Invesco released a brief letter to clients, updating them on its plans for the company's money market funds in response to SEC reforms. The main point of the message is to announce that Invesco does not plan to implement fees and gates on its government money market funds. They also state their intention to "provide our investors with a full suite of liquidity management solutions to meet their investing needs with the least amount of disruption." Also, Federated Investors announced that it has finalized its deal to acquire the assets of Reich & Tang's money market funds. Reich & Tang, the 25th largest money fund manager, declared in March that it was getting out of the money fund business due to the "challenging landscape for money funds," the company said in a news release, which we covered in our March 13 "Link of the Day," "Reich & Tang Announces Liquidation of Money Market Mutual Funds." A few days later, Federated announced that it was in negotiations with Reich & Tang to acquire its MMF assets. (See our March 17 "News," "Federated In Talks with Reich & Tang Over MMF Assets.")
Invesco's "Money Market Regulatory Reform," letter says, "Invesco has been thoughtfully evaluating the impact of money market fund reform in order to provide our money market investors with the best possible outcome. We have been listening to your questions, and working through the concerns that you have articulated. As part of this process we want to make you aware of our intentions regarding two key elements relating to government money market funds in the new regulations. The latest reform also strengthened the definition of government funds requiring government funds hold at least 99.5% of their assets in cash, US government securities, and/or repurchase agreements collateralized by US government securities. Invesco's government funds have historically invested 100% of their assets in cash, US government securities, and/or repurchase agreements collateralized by US government securities and are therefore already in compliance with that heightened standard. Our government money market funds will continue to remain in compliance with this rule in advance of its effective date."
It continues, "We have reviewed our intentions with the funds' Board of Trustees. Accordingly, each of Invesco's Treasury Portfolio, Government & Agency Portfolio, Government TaxAdvantage Portfolio, and Premier US Government Money Portfolio (collectively "Invesco's government funds") are announcing today that they have no current intention of adopting liquidity fees or redemption gates and will continue to comply with the new definition of a government fund when money market reform is implemented on October 14, 2016."
Finally, Invesco explains, "For more than 30 years, the Invesco Global Liquidity team has worked to gain and keep the trust of our investors through our deep industry knowledge and investment expertise. Our primary goal through the money market fund reform process is to provide our investors with a full suite of liquidity management solutions to meet their investing needs with the least amount of disruption while remaining focused on our disciplined investment process. For Invesco Global Liquidity, safety is of paramount importance in the investment process for all of our money market funds. Our conservative investment philosophy has always focused on providing safety, liquidity, and yield -- in that order -- to our money market fund investors."
Another release, entitled, "Federated Investors, Inc. Finalizes Arrangement with Reich & Tang Asset Management, LLC to Transition Approximately $7 Billion in Money Market Fund Shareholder Assets, says, "In connection with the transition, approximately $7 billion in shareholder accounts from six Reich & Tang money market funds will be transitioned into Federated strategies. The transaction is designed to assist with the orderly liquidation of Reich & Tang's domestic and offshore money market funds. The agreement provides for Federated, Reich & Tang, financial intermediaries and shareholders to work together on a coordinated and cooperative basis to transition the assets in shareholder accounts from the Reich & Tang money market funds to comparable Federated money market funds. Federated is now working with Reich & Tang customers on the transition, which is expected to take place in stages beginning in June and running through July 2015."
Solon A. "Bud" Person, National Director for the Wealth Management & Cash Division at Federated, says, "As a leading provider of liquidity management services, Federated regularly works with organizations of many types and sizes as they evaluate their liquidity businesses. We are currently reaching out to clients of Reich & Tang funds to introduce them to the range of cash-management solutions that we offer and work to achieve a seamless transition of their business to Federated."
President & CEO Michael Lydon, adds, "Reich & Tang made a strategic decision to exit the money market fund business and focus on our leading FDIC-insured sweep programs in the bank and brokerage spaces.... The agreement with Federated establishes a framework to accomplish this goal and provides us with the peace of mind that the Reich & Tang money market shareholders will have the option to move forward with a premier money market fund provider." The release adds, "The transaction and related transition of assets are subject to certain customary approvals and contingencies, such as shareholder consents."
In recent weeks, Federated also announced plans to acquire the Touchstone Ohio Tax Free Money Market Fund. The fund, with about $91 million in assets, will be rolled into the Federated Ohio Municipal Cash Trust. Touchstone is another firm that recently announced its exit from the money fund space. In March, the company announced that its $1.1 billion in money market funds would be acquired and run by Dreyfus, as we reported on March 5 in the story, "Touchstone Rescinds Liquidations, Moves to Dreyfus; MFS Goes Govt."
Given the changing landscape for money funds, these two mergers could be just the beginning of a period of consolidation in the space. As BlackRock President Rob Kapito said in the company's first quarter earnings call, "We're also seeing some of the smaller money market groups approaching us, as well, because scale and size is going to be very important to be able to satisfy clients' needs."
