A co-founder of BlackRock said Friday that money market mutual funds would survive, if their asset values would allowed to float from their a stable $1 net asset value per share.
Barbara Novick, the vice chairman of the world’s largest asset manager, said money market mutual funds would survive even if new regulations being proposed by the Securities and Exchange Commission took effect. One of its proposals is expected to be to let the value float, in order to avoid any necessity for government intervention should another run on the funds occur.
"We think there will be some shrinkage, but we don't think it would eliminate the product," Novