The Independent Advisor for Vanguard Investors newsletter recently sent out a brief entitled, "Billions In, Billions Out - It's Real Money," which discussed the huge flows from Prime into Govt MMFs at Vanguard. They wrote, "Billions of dollars are sloshing into, and out of Vanguard's money market funds as investors wrestle with new SEC's rules scheduled to take effect in October. Investors are sucking billions per month out of prime money market funds, which invest mainly in short-term debt issued by companies, and pouring it into funds focused on government debt. The SEC rules, meant to make money market funds safer, have set off a slew of unintended consequences. Over the past four months at Vanguard $13.5 billion has drained out of Vanguard Prime Money Market while more than $19 billion has sluiced into Vanguard Federal Money Market.... You can see there have been net outflows for all of Vanguard's prime and municipal money market funds while the government money market funds have raked in billions of dollars." The newsletter also pointed out a recent Vanguard filing for its internal Market Liquidity Fund and Municipal CMF. This says, "Vanguard Market Liquidity Fund has announced a 1-for-100 reverse share split at the close of business on August 12, 2016. The reverse share split will not affect the rights or total dollar value of a shareholder’s investment in the Fund and will not be taxable.... Vanguard Municipal Cash Management Fund has announced a 1-for-100 reverse share split at the close of business on August 12, 2016. The reverse share split will not affect the rights or total dollar value of a shareholder's investment in the Fund and will not be taxable." We believe this means that Vanguard intends to reset the NAVs for these soon-to-be-floating NAV funds at $100.00 instead of $1.0000. (See our June 29 News, "UBS Liquidates Sweeps, Goes Govt; Vanguard Floats Internal Money Fund.")
