ICI Says Stricter Portfolio Quality, Not Floating NAV, Will Strengthen Money Funds

The Investment Company Institute reiterated its opposition to a floating net asset value for money market funds, saying that the Securities and Exchange Commission’s proposals to strengthen the quality of credit and cash reserves in portfolios should adequately protect the funds from a crisis similar to what happened a year ago.

In fact, the ICI said, a floating NAV could pose harm to the general economy and potential systemic risk to the financial system if institutional investors decided to move into unregulated, alternative investments. This would result in a significant reduction in the supply of short-term credit to corporate America and the loss of an important source of financing for municipalities.

“Stable-NAV funds provide enormous benefits to money market fund investors,” said Paul Schott Stevens, president and CEO of the ICI. “Forcing funds to adopt a floating NAV would introduce new and significant risks to the financial system without any offsetting gains.

“The SEC has proposed significant steps to reform money market fund regulation and further strengthen an already resilient product. We appreciate the Commission’s leadership on this issue and believe that the proposed improvements to portfolio standards, disclosure and money fund operations are balanced and should serve funds and their investors well in normal circumstances and during times of severe market pressures,” Stevens said.