FT on Prime Inst Money Fund Shifts
The Financial Times writes, "Managers to shut or convert $220bn of US money market funds before rule change," which explains, "The $674bn US institutional prime money market funds sector is set to shrink by at least one-third this year, as large investment firms shut down these vehicles rather than pay for upgrades needed to meet new regulations. Cash managers including Federated Hermes, Capital Group and Vanguard say they are planning to close institutional prime money market funds holding more than $220bn in assets or convert them to another type of fund before Securities and Exchange Commission rules come into effect in early October, imposing a mandatory fee on large redemptions. Other managers say they are still deciding what to do, but analysts at Bank of America and industry executives predict additional closures and conversions as the deadline draws nearer." The article incorrectly states, "Under the new rules, institutional prime funds must impose a fee on departures whenever net redemptions top five per cent of total net assets in a single day." [Prices also have to move more than a "de minimis" amount.] It also says, "But a number of large managers have chosen to shut down prime funds or convert to government debt-focused vehicles, which will not be subject to the rules. They argue that the new criteria constitute an 'operationally difficult' and 'highly prescriptive' burden that will push up costs and complicate fund structures.... Interest remains strong in retail prime funds, which are not affected by the new SEC liquidity fees. These funds' net assets were up 48 percent year on year at $750bn at the end of March, according to Crane Data." The piece adds, "Many firms are still attempting to 'figure out' how to implement the rule, said Eric Pan, chief executive of the Investment Company Institute, noting that there is demand for prime money market funds and a number of providers will 'do [their] damnedest to try to meet that demand.'" Fpr more, see Crane Data's April Money Fund Intelligence and our April 1 Link of the Day, "Federated Liquidating Money Mkt Trust," our March 20 News, "Vanguard Market Liquidity Fund Files to Go Government, Joins American" and our Feb. 6 News, "American Funds Central Cash to Convert to Govt to Avoid Liquidity Fees."
