Authors and mutual fund gurus Robert Pozen and Theresa Hamacher opined on money market mutual fund reform in the Wall Street Journal this week, saying the SEC had gotten the new rules "half right:"

Sensibly, the SEC's first proposal would not apply to money-market funds holding mainly U.S. government-guaranteed securities ...

Unfortunately, the second SEC proposal would apply to prime money-market funds owned mainly by retail investors (although it would not apply to money-market funds that invest primarily in U.S. government-guaranteed securities.) The proposal would generally require funds to impose a 2% charge on all shareholder redemptions once a fund's liquid assets dropped below 15% of total assets. This 2% redemption fee is huge for retail investors in money-market funds, whose total annual returns are often less than 2%.

The second proposal also allows a retail money-market fund to suspend all shareholder redemptions for a period of up to 30 days. The threat of being locked into a money-market fund would terrify most retail investors.

For more details, check out the original article here. 

Edited by: Ben Geier


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