Bear Stearns ("BSAM") today announced the pending launch of the Bear Stearns Current Yield Fund (www.yyyfund.com). The institutional "YYY" fund, which goes live March 18, "aims to generate higher returns than an average money market fund". It will will be one of the first "enhanced cash" ETFs, and will likely be the closest thing yet to a money market mutual fund ETF.
The press release quotes Jeff Lane, Chairman & CEO of BSAM, "The Bear Stearns Current Yield Fund is an innovative vehicle which allows investors to manage short-term fixed income. Through Triple-Y, investors have access to a talented management team, with a long and successful track record in this space. In addition, the Fund offers full transparency of holdings every day on the internet, liquidity via exchange trading and institutional class fees for all investors."
The release adds, "Triple-Y is managed by a team of fixed income professionals at BSAM, led by senior portfolio manager Scott Pavlak. Mr. Pavlak has more than 20 years of investment experience and has been managing portfolios similar to Triple-Y for over 15 years." Pavlak says, "Utilizing a disciplined investment process, we seek to add value through sector allocation, security selection, yield curve positioning, and duration management. We use a conservative approach which aims to maximize income for our investors, while preserving capital."
The fund's institutional "units" will be available only in blocks of "millions" initially and the fund will have an expense ratio of 0.35%. It will "seek as high a level of current income as is consistent with the preservation of capital and liquidity.... The Fund is not a 'money market fund' relying on Rule 2a-7 of the Investment Company Act and is not subject to the requirements applicable to money market funds, nor is it an objective of the Fund to maintain a target share price as would be the case for a money market fund," says the prospectus.
It remains to be seen whether the new fund can overcome market concerns about "enhanced cash" funds. But the fund's relatively conservative investment policies, which include a looser 5% per issuer diversification policy than money funds and which allow for 15% in "illiquid" securities (vs. money funds' 10%), and transparency of holdings should help. YYY should be a nice test to see whether the marketplace has a need for a brokerage-traded and intraday "cash-plus" vehicle.
