The last set of announcements on funds planning to exit the Prime Institutional Money Fund space took place a little over a month ago. But we recently found a new batch of funds declaring exits ahead of the October 2 deadline for the new emergency liquidity rules in the latest round of Money Fund Reforms. A filing for the $5.8 billion Schwab Variable Share Price Money Fund (SVUXX) tells us, "The Board of Trustees of The Charles Schwab Family of Funds has determined that it is in the best interest of the Schwab Variable Share Price Money Fund, a series of the Trust, and its shareholders to reorganize with and into the Schwab Government Money Fund. Accordingly, the Board has approved an Agreement and Plan of Reorganization that would provide for the reorganization of the Acquired Fund into the Surviving Fund. (See the Crane Data News updates, "Invesco Files to Liquidate Prime Inst MMFs; UBS MF Converting to Retail" (6/13/24) and "BlackRock Liquidates TempFund, LEAF" (6/10/24).)
It states, "The Plan of Reorganization approved by the Board sets forth the terms by which the Acquired Fund will transfer its assets and liabilities to the Surviving Fund in exchange for Ultra Shares of the Surviving Fund, and subsequently distribute those Surviving Fund shares to shareholders of the Acquired Fund. After the Reorganization is consummated, shareholders of the Acquired Fund will become shareholders of the Surviving Fund. The Reorganization is intended to be tax-free, meaning that shareholders of the Acquired Fund will become shareholders of the Surviving Fund without realizing any gain or loss for federal income tax purposes. It is expected that the Reorganization will occur on or about September 9, 2024."
Schwab's filing says, "Shareholder approval of the Reorganization is not required. Shareholders of the Acquired Fund will receive a prospectus/information statement prior to the Reorganization that describes the investment objective, strategies, expenses and risks of an investment in the Surviving Fund and provides further details about the Reorganization. Charles Schwab Investment Management, Inc. (investment adviser) will bear the costs associated with the Reorganization."
It explains, "The Surviving Fund has a substantially similar investment objective to that of the Acquired Fund.... The Acquired Fund invests primarily in high-quality short-term money market investments issued by U.S. and foreign issuers, such as commercial paper, promissory notes, certificates of deposit, and other money market securities, including securities issued by the U.S. government or its agencies and instrumentalities. The Surviving Fund is a 'government money market fund' and as such intends to operate as a government money market fund under the regulations governing money market funds."
Schwab adds, "Beginning June 7, 2024, the Acquired Fund will gradually transition its portfolio to invest a greater percentage of its net assets in government securities. As a result, the Acquired Fund's yield may be impacted.... Effective as of the close of business on June 28, 2024: The Acquired Fund will close to new investors; Existing shareholders of the Acquired Fund (including participants in 401(k) plans) as of the Closing Date may continue to purchase additional shares and receive dividends and/or distributions in the form of additional shares of the Acquired Fund, and registered investment advisers who maintain investments in the Acquired Fund on behalf of client accounts as of the Closing Date may continue to purchase additional shares on behalf of their clients, up until the close of business on September 5, 2024."
Another filing for the $1.4 billion JPMorgan Securities Lending Money Market Fund (VSLXX), an internal or private Prime Inst MMF, states, "At its June 2024 meeting, the Board of Trustees approved the conversion of the JPMorgan Securities Lending Money Market Fund to qualify as a 'government money market fund' as defined in Rule 2a-7 under the Investment Company Act of 1940, as amended. As a result, the Fund will make certain changes to its investment policy. investment strategies and related risks, including the adoption of a new investment policy to invest at least 99.5% of its total assets in cash, government securities and/or repurchase agreements that are 'collateralized fully' by cash or government securities."
It tells us, "The Fund expects that these changes will become effective on or about September 3, 2024. On the Effective Date, a new prospectus will replace the existing prospectus for the Fund. You should refer to the New Prospectus for the Fund, when it is available. Please note that the New Prospectus reflecting changes for the Fund is not yet effective and that the information in this supplement may be changed at any time prior to the Effective Date."
