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Wednesday, April 01, 2020

An $85B-AUM Money Fund Trio Soft-Closes

News summary by MFWire's editors

A mutual fund industry titan is soft-closing several rapidly growing money market funds in light of plunging interest rates during the ongoing coronavirus crisis.

Abigail Pierrepont Johnson
FMR (dba Fidelity Investments)
Chair, President, CEO
Yesterday, the Fidelity [profile] team closed off three Treasury money funds to most new investors, the Financial Times and Reuters report. The three funds — the Fidelity Treasury Only Money Market Fund, the Fidelity Institutional Money Market Treasury Only Portfolio, and the Fidelity Institutional Money Market Treasury Portfolio — have $85 billion in combined AUM. All three funds remain open to existing shareholders and to participants whose 401(k), 403(b), or 457 plans offer the funds.

In a statement, a Fidelity spokesman confirmed that existing shareholders of all three funds "retain full access to the funds in their accounts and there are no restrictions on redemptions."

Fidelity's move comes after the three funds saw their assets jump $23 billion (37.1 percent) last month as investors rushed to safety during the market's COVID-19-inspired woes. According to the FT and Reuters, the Fidelity team is explaining the move to investors as a way to avoid have to buy more low-yielding Treasuries (thus lowering the funds' performance) in light of lower (and sometimes even negative) yields on U.S. Treasuries.

"We are taking these actions because we believe they are in the best interest of the funds' shareholders of at this time ... [W]ith the recent reduction in the federal funds rate and yields on Treasury securities are historic lows, Fidelity believes that limiting new purchases into the Treasury money market funds will help preserve the returns of existing fund shareholders," a Fidelity spokesman tells MFWire via an emailed statement. "Restricting inflows will help reduce the number of new Treasury securities that the funds will need to purchase. That's important because the newer issues generally have lower yields than the funds' current holdings, and as such they would affect the funds' ability to continue to deliver positive net yields to shareholders."

"We will continue to monitor market conditions and will re-open the funds to new investors when we determine that it is appropriate to do so," the spokesman adds.

Editor's Note: A prior version of this misclassified the three money funds in question and used misleading phrasing to describe what Fidelity is changing with the funds. Fidelity soft-closed the three funds, which are all Treasury money market funds. 

Edited by: Neil Anderson, Managing Editor

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