Panel to weigh changes to money funds draws critics

A panel that is charged with recommending changes to the ways money market mutual funds operate is being met with skepticism by money fund experts who worry that changes might be unnecessary.
NOV 16, 2008
A panel that is charged with recommending changes to the ways money market mutual funds operate is being met with skepticism by money fund experts who worry that changes might be unnecessary. The Investment Company Institute of Washington recently announced the formation of a task force, comprising leaders in the $3.4 trillion money fund industry, to make recommendations aimed at improving the functioning of the money market and the operation and regulation of funds investing in that market. The Money Market Working Group is being headed by John J. Brennan, chairman of The Vanguard Group Inc. of Malvern, Pa. While the task force's mandate is to make recommendations to "minimize risk and help assure the orderly functioning" of the money market, some experts are leery.

BIG BUCKS

"Money market mutual funds bring in more revenue per year than Hollywood does at the box office," said Peter Crane, president of Crane Data LLC, a Westborough, Mass.-based money fund research firm. "It's in the range of $13 billion or $14 billion," he said. "You don't want to kill the golden goose." Despite issues that came to a head Sept. 16, when Reserve Management Co. Inc. of New York announced that the nest asset value of the Reserve Primary Fund (RFIXX) had slipped below $1 a share — only the second time a money fund had ever "broken the buck" — money funds continue to operate successfully, Mr. Crane said. Connie Bugbee, managing editor at iMoneyNet, a Westborough-based money fund research firm, is also doubtful. "I don't believe that a lot of work needs to be done," she said. The panel is expected to make its recommendations sometime during the first quarter of next year. At this point, it is unclear in what direction those recommendations are headed. "The working group is still very much in the preliminary stage," said Karen "Karrie" McMillan, general counsel for the ICI. "No decisions have been made." Mr. Brennan declined to comment.

BIG NAMES

Other members of the working group are James H. Bodurtha, the independent chairman of the BlackRock Funds of BlackRock Inc. of New York, Richard S. Davis, managing director of BlackRock, Mark R. Fetting, president and chief executive of Legg Mason Inc. of Baltimore, Martin L. Flanagan, president and chief executive of Invesco PLC of Atlanta, and George C.W. Gatch, president and chief executive of the JPMorgan Funds, a unit of JPMorgan Chase & Co. of New York. Rounding out the group are John W. McGonigle, vice chairman and chief legal officer of Federated Investors Inc. of Pittsburgh; James A. McNamara, president and chief executive of Goldman Sachs Mutual Funds, a unit of The Goldman Sachs Group Inc. of New York; Randall W. Merk, executive vice president of Charles Schwab & Co. Inc. of San Francisco and president of Schwab Funds; Paul Schott Stevens, president and chief executive of the ICI; and Michael Wilens, head of asset management at Fidelity Investments of Boston. All declined to comment on what the board may recommend. E-mail David Hoffman at [email protected].

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