Sunday's Financial Times features an article entitled, "Not all money market funds are equal". Written by Robert Pozen and Theresa Hamacher, it says, "There is a sensible compromise to the debate over money market fund reform that regulators should seriously consider: requiring a fluctuating share price for some money market funds owned by institutional investors, but not for those owned by retail investors. Currently, all money market funds may use a fixed share price -- known as the "net asset value", or NAV -- at one dollar per share, subject to strict conditions. Regulators have argued that a fixed NAV creates systemic risk in the financial system and misleads investors into thinking their investment is guaranteed. They believe that money market funds should instead calculate their NAV daily based on the market value of their investments, as stock and bond mutual funds do -- meaning that the NAV may fluctuate from day to day. However, the fund industry argues that a fluctuating NAV would drastically undermine the utility of money market funds. Most investors use money market funds as an alternative to bank deposits, so most investors require the convenience and liquidity of a fixed-dollar account. Additionally, the industry points out that only two money market funds - both institutional - have ever caused any investor losses by "breaking the buck". Walt Bettinger, president and CEO of investment services firm Charles Schwab, recently advocated a smart proposal that would treat different types of funds differently."
