BoardIQ Writes on Prime Inst Exodus
BoardIQ writes "Advisors Purge Institutional Money Funds Ahead of Rule Deadline." The article explains, "Advisors are pulling the plug on institutional prime money market funds ahead of the compliance deadline for a new regulation industry advocates said is operationally burdensome. As many as half of the funds may disappear by the Oct. 2 deadline, said Peter Crane, president and CEO of researcher Crane Data. 'The big ones are no doubt going to hang in there,' he said. 'The smaller ones are all going to liquidate.'" The piece quotes Investment Company Institute associate general counsel Joshua Weinberg, "The mandatory liquidity fee for institutional prime money market funds is an over-engineered attempt at a solution, adopted without input from those required to implement it. As a result, fund sponsors are faced with a choice to either proceed with an expensive, burdensome and complex operational implementation or move away from offering investors choice." It tells us, "The 'exodus' is already underway, Crane said. UBS is among the latest and said last week in a pair of filings that it would convert its Select Prime Preferred and Select Prime Institutional funds into retail money funds with fluctuating share prices as of Aug. 16.... The firm last month also disclosed that it would convert its prime institutional Limited Purpose Cash Investment Fund to a government money-market fund, effective Aug. 27, Crane Data shows. The fund had about $5 billion in assets as of last October, according to fund filings. Mutual of America Capital Management also disclosed the conversion of an institutional money fund last week. Its $537 million MoA Money Market Fund will be converted to a government money fund effective on or about Aug. 23. Other money fund sponsors that have announced plans to pull certain prime institutional products include Allspring Heritage, American Funds, BlackRock, Dreyfus, DWS, Federated Hermes, Fidelity, Goldman Sachs and Vanguard, according to data from Crane Data. Almost all expect to exit between June and September." Finally, they write, "Crane said that the news wasn't all bad from the board perspective. 'The good news for directors is that the liquidity fee decisions were taken out of their hands, so I'm sure they're more than happy to leave it to the advisor,' he said. But directors now face the question of whether it's worth the risk to keep institutional prime funds around. For those with less than $5 billion, the answer is no, Crane said."
