While money funds have provided one of the few bright spots for the mutual fund industry recently—with $3.9 trillion in assets, they currently hold about 40% of all of the total $9.4 trillion held in mutual funds—they are headed for reforms that could reduce their current paltry yields of 0.29% even further, the Associated Press reports. The government is likely to restrict the funds' holdings to avoid another fund breaking the buck, as the Primary Fund did last September.

But some view the inevitable new restrictions as a plus because they will restore investors’ confidence in the category even further than it has been restored by the federal government’s temporary guarantees. “Everybody will look forward to a time when money funds are boring again,” explained Peter Crane, publisher of Money Fund Intelligence.

However, with yields so low, many asset managers are absorbing fees in order to keep shareholders’ net asset values whole at $1 per share. And that is cutting into profits, forcing some managers to close Treasury-only funds to new investments. Only the largest asset managers are likely to survive.

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