks will be revised as follows: The investment objective of the fund is to provide you with a way to earn income on your cash reserves while preserving capital and maintaining liquidity. The fund is a government money market fund. The net asset value of the fund's shares will 'float,' fluctuating with changes in the value of the fund's portfolio securities. Shares of the fund are currently only available for investment by (a) other funds and investment vehicles and accounts managed by the fund's investment adviser and its affiliates and (b) the fund's investment adviser and its affiliates. Shares of the fund are not available to the public."

Under "Investment strategies and risks," it comments, "The fund will invest at least 99.5% of its total assets in cash, U.S. Treasury securities and other government securities guaranteed or issued by an agency or instrumentality of the U.S. government, and repurchase agreements that are fully collateralized by cash or government securities. Additionally, at least 80% of the fund's assets will normally be invested in securities that are issued or guaranteed by the U.S. government, its agencies and instrumentalities, and repurchase agreements that are fully collateralized by government securities."

The filing continues, "Repurchase agreements are agreements under which the fund purchases a security from a bank or broker-dealer and obtains a simultaneous commitment from the seller to repurchase the security at a specified time and price. Because the security purchased by the fund constitutes collateral for the seller's repurchase obligation, a repurchase agreement is effectively a loan by the fund that is collateralized by the security purchased. The fund will only enter into repurchase agreements involving securities of the type (excluding any maturity limitations) in which it could otherwise invest. In practice, the fund expects to enter only into repurchase agreements that are fully collateralized by cash or U.S. government securities."

It states, "The fund relies on the professional judgment of its investment adviser to make decisions about the fund's portfolio investments. The basic investment philosophy of the investment adviser is to seek to provide current income while preserving capital and maintaining liquidity. The investment adviser believes that an important way to accomplish this is by analyzing various factors, including the credit strength of the issuer, prices of similar securities issued by comparable issuers, current and anticipated changes in interest rates, general market conditions and other factors pertinent to the particular security being evaluated."

Capital Group adds, "While it has no present intention to do so, the fund's board may change the fund's objective without shareholder approval upon 60 days' prior written notice to shareholders. In accordance with applicable rules and regulations relating to money market funds, the fund will maintain a dollar-weighted average maturity of 60 days or less and its dollar-weighted average life will not exceed 120 days. Additionally, the fund will hold at least 25% of its total assets in daily liquid assets and at least 50% of its total assets in weekly liquid assets. For purposes of these limits, daily liquid assets and weekly liquid assets are generally defined to include cash, U.S. Treasuries, certain other government securities, as well as other securities that can be readily converted to cash within one or five business days, respectively."

Finally, the filing says, "Floating net asset value - The fund does not maintain a constant net asset value per share of $1.00. The fund transacts at a market-based net asset value calculated to four decimal places or an equivalent value for the fund depending on the share price (e.g., $10.000 or $100.00). Accordingly the fund's net asset value will vary as a result of changes in the value of the securities in which the fund invests. Liquidity fee - The fund will not be subject to a liquidity fee."

The largest Prime Inst MMFs (who will be subject to the new emergency liquidity fee regime) tracked by Crane Data currently include: American Funds Central Cash (CMQXX, $144.4B), Vanguard Market Liquidity Fund (VAN01, $72.5B), BlackRock Cash Inst MMF SL (BISXX, $68.5B), Fidelity Cash Central Fund (FID01, $50.6B), JPMorgan Prime MM Capital (CJPXX, $40.0B), Fidelity Sec Lending Cash Central Fund (FID05, $25.7B), Federated Hermes Inst Prime Obligs IS (POIXX, $21.3B), JPMorgan Prime MM Institution (JINXX, $18.3B), Columbia Short-Term Cash Fund (COL01, $17.6B), PGIM Inst Money Market Fund (PRU01, $14.8B), Morgan Stanley Inst Liq Prime Inst (MPFXX, $14.8B), Federated Hermes Inst Prime Value Obl IS (PVOXX, $14.8B), State Street Inst Liquid Res Prem (SSIXX, $13.8B), DFA Short Term Investment Fund (DFA01, $13.7B), BlackRock Lq TempCash Inst (TMCXX, $13.6B), JPMorgan Prime MM IM (JIMXX, $12.2B), UBS Select Prime Money Mkt Inst (SELXX, $10.4B), UBS Select Prime Money Mkt Pref (SPPXX, $9.3B), Schwab Variable Share MF Ultra (SVUXX, $5.9B) and MFS Inst Money Market A (MFS01, $4.9B).

The largest Prime Retail MMFs (who won't be subject to liquidity fees) include: Schwab Value Adv MF Inv (SWVXX, $175.5B), Schwab Value Adv MF Ultra (SNAXX, $98.3B), Fidelity Money Market Fund Premium (FZDXX, $92.2B), Fidelity Inv MM: MM Port Inst (FNSXX, $67.9B), Federated Hermes Prime Cash Oblig WS (PCOXX, $58.7B), Fidelity Inv MM: MM Port I (FMPXX, $53.5B), Allspring MMF Prm (WMPXX, $32.7B), JPMorgan Liquid Assets Premier (PJLXX, $24.8B), JPMorgan Liquid Assets Capit (CJLXX, $14.5B), Fidelity Money Market Fund (SPRXX, $10.6B), JPMorgan Liquid Assets Instit (IJLXX, $10.2B), UBS Prime Reserves Fund (UPRXX, $7.4B), JPMorgan Liquid Assets Morgan (MJLXX, $6.7B), Goldman Sachs Investor MM Inst (FMJXX, $6.5B), UBS Prime Preferred Fund (UPPXX, $6.4B), Invesco Premier Institutional (IPPXX, $6.1B), T Rowe Price Cash Reserves (TSCXX, $4.7B), Federated Hermes Capital Reserves (FRFXX, $3.9B), JPMorgan Liquid Assets Agen (AJLXX, $3.8B) and Federated Hermes Prime Cash Oblig SS (PRCXX, $3.7B).

For more info, see these Crane Data News stories: "More from the SEC's Money Market Fund Reforms: Liquidity Fee Excerpts" (7/24/23) and "Big Shift Out of Prime and Muni MMFs Hits $1 Trillion" (9/30/16).

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