MMF Assets Rebound; Plan Sponsor
After a rough April, money fund assets were back in black last week, according to ICI in its latest weekly "Money Market Mutual Fund Assets" report. The release says, "Total money market fund assets increased by $8.60 billion to $2.59 trillion for the week ended Wednesday, May 6, the Investment Company Institute reported today. Among taxable money market funds, Treasury funds (including agency and repo) increased by $5.30 billion and prime funds increased by $640 million. Tax-exempt money market funds increased by $2.65 billion. Assets of retail money market funds increased by $1.60 billion to $861.68 billion. Among retail funds, Treasury money market fund assets decreased by $200 million to $190.31 billion, prime money market fund assets increased by $730 million to $490.74 billion, and tax-exempt fund assets increased by $1.07 billion to $180.63 billion. Assets of institutional money market funds increased by $6.99 billion to $1.73 trillion. Among institutional funds, Treasury money market fund assets increased by $5.50 billion to $769.86 billion, prime money market fund assets decreased by $90 million to $893.11 billion, and tax-exempt fund assets increased by $1.59 billion to $65.81 billion." Year-to-date, MMF assets are down $143 billion, or 5.2%. In other news, Plan Sponsor magazine reports, "Money Market Reform Likely to Change Retirement Plan Investments." It says, "Money market fund reforms, which take effect in October 2016, will require retirement plan sponsors to review the money market funds in their lineups and possibly replace their funds, experts say. And this will affect nearly two-thirds of plans, as 63.5% have money market funds in their lineup, according to the 2014 PLANSPONSOR Defined Contribution Survey." It explains, "Institutional clients in endowments and pension plans are going to be greatly affected because of the floating NAV," says Jay Sommariva, vice president and senior fixed income portfolio manager at Fort Pitt Capital Group in Pittsburgh. "While on paper, retail clients in 401(k) plans will not be affected because the retail funds will maintain a constant $1 NAV -- just like in 2008, when the largest money market fund in the nation 'broke the buck' due to its holding of Lehman Brothers and some structured investment vehicles (SIVs) associated with distressed mortgages -- there is a chance assets in the retail funds can depreciate. They might also impose a redemption gate or a 2% penalty to take your money out. They have never been risk-free and should not be viewed as such."" The piece adds, "This is why Sommariva believes that advisers to 401(k) plans will recommend that the plans replace their retail money market funds with government money market funds, "which provide higher credit and liquidity standards" -- and will not have liquidity fees or redemption gates."
