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Thursday, August 09, 2012

Money Fund Firms Hedge Their Bets

News summary by MFWire's editors

The SEC's five commissioners will vote on tightening money fund rules later this month, but some of the largest players in the business already have contingency plans in place. InvestmentNews reporter Jason Kephart writes about the preparations firms are making in case regulators force money market funds to adopt a floating NAV or capital buffer, as Schapiro has proposed.

Fidelity launched a money-market-like mutual fund, the Fidelity Conservative Income Fund, last year, and Kephart writes that Pimco and Putnam followed shortly after. BlackRock has a similar product on the way. Fidelity's fund has already attracted $1.6 billion, and other firms are eager to get a piece of the action.

"Ironically," Kephart writes, these funds were made possible after the 2010 reforms, which raised the average weighted duration of money market funds' investments. These new funds invest in ultrashort bonds, which are now off limits for money funds.

Vanguard is taking a different tack. The InvestmentNews piece, citing Reuters, says that the firm is planning to add FDIC-insured accounts and CDs.

Meanwhile, Federated, with $228 billion in money market assets, is trying to expand its presence in the field and has picked up nearly $6 billion in money fund assets since the 2010 reforms. 

Edited by: Chris Cumming

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