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Rating:Falling Revenues Squeeze the Life Out of Money Funds Not Rated 3.0 Email Routing List Email & Route  Print Print
Monday, October 17, 2011

Falling Revenues Squeeze the Life Out of Money Funds

News summary by MFWire's editors

Just how hard are non-existent short rates squeezing money market mutual operators? Bloomberg reports that since before the Reserve Primary Fund crisis in 2008 revenues for the segment have fallen 62 percent to $4.5 billion annually. With an average yield of just 18 bps, the funds have also lost 23 percent of their asset base, which may be a good thing for their operators.

"I haven't seen an environment like this in my lifetime," Western Asset Management PM Kevin Kennedy told the news service.

The squeeze is causing money fund sponsors to flee. Not only did RidgeWorth Capital Management sell its money funds to Federated Investors last year, but EBay outright shuttered its PayPal money fund in July.

iMoneyNet reports there are 25 percent fewer fund complexes sponsoring money funds. Just 105 complexes still offer money funds by its count. 

Correction: An earlier version of this story reported an incorrect number of money market funds. There currently are 1,589 money funds from 105 complexes, according to iMoneyNet.

Edited by: Sean Hanna, Editor in Chief

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