Mutual fund news source ignites.com features Crane Data's Peter Crane in its "Money Voices" column today in an editorial entitled, "Don't Mess With The Buck." Crane argues that the $1.00 NAV and the structure of money funds should not be changed."
He writes in ignites, "Over the past two years, money market mutual funds have experienced at least 25 cases of support actions by fund advisors and a single case of a fund 'breaking the buck.' Given this unprecedented period of money market turmoil, a number of people have suggested changes to the regulation and structure of money market mutual funds. Some have gone so far as to propose that money funds abandon their $1 share price target and discontinue their use of amortized cost accounting."
Crane says, "I believe investors almost unanimously oppose these suggestions, and that these ideas would severely diminish the attraction of money market funds. Some of the changes could even cause severe economic repercussions, including a return to the credit market freeze we experienced in the second half of last year. Money funds purchase almost half of all the debt in the short-term Treasury, government agency, commercial paper, bank certificate of deposit and municipal security markets, so any change to their structure should not be taken lightly."
The ignites editorial continues, "While yield has played a role in the tremendous success of money funds, it's clear that convenience and simplicity have been big drivers of the category. If yield were the main consideration for savers, Internet banks, ultra-short bond funds or auction rate securities would be the ones holding almost $4 trillion in assets. The safety, stability and, particularly, the simplicity of a stable share price have been the key drivers of money funds' growth. Many an investor has learned that conducting daily check-writing and debit-card transactions with a fluctuating NAV product, like an ultra-short bond fund, quickly becomes a recordkeeping nightmare."
Finally, Crane says, "Money market mutual funds now have approximately 40 million shareholders with assets totaling over $3.9 trillion. Crane Data estimates that money funds have produced over $1 trillion in interest income over their 38-year history -- over $300 billion in interest income above and beyond what investors would have earned in bank savings accounts. Savers and investors do not forget this kind of performance and generosity.... My advice to regulators, commentators and industry participants is, 'Don't mess with the buck.'."
