Get ready for $1,000 money market shares: ICI

Changes to NAV would barely register on $1 share, fund industry group says; wants SEC to abandon plan

Mar 19, 2012 @ 2:47 pm

By Jason Kephart

Investors can say goodbye to $1 shares of money market funds and hello to $100 or even $1,000 shares — if the Securities and Exchange Commission requires the funds to float their net asset value, said Karrie McMillan, the Investment Company Institute's general counsel.

The ICI, which represents fund firms, studied the market value of money market funds during the eurozone crisis last summer. The group found that the floating value of prime funds with the greatest exposure to the continent dropped by nine-tenths of a basis point, or nine-one-thousandths of a penny.

“That kind of float isn't going to move a $1 share; it's not even going to move a $10 share. It might move the price of a $100 share,“ Ms. McMillan said. “Forget about breaking the buck; funds will have to break the Benjamin.”

ICI's research shows that firms would have to re-price money market funds at $1,000 a share to show the changes in a fund's net asset value.

Ultimately, floating the NAV won't change investor attitudes or behaviors, or prevent redemptions in a crisis," she said. Instead, Ms. McMillan said, it will just drive “billions of dollars away from money market funds and into unregistered cash products.”

She maintains that the increased regulations that were put into place in 2010 are adequate to protect investors in money market funds. Those amendments reduced portfolio risk, increased liquidity and made the funds more transparent, Ms. McMillan said.

“It's time for the SEC to recognize the success of its 2010 reforms and move on,” she said.

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