"Extreme Makeover: Money Markets"
SmartMoney writes "Extreme Makeover: Money Markets" which says, "Money-market funds were a hot topic at the Mutual Funds and Investment Management conference in Phoenix this week. SmartMoney sat down with Paul Stevens, president and chief executive of the Investment Company Institute, a mutual fund industry trade group, to talk about what options there are for modifying one of the most commonly held forms of mutual fund, including his group's position: creating a pool of cash, funded by the money-market industry, as a backstop for the funds." SmartMoney asks, "The Investment Company Institute created a working group during the financial crisis to look at ways to strengthen money-market funds. Why did you feel this was necessary?" Stevens says, "Money-market funds account for more than one-quarter of the assets in mutual funds now, so it is a huge segment of our business. More importantly, they were the part of the business that was hit in the fall of 2008, and they've been the focus of a great deal of regulatory attention. The Securities and Exchange Commission, the Federal Reserve and the Treasury Department are all continuing to mull over what steps to take to make sure that money-market funds will be safe in tough market conditions." The piece also says, "One idea that the SEC has suggested is allowing money-market funds to have variable share prices, just like other mutual funds. They would no longer have the share price of $1. In that case, how would money-market funds be different from short-term bond funds?" Stevens answers, "They wouldn't be." SmartMoney continues, "Why does the Investment Company Institute oppose this idea?" Stevens responds, "If net asset values were allowed to fluctuate, individual investors would be deprived of what has become a vitally important vehicle for managing their cash. These funds had their inception in the 1970s. At that time, individual investors didn't have access to high-yielding money markets. All they had was demand deposit accounts. That may not seem like an important distinction now, because yields are so low. But as interest rates move up -- and clearly they will, particularly if we get into an inflationary environment -- then it would be a real loss if investors were unable to buy money-market funds." See also, LA Times' "Money market mutual fund assets fall below $3 trillion".
