“A mutual fund seeking current income and capital appreciation by investing primarily in fixed-income securities issued by developed countries, including the United States. The Fund is not a money market fund. The share performance of this Fund fluctuates on a daily basis.”

Thus begins the registration statement for the Federated Prudent DollarBear Fund.

In the not too distant future, such distinctions may not be drawn between bond funds and money market funds. Or funds of any type.

That, of course, is because the Securities and Exchange Commission is drafting proposals that it hope will further strengthen money-market mutual funds, by the fourth anniversary of the infamous “breaking of the buck” in September 2008 by the nation’s oldest money market fund, the Reserve Primary Fund.

Until then, it was sacrosanct that money funds would hold $1 in assets for each investor dollar in the fund. But when the value of Lehman Brothers assets plunged, the Reserve Primary Fund could not keep up. And broke the promise of the buck.

Now the SEC is looking at a “floating value” option for money market funds.

This would give fund managers room to maneuver, goes the theory. With this option, the value of a share in a fund can float slightly above or slightly below a dollar.

 This means investors would have to absorb the loss in the value of assets, at crunch times. If the value is under $1, as in September 2008, that is the value that they would get if they withdrew their cash.

Makes sense, if it indeed proves to be “temporary” – and rare.

After all, it’s the dollar for dollar value that has always allowed money market funds to compete with interest-bearing check accounts. There is the sense, if not the reality, that one’s money is safe and won’t lose its value, in a crunch.

Other solutions revolve around different forms of capital buffers and withdrawal restrictions.

But money always searches for ways to turn itself into more money. Not too long ago, money funds invested heavily in European banks. Now, they are actively withdrawing those funds adding to the strains on European banking stability. After all, funds held in their accounts are not backstopped by any government. There is no Federal Money Market Deposit Corporation extant here, for instance.

The outcry against the potential for a floating value, in particular, has been fiere. Fidelity Investments has warned regulators that more than half of its money-fund clients would move some or all of their assets out of the investments if the net asset value of the funds were allowed to fluctuate.

Investors are already nervous. Total U.S. money market mutual fund assets fell $21.3 billion to $2.66 trillion for the week that ended Wednesday, the Investment Company Institute said on Thursday.

Most nervous? Not the hyper-connected retail investor. Rather, the hyper-tense institutional investor.  Assets of institutional money market funds fell $16.8 billion to $1.73 trillion.

The seven-day average yield on money market mutual funds? Just 0.02 percent in the week that ended Tuesday, according to Money Fund Report.

Something’s got to give. Rest now. Because, by year’s end, administering and servicing money market funds is likely to get a lot more complicated.

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