Earlier this month, Fidelity Investments, the largest manager of money market mutual funds with over $500 billion, posted a Q&A piece entitled, "A Discussion of the Expiration of the U.S. Treasury Temporary Guarantee Program for Money Market Funds," which discussed the ending of the Treasury Guarantee, recent market conditions, and expenses associated with the program. We excerpt from the article below.
The Fidelity Q&A first asks, "Q: What has happened to the U.S. Treasury Temporary Guarantee Program for Money Market Funds?" It says, "A. As planned, the program expired on September 18, 2009. Fidelity's general purpose and tax-exempt money market funds had participated in the program since its inception in September 2008. However, Fidelity's money market funds that invest primarily in U.S. Government and Treasury securities had not participated in the program since April 30, 2009. Under the temporary program, the U.S. Treasury guaranteed the share price of any publicly offered eligible money market mutual fund that applied for and paid a fee to participate in the program. Throughout its duration, the coverage applied only to investments held in participating money market funds as of the close of business on September 19, 2008."
The brief then asks, "Q. Have short-term credit market conditions improved over the past year? If so, what does that mean for Fidelity's money market funds?" It answers, "A. Overall market conditions for money market investing have improved since the Treasury program began last fall. Even though it was highly unlikely that the coverage would have been needed for any of our funds, we understood that the program reassured some of our investors. Fidelity money market funds continue to invest in high-quality securities, and our customers continue to have full access to their investments any time they wish. Most importantly, we have been proactive in keeping our money market funds safe and in protecting the $1.00 net asset value, which has always been our #1 objective in managing these funds."
It continues, "Q. Why did Fidelity participate in the Treasury program to insure money market funds? A. At the time the temporary program began, Fidelity and the Board of Trustees for the money market funds believed it was in the interests of our fund shareholders to participate in the temporary program. Again, though we believed it was highly unlikely that the insurance would be needed for any of our funds, we wanted to reassure our investors that their money market funds would continue to provide safety and liquidity for their cash investments. Q. How much did Fidelity's funds pay to participate in the program? A. Each of Fidelity's funds paid 0.04 percent, or four basis points, to participate in the program over the insured period."
Next, the Q&A asks, "Q. How will my fund's expenses be affected now that the Guarantee Program has expired?" It answers, "A. Now that the Guarantee Program has expired, each money market fund will no longer charge fees to be covered under the insurance program. Each fund will charge expenses as it did before the Guarantee Program, as detailed in the fund's prospectus." It also asks, "Q. Is the program expiring for all money market funds or are there money funds that will still carry the insurance?" It answers, "A. As of September 18, 2009, the program has expired for all money market funds. Again, the program was temporary in nature and the coverage applied only to investments held in participating money market funds as of the close of business on September 19, 2008."
Finally, it asks, "Q. Should an investor take action now that the insurance has expired?" It responds, "A. Your investment decisions should be based on your own personal investment goals. If your question is about the safety of your money market investments, we can tell you that our funds continue to invest in money market securities of high quality, and our customers continue to have full access to their investments any time they wish. Most importantly, we have been proactive in keeping our money market funds safe and in protecting the $1.00 net asset value, which has always been our #1 objective and will continue to be our main priority in managing these funds."
