AP writes on Money Market Funds
The Associated Press writes "Money fund investors: Prepare to stay underwhelmed" (this version is from The Oakland Press). It says, "Money-market mutual funds are safe places to stash cash and see it slowly but steadily grow. Except for one recent misstep, it's been that way for four decades. Now, the industry is playing by new rules to make amends for that one false move. It's all about restoring confidence in money funds' biggest selling points: the near-certainty that investors won't lose money, and that they can quickly pull cash out even when markets are in turmoil. The problem is, the tighter rules are shaving a bit off money funds' historically small returns. These days, that's not much." The piece quotes, "Peter Crane, of the fund researcher Crane Data, is a bit more optimistic. He notes that investor withdrawals from money funds eased in May as worries about Europe's debt troubles led them to seek protection. Investors are also nervous about the government's removal of measures to lift the U.S. economy out of recession, like the homebuyer tax credit.... That increase is lifting the returns that money funds earn, offsetting the hit to returns from the SEC rules and the more cautious investing style they require. The opposing forces are nearly canceling one another out." AP quotes Crane, "The impact is barely noticeable in this super-compressed yield environment.... We're years away from measuring returns in full percentage points ... and we're months away from returns of a quarter of a percentage point or more."
