In yet more signs that near zero yields are causing stresses to money market mutual funds, the $5 million Monetta Government Money Market Fund (MONXX) announced plans to liquidate and the $705 million Accessor U.S. Government Money Fund announced plans to invest in commercial paper.
The Monetta Govt MMF filing says, "On November 9, 2009, the Monetta Trust Board of Trustees and the Trust's investment adviser approved a plan to liquidate and close Monetta Government Money Market Fund. The liquidation is expected to occur on December 18, 2009. The remaining 3 series of the Monetta Trust will remain open and unaffected by this announcement."
It adds, "The Government Money Market Fund will not accept any additional purchases of Fund shares through the Liquidation Date. Shares of the Government Money Market Fund may be exchanged for shares of Monetta Fund or any of the other series of the Monetta Trust before the Liquidation Date. Shareholders in the Government Money Market Fund who do not exchange or redeem their shares prior to the Liquidation Date will have the proceeds of their account sent to them at their address of record when the liquidation occurs."
Accessor's Director of Investments Nathan Rowader wrote a letter to shareholders recently, saying "I am pleased to announce an expansion to the current investment guidelines for the Accessor U.S. Government Money Fund effective September 14, 2009. The expansion will allow the Fund to take a position in commercial paper while maintaining its status as a government money market fund. As you are no doubt aware, U.S. Treasury and Agency bond rates have reached historical lows and are no longer sufficient to produce a positive yield in the Fund. This is a phenomenon that many money market funds currently face."
The letter continues, "As the Accessor U.S. Government Money Fund's higher yielding bonds mature, those assets are being reinvested at today's lower levels. Forward Management has explored several options to adapt to this difficult environment and has determined that the best solution for shareholders is an expansion of the current guidelines. This allows the investment team the flexibility to include an allocation to commercial paper to help mitigate the effect of lower rates in the short term government fixed income markets.... The short-term nature of commercial paper provides the portfolio access to bonds yielding roughly two times that of comparable U.S. Treasury and Agency securities."
Finally, it says, "Forward Management has always managed the Accessor U.S. Government Money Fund conservatively and has developed a number of processes to help mitigate risk. This process will continue as we expect to limit the Fund's exposure to commercial paper to 15% of Fund assets and will be complemented with rigorous credit research on the issues we choose to put into the portfolio. We intend to include only the highest rated, most stable companies on our authorized purchase list. We feel that the addition of commercial paper to the Accessor U.S. Government Money Fund enhances the investment team's ability to generate value for shareholders. This change in strategy will likely alter the credit profile of the portfolio, but we believe the yield benefits will be measureable and sustainable. We are confident that this change is the appropriate adjustment in today's investment environment."
