Bloomberg writes "A $1 Trillion Paradigm Shift Changes Funding Markets Forever." The piece says, "It's the most sweeping change for U.S. money market funds in over three decades and the biggest operators say it'll have a permanent effect on the way investors allocate their capital. After years of wrangling with regulators, the $2.7 trillion industry will give up its rock-solid, dollar-for-dollar guarantee for institutional funds that invest mainly in riskier, non-government debt. The impending change has been a boon for the U.S. government and comes at the expense of banks and other corporate borrowers. Already, investors have shifted more than $1 trillion away from so-called prime funds that buy certificates of deposit and company IOUs and flooded into government-only funds, which invest in T-bills and other short-term U.S. debt and are exempt from the change. Assets in those funds, which never exceeded 40 percent before December, now account for 77 percent of all money-market assets, according to Investment Company Institute data going back to 2007." The article adds, "The reforms have triggered an exodus from prime funds. Assets in that category have plunged by $974 billion in the past year to $473 billion. Almost all of it has flowed into government-only funds, which have doubled to $2.05 trillion over the same span. "There is a lot of uncertainty around prime funds," said `Tom Callahan, head of global cash management at BlackRock, the second biggest money-market fund company with about $250 billion of such assets. "For some, it's the floating NAVs. For some, it's the gates and for some, it's the fees. For some it's all of the above."" See also, the WSJ blog "M&A Deals Feel Ripples of Money Market Reform".

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