Wells Fargo Advantage Funds is the latest money fund family to begin providing daily "shadow" or mark-to-market net asset values. To date, those posting this information on their own websites includes: BlackRock, BofA Funds (prime only), Dreyfus, Federated (prime), Fidelity, First American (prime), Goldman, Invesco (prime), JPMorgan, Reich & Tang, Schwab, SSgA, Wells Fargo, and Western Asset (prime). (Crane Data's Money Fund Intelligence Daily tracks these "MNAVs" and lists the Wells numbers starting with today's issue.) The statement announcing these latest postings, entitled, "Wells Fargo Advantage Money Market Funds to begin disclosing daily market-based net asset values," says, "Beginning April 1, 2013, Wells Fargo Advantage Funds will begin publishing daily market-based net asset values (NAVs) for its entire suite of money market funds."
The release says under "Key points for our investor clients: We already calculate the daily market-based NAVs for the funds each trading day. Applicable regulations do not require the disclosure of a fund's market-based NAV, except as is reported monthly on Form N-MFP and made public on a 60-day delayed basis. This disclosure of daily market-based NAVs will not change how shareholders buy and sell Wells Fargo Advantage Funds money market shares. Transactions will still be executed at the $1.00 NAV, in accordance with Rule 2a-7 under the Investment Company Act of 1940. Disclosing a daily market-based NAV should not be interpreted as instituting a floating NAV."
Wells explains, "Stable-NAV money market funds have long provided money market fund investors with ease of trading, stability of principal, and daily access to funds while offering a competitive yield. As detailed in past comment letters to industry regulators, we remain opposed to the introduction of a requirement that money market funds switch to a floating NAV. In addition to reviewing the market-based NAV data point, we encourage investors to understand and monitor other key attributes of money market funds when making investment decisions. Credit quality, liquidity, portfolio maturity, and fund manager experience should be the primary considerations of a broader due diligence process for those seeking a better understanding of the money market funds in which they invest."
The posting's "Frequently Asked Questions" says, "1. Which funds will have their market-based NAVs disclosed on a daily basis? We will disclose the market-based NAVs for all of our money market funds: California Municipal Money Market Fund, Cash Investment Money Market Fund, Government Money Market Fund, Heritage Money Market Fund, Municipal Cash Management Money Market Fund, Municipal Money Market Fund, Money Market Fund, National Tax-Free Money Market Fund, Treasury Plus Money Market Fund, and 100% Treasury Money Market Fund."
The FAQ also asks, "3. What is a market-based NAV and how is it different than the stable $1.00 NAV used for transactions? A market-based NAV is produced by valuing portfolio securities at current market prices, also known as mark-to-market. Currently, we calculate market-based NAVs daily.... The stable $1.00 NAV is calculated based on amortized cost accounting and rounded to the nearest cent. More specifically, portfolio securities are valued at acquisition cost plus or minus any amortization of premium or accretion of discount. We intend to continue to value money market fund portfolios according to this method and to process purchases and redemptions of fund shares at the stable $1.00 NAV, in accordance with Rule 2a-7. For more explanation about the differences between a stable $1.00 NAV and a market-based NAV, please see the report Update on market-based NAVs."
Wells also tells us, "4. Why would a fund's market-based NAV fluctuate? The market prices for money market fund securities may fluctuate in value on a daily basis, although the amount of the fluctuation is typically small. In addition to changes in the prices of portfolio securities due to changes in interest rates or credit spreads, some of the factors that may affect a fund's market-based NAV include flows in and out of the fund due to shareholder transactions and dividend distributions."
Finally, they add, "5. Is disclosing the market-based NAV on a daily basis an endorsement of a floating NAV? No. We oppose any regulatory requirement that would require money market funds to maintain a floating NAV rather than the current stable $1.00 NAV per share. A stable $1.00 NAV has long provided investors with stability of principal and daily access to funds while offering a competitive yield. Additionally, there are a number of other important benefits to a stable $1.00 NAV in terms of tax, accounting, and recordkeeping simplification, which we believe are important to maintain for money market fund investors. To learn more about our position on proposals to require money market funds to switch to a floating NAV, please consult the second page of our summary of a recent comment letter to the Financial Stability Oversight Council."
