WSJ on New Mutual Fund Rules
The front page of Monday's Wall Street Journal featured a story entitled, "SEC Preps Mutual Fund Rules." The piece, which doesn’t involve money market funds, says, "The Securities and Exchange Commission is preparing new rules to boost oversight of mutual funds, hedge funds and other firms as part of an effort to gain insight into whether the $50 trillion asset-management industry poses risks to the financial system, according to people familiar with the discussions. The SEC is in the early stages of developing requirements, including that asset managers such as Fidelity Investments and BlackRock Inc. give regulators more data about their mutual-fund portfolio holdings and conduct stress tests on their funds to determine how they would weather economic shocks such as a sudden change in interest rates. The SEC staff is developing the rules with the five-member commission but has yet to complete a formal proposal." (Note: Money market mutual funds aren't mentioned in the story, but already have portfolio disclosure and stress testing requirements.) The Journal also published a story Monday, "Expecting Trouble? Here Are Investments to Ponder." It begins, "It may be time for investors to seek out safe harbors." It then talks about one of those safe harbors, cash. Mr. [Will] Hepburn says his firm [Hepburn Capital Management], which was building cash positions for part of the summer, prefers conservative money-market funds such as those focused on U.S. government debt. "If stocks drop 10%, your money-market fund has 10% created buying power when you go back into the stock [market]." He suggests avoiding higher-yielding money-market funds, since some of them may invest in junk bonds [sic]." Finally, the Financial Times wrote "Future of Money Funds Questioned." "On the face of it, an unprecedented series of losses is the last thing the money market industry needs right now. As FT reported last month, at least 10 South African money market funds -- ultra low-risk vehicles that provide short-term funding to governments and companies -- have "broken the buck," meaning their price has fallen below R1 a unit. This is such a rare event in global money market circles that only two other so-called constant net asset value (CNAV) funds have broken the buck in the 43-year history of the sector, both of them in the US."
