The offering comes at a time when the Securities and Exchange Commission is considering changing the stable NAV of money funds to a floating one. Big fund houses, including Fidelity and Vanguard, have said the change could ruin the money fund industry.
Deutsche Bank, however, sent a comment letter to the SEC in support of a floating money fund NAV of $10. The firm apparently hopes the SEC will back off of stricter money fund rules that have been proposed, including those covering holdings. While that would permit money funds to assume more risk, it also gives them the opportunity to juice returns, which could be of keen interest to large institutional investors.
In its comment letter, Vanguard tells the SEC that “a floating NAV would eviscerate a successful and important product for investors.” Fidelity said the move would lead to “significant shareholder outflows, destabilizing money market mutual funds and overall money markets.” The firm estimates that 69% of institutional investors would leave money funds with a floating NAV.
The collapse of the $62.4 billion Reserve Fund in September 2008 threatened a run on the bank for all of the funds in the $3.5 trillion money fund industry, and the SEC has been looking for ways to stabilize the market since then. It issued its proposals in June.