Fund Giants Resist ‘Radical Changes’ to Money Funds

While Fidelity Investments agrees with most of the Securities and Exchange Commission’s proposed changes to money market funds, it doesn’t want to see “radical changes” to the asset class, a spokesman told The Wall Street Journal.

What large fund companies seem to agree on is better security of and discipline for capital markets, and greater transparency for money funds, which should be limited to holding only the highest-quality securities. As for increased capital requirements for both retail and institutional funds, in theory, that is not a problem, but in practice, it could be because money funds do not differentiate between the two investors, executives said.

Also potentially difficult is reducing the average maturity of the holdings of money market funds from 90 to 60. Some executives think the inventory of such securities is too small.

Vanguard Chairman Jack Brennan, who headed the money fund working group of the Investment Company Institute, said the SEC did a good job of addressing the key issues that led to the Primary Fund breaking the buck and helping other funds avoid such a fate.

One of the SEC’s key proposals would require retail money market funds to have 5% of their assets in cash or cash-equivalent securities that they could access in one day and 15% in assets that could be converted to cash in one week. For institutional funds, lost levels are 10% within one day and 30% within one week.