While most of the heavy lifting is done, money fund managers continue to tweak and fine tune their lineups in preparation for October reforms. Among the latest -- on May 31, PNC completed the liquidation of its Prime and Tax-Exempt money funds, while Morgan Stanley Investment Management changed the names of two funds, removing "Inst". In addition, we report on a couple more small Variable Annuity funds converting from Prime to "Govie." When we include the Northern Trust conversion we reported on yesterday (see "Northern Streamlines MMFs: One Prime to Govie, Two T-E Liquidations"), we now count over $300.1 billion in Prime to Govie conversions. We discuss these below, and we also review an ignites story on TIAA and fee recapture.
In effect "going Government" by proxy, PNC funds completed the liquidation of its Prime and Tax-Exempt funds on May 31. (See our March 1 News, "More Exits: PNC Liquidates, PIMCO Goes Govt; First American Update.") The SEC filing explained, "On February 25, 2016, the Board of Trustees of PNC Funds and PNC Advantage Funds approved plans of liquidation for each of PNC Money Market Fund, PNC Tax Exempt Money Market Fund, and PNC Advantage Institutional Money Market Fund, with such liquidations expected to take place on or about May 31, 2016."
PNC Money Market Fund had $1.5 billion in assets, PNC Advantage Institutional Money Market Fund had $1.2 billion, and PNC Tax-Exempt fund had $535 million prior to liquidation. PNC still has a full slate of Government funds, including PNC Government, PNC Treasury, and PNC Advantage Institutional Treasury. We expect most of the $3 billion in liquidated assets to flow into PNC's government funds. In fact, over $2.5 billion has shifted into PNC Government MMF over the past month, according to the pending issue of MFI. As of May 31, PNC Government MMF has $5.1 billion in AUM, PNC Treasury MMF has $1.3 billion, and PNC Advantage Inst Treasury has $455 million.
The Trend towards removing "Institutional" from funds destined to be "Retail" also continues. A Morgan Stanley filing announced recent name changes for two of its funds. It states, "At a meeting held on February 24-25, 2016, the Board of Active Assets Institutional Government Securities Trust approved changing the Fund's name to "Active Assets Government Trust," effective as of March 31.... At the same meeting, the Board of Active Assets Institutional Money Trust approved changing the Fund's name to "Active Assets Prime Trust," effective as of March 31, 2016. Accordingly, all applicable references to each Fund's name are hereby revised. Also effective March 31, 2016, the original class of Active Assets Prime Trust is redesignated as the "S Class."
It continues, "In addition, the Board of Active Assets Prime Trust approved the designation of the Fund as a "retail money market fund," as such term is defined in or interpreted under Rule 2a-7 under the Investment Company Act of 1940, as amended, effective on or before October 14, 2016. As a retail money market fund, the Adviser of Active Assets Prime Trust will be permitted to continue to seek to maintain the Fund's share price at $1.00. In addition, as a result of Active Assets Prime Trust's designation as a retail money market fund, on or before the Effective Date, the Fund will implement, and will work with its intermediaries to develop and implement, policies and procedures reasonably designed to limit all beneficial owners of the Fund to natural persons. Effective on or about June 30, 2016 or such other date as selected by the Adviser, Active Assets Prime Trust may, upon advance written notification, involuntarily redeem investors that do not satisfy these eligibility requirements."
In other "Changes" news, two Variable Annuity funds switched from Prime to Government. The first is the $609 million MainStay VP Cash Management Portfolio, which is converting to MainStay VP US Government Money Market Portfolio. Its filing explains, "At a meeting held on March 22-23, 2016, the Board of Trustees of MainStay VP Funds Trust approved certain changes regarding the MainStay VP Cash Management Portfolio. Effective August 26, 2016, the following changes will take place: The name of the Portfolio is changed to "MainStay VP U.S. Government Money Market Portfolio.... Effective October 14, 2016, the Portfolio will commence operations as a "government money market fund" as defined in Rule 2a-7 under the Investment Company Act of 1940, as amended."
The second conversion is the $669 million Transamerica Aegon Money Market VP, which is converting to Transamerica Aegon Government Money Market VP. This filing says, "In response to recent amendments to Rule 2a-7 under the Investment Company Act of 1940 passed by the Securities and Exchange Commission, the Board of Trustees of Transamerica Series Trust has approved changes to the Portfolio's investment objective and principal investment strategies that will allow the Portfolio to operate as a "government money market fund." Under amended Rule 2a-7, a government money market fund is a money market fund that invests at least 99.5% of its total assets in U.S. government securities, cash, and/or repurchase agreement that are fully collateralized by U.S. government securities or cash.” Effective May 1 the name changed to Transamerica Aegon Government Money Market VP."
Finally, Ignites published the story, "TIAA's Plan to Recoup Money Fund Fees Irks U. of Maine." Author Beagan Wilcox Volz writes, "The University of Maine has shown its disapproval of TIAA's plan to recoup fee waivers on its $11.4 billion CREF Money Market fund. The fund is currently an investment option for the University of Maine's defined contribution plans.... "Along with removal of the fee waivers, TIAA will also begin recouping lost expenses," the investment committee states. "The recoupment is subject to a three-year lookback period, with the clock already started for the R3 shares." The last possible date for recouping waivers would be April 14, 2020, and the rate of the clawback is capped at 25% of gains on a daily basis, the committee notes."
The piece quotes our Peter Crane, "Although this is a small piece [of the money fund market], it may be representative of much bigger moves and changes to come." It adds, "With the SEC's reforms, managers expect to see a lot of "money in motion" -- moving not just between vendors but also between types of products, he says."
The ignites story continues, "The investment committee notes that it's not removing the CREF Money Market fund from the lineup altogether because participants have individual contracts with TIAA that require them to have access to the fund. The plans' consultant, Captrust Financial Advisors, recommended that the investment committee add the Vanguard Federal Money Market Fund to the plans. The investment committee last week approved the addition of the Vanguard product, according to the University of Maine's director of finance."
It concludes, "Some fund groups have said they will not recoup previous money fund fee waivers, while others have disclosure that would allow them to do so. Vanguard and Schwab are among the money fund providers that have said they won't recapture previous fee waivers, as previously reported. Fidelity's money funds disclose that they may recoup previously waived fees within the fund's fiscal year. "We do not presently intend to recapture the fees we have waived on our money market funds," says a spokesman in a statement. Similarly, OppenheimerFunds' money funds also disclose that they may recoup previously waived fees. A spokeswoman declined to comment beyond the disclosure."
