P&I: MMF Managers Prep for Changes
Pensions & Investments published a piece Monday, "Firms Prepare for Money Market Changes." It states, "Managers such as BlackRock, Vanguard Group Inc., J.P. Morgan Asset Management, Goldman Sachs Asset Management and RBC Global Asset Management Inc. are retooling their cash management businesses in advance of changing regulations on net asset value for institutional prime money market funds. Some firms are adding investment and/or distribution staffers; others are augmenting their short-duration fixed-income strategies; and still others are doing a combination of both." The article explains, "BlackRock, New York, is already seeing demand, said Thomas Callahan, managing director and co-head of global cash management. In response, company officials are adding standard short-duration mutual funds, short-duration exchange-traded funds and separate accounts. "The demand for short-duration products is directly related to money market reform," Mr. Callahan said. He said the money management giant might launch a municipal short-duration ETF "in the near future." Noting he is seeing a migration out of money market funds into separately managed accounts, Mr. Callahan added: "As we get closer to implementation in October 2016 we think that trend will continue.... Cash was something clients didn't have to think about; it was pretty much auto-pilot," said Mr. Callahan. "Now the auto-pilot's been switched off." In late November, Vanguard, Malvern, Pa., filed a registration statement with the SEC to launch an actively managed ultra-short-term bond fund as an alternative to prime money market funds." The P&I piece adds, "John Donohue, managing director and head of global liquidity in JPMAM's global fixed-income and liquidity group in New York, said his team is talking to clients about their liquidity needs. "We launched a few floating NAV products a few years ago in anticipation of these regulatory changes," said Mr. Donohue. "They haven't had a lot of traction, but as that (October 2016) date approaches, we may see some movement into that space." It goes on, "JPMAM also launched a short-duration high-yield fund last year. In addition to separately managed accounts, Mr. Donohue added he expects to see money flowing into government money market funds, since they're exempt from the new SEC regulation. GSAM is another manager that's preparing for the impending regulation change. "Our clients have been interested in stability, liquidity and yield. Money market funds used to bring you all three, but money market reform is changing that a bit," said David Fishman, managing director and co-head of GSAM's global liquidity management business, New York. "You can't get all three at once in today's market, so you need to decide what's more important and what will yield you two out of those three." James McCarthy, managing director and co-head of that business, said, "We continue to explore other strategies. Bespoke separately managed portfolios are something we can already offer today. In addition, we're considering other types of mutual funds and even ETFs." Mr. McCarthy said GSAM launched in February "a limited maturity obligation fund. It's longer than a money market fund but less volatile than a traditional short-duration fund." Officials at RBC Global Asset Management, Minneapolis, launched a short-duration fixed-income mutual fund and an ultra-short fixed-income mutual fund at the beginning of 2014. "We think separately managed accounts will capture a good portion of the money we think will be in motion," said Brandon T. Swensen, vice president and co-head of U.S. fixed income."
