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Friday, March 19, 2010

Money Funds Assets Fall While Fees Remain Low

News summary by MFWire's editors

Money market funds, which were a popular investment vehicle during the economic downturn, are still a popular topic of conversation, but for different reasons.

The first of two separate "Fund Track" columns in today's Wall Street Journal looks at the recent fall in money market fund assets, which dropped by $75.6 billion.

Money market assets fell below $3 trillion as many investors moved back into the broader market. According to iMoneyNet data, as of Tuesday, money market funds manage $2.99 trillion in assets, marking the first dip below $3 trillion since 2007.

iMoneyNet managing editor Connie Bugbee told the Journal that the outflows are likely the result of Q2's corporate tax day, which occurred on Monday.

The second Fund Track story this morning covers money market fund fees. According to The Journal, because of low interest rates, the money fund industry has lost hundreds of millions in waved fees.

To avoid damaging investors, fund companies will have to wait until interest rates rise before fees can do the same, according to the Journal's Sam Mamudi. He cautions that firms shouldn't raise fees to recoup losses too quickly, ensuring that investors can see the benefits of the rate-increase.

The Journal spoke with representatives from Fidelity, Federated Investments, JP Morgan and Northern Trust, who all concurred that "no language in their funds' literature would allow them to recoup fees." 

Edited by: Daniel Tovrov

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