JPM writes, "The following is a brief summary of some of the changes that are anticipated to take effect on the Effective Date. Please refer to the New Prospectus, once available, for a more complete discussion of the Fund's strategies after the Effective Date.... The Fund intends to qualify as a 'government money market fund,' as such term is defined in or interpreted under Rule 2a-7 under the Investment Company Act of 1940, as amended. 'Government money market funds' are required to invest at least 99.5% of their assets in (i) cash, (ii) securities issued or guaranteed by the United States or certain U.S. government agencies or instrumentalities and/or (iii) repurchase agreements that are collateralized fully, and are exempt from requirements that permit money market funds to impose a liquidity fee. While the J.P. Morgan Funds' Board of Trustees may elect to subject the Fund to liquidity fee in the future, the Board has not elected to do so at this time."
They comment, "Under the new strategy, the Fund, under normal conditions, will invest its assets exclusively in: debt securities issued or guaranteed by the U.S. government, or by U.S. government agencies or instrumentalities or Government-Sponsored Enterprises ('GSEs'), and repurchase agreements fully collateralized by U.S. Treasury and U.S. government securities. The Fund is a money market fund managed in the following manner: The Fund seeks to maintain a net asset value ('NAV') of $1.00 per share."
Finally, the $507 million Meeder Inst Prime Money Market Fund (FLPXX) has also converted into Meeder Government Money Market Fund. (For more on recent Prime Institutional MMF liquidations and conversions, see these additional stories: "Federated Hermes Merging Prime Inst Money Funds; Prime Value To POF" (6/6/24), "Allspring to Merge Heritage MMF Into Govt MMF; UBS Converting Fund" (6/3/24), "DWS Liquidating ESG Liquidity Fund, 7th Prime Inst to Exit" (5/22/24), "Dreyfus Files to Liquidate Cash Management Prime Inst MMF, Tax Exempt" (5/13/24), "Goldman Files to Liquidate Prime Inst MMFs; Barron's: MMFs Tempting" (4/22/24), "Federated Liquidating Money Mkt Trust" (4/1/24), "Vanguard Market Liquidity Fund Files to Go Government, Joins American" (3/20/24) and "American Funds Central Cash to Convert to Govt to Avoid Liquidity Fees" (2/6/24).)
In related news, the $264 million BNY Mellon Government Money Market Fund (MLMXX) announced that it is liquidating, explaining, "The Board of Trustees of BNY Mellon Funds Trust has approved the liquidation of BNY Mellon Government Money Market Fund, a series of the Trust, effective on or about August 27, 2024. Before the Liquidation Date, and at the discretion of Fund management, the Fund's portfolio securities will be sold and/or allowed to mature in their normal course and the Fund may cease to pursue its investment objective and policies. The liquidation of the Fund may result in one or more taxable events for shareholders subject to federal income tax."
Dreyfus says, "Accordingly, effective on or about July 18, 2024, the Fund will be closed to any investments for new accounts, except that new accounts may be established for 'sweep accounts' and by participants in group retirement plans (and their successor plans), provided the plan sponsor has been approved by BNY Mellon Investment Adviser, Inc. in the case of BNYM Adviser-sponsored retirement plans, or BNY Mellon Wealth Management, in the case of BNYM WM-sponsored retirement plans, and has established the Fund as an investment option in the plan before the Closing Date. The Fund will continue to accept subsequent investments until the Liquidation Date."
They add, "Fund shares held on the Liquidation Date in BNYM WM Retirement Plans will be reallocated to other previously approved investment vehicles designated in plan documents as determined by BNYM WM and/or a client's trustee or other fiduciary, where required, within BNYM WM's investment discretion should the consent of a client's third-party fiduciary not be obtained prior to the Liquidation Date. Fund shares held on the Liquidation Date in BNYM Adviser Retirement Plans will be exchanged for Wealth shares of Dreyfus Government Cash Management."
