Commonfund, a "cash" asset manager specializing in colleges and nonprofits, will be closing its cash investment platform, Treasury Access, the firm announced on its website. The statement, "Important Information for Treasury Access Users," says, "In light of new regulations issued by the SEC governing money market funds that will take effect later this year we have decided, in consultation with our banking partner, The Bancorp Bank, to close the Treasury Access platform effective February 11, 2016." In other news, Prudential issued a press release, "New research from Prudential predicts expansion of stable value market," which predicts a move away from money funds to stable value funds in retirement plans. (See also our Dec. 9 News, "MetLife Stable Value Study Says Time to Reconsider Money Markets.")
Commonfund's letter to clients, dated January 8, 2016, explains, "We are writing to inform you that Commonfund is discontinuing the Treasury Access cash platform effective February 11, 2016. In light of new regulations issued by the SEC governing money market funds, we recognized that the platform would require modifications prior to the regulations' effective date in October. However, in consultation with our banking partner, The Bancorp Bank, we have decided to announce the closing of the platform at this time. We understand that many of our clients have valued the convenience of Treasury Access and we will work with you to assess the best solution for your institution going forward. Further, we want to assure you that we will do everything in our power to make this transition as seamless as possible."
Commonfund's Treasury Access platform first opened in 2009. A press release from Nov. 16, 2009, "Commonfund Introduces Treasury Access, Its New Cash Investment Platform for Higher Education and Nonprofit Institutions" (cached by Google) provides some background. It explained, "Commonfund today introduced Treasury Access, its new cash investment platform for nonprofit institutions. Treasury Access offers a diversified approach to investing cash. The web-based platform includes electronic banking services for flexible short-term cash management as well as investment options spread across multiple money market mutual fund families and providers."
The release continued, "Treasury Access is designed to help nonprofit institutions manage operating reserves and working capital balances. Its web-based platform allows institutions to make seamless transactions to and from their local bank disbursement and collection accounts; fund payroll accounts, bond payments and other obligations; automatically receive government and other third-party transfer payments; move funds into Treasury Access' money market mutual funds; and send or receive payments from pre-registered accounts."
It added, "Treasury Access will offer a choice of nine money market mutual funds from different fund families or providers.... State Street Global Advisors is the transfer agency partner and will maintain accounts for all money funds offered by Treasury Access and individual investor records. State Street also provides the first two Treasury Access investment funds: The State Street Institutional Liquid Reserves Money Market Fund, which is rated AAAm by Standard & Poor's, and The State Street Institutional US Government Money Market Fund."
In other news, Prudential Retirement put out a press release on a new white paper called, "Expanding the Case for Stable Value." The release says, "Growing numbers of plan sponsors and intermediaries may be open to embracing stable value in the coming years, according to a new white paper released today by Prudential Retirement, a business unit of Prudential Financial, Inc. Favorable perceptions of stable value among plan sponsors and intermediaries coupled with the changing regulatory environment for money market funds could boost demand for stable value funds. The paper is based on the survey of 400 plan sponsors and 300 intermediaries, which identified the factors that motivated them to adopt stable value and recommend the asset class to others."
It continues, "The survey revealed a number of key findings: the top two reasons for stable value adoption were capital preservation and steady returns; 54 percent of plan sponsors and 75 percent of intermediaries cited capital preservation as their main reason for adoption; 54 percent of plan sponsors and 70 percent of intermediaries cited steady returns as a deciding factor in adoption; stable value recommendations were primarily based on three factors: 1) the returns the asset class delivered versus other fixed-income investments 2) their role in boosting plan participation and deferral rates, and, 3) for the intermediaries, their liquidity for participants; non-adoption of stable value stemmed mainly from three factors: 1) perceptions about cost 2) their performance relative to equities and other non-fixed income asset classes, and 3) the notion that they may be difficult for plan participants to understand; 53 percent of plan sponsors and 69 percent of intermediaries saw the cost of stable value funds as a challenge."
Prudential explains, "The white paper also points out that another reason for non-adoption might be that stable value is less well known than other investment options, including money market funds and mutual funds -- and familiarity is a key driver of acceptance for most investment products in the marketplace. "Over the past 40 years, stable value funds have performed remarkably well, even through economic downturns, like the financial crisis in 2008," says Gary Ward, head of Stable Value at Prudential. "Yet, the number of DC plans offering stable value funds remains at less than 50 percent, leaving significant numbers of plan participants without access to the asset class. Through this new research, we were able to uncover what motivates decision-makers to adopt and recommend stable value and why some aren't taking advantage of it."
They add, "Among plan sponsors, 55 percent of non-adopters plan to offer stable value in the future, while only 9 percent of adopters are at risk of getting rid of it. For intermediaries, 30 percent of those who recommend stable value to clients are doing so more often today than they did a year ago, and 35 percent expect this trend to accelerate over the next three years."
Finally, the survey says, "Another factor is the changing regulatory environment for money market funds. Beginning in October 2016, the U.S. Securities and Exchange Commission will allow money market funds to impose redemption fees, or temporarily halt redemptions, when the funds fall below certain liquidity thresholds, which could spur more interest in stable value funds as an alternative. Sixty-three percent of sponsors that currently offer money market funds and 49 percent of intermediaries who currently recommend them say the SEC ruling is likely to drive changes in their allocation to money market funds. In addition, 39 percent of plan sponsors who moved money out of a money market fund in the past year or plan to do so in the next three years, switched some of it to stable value funds or plan to do so."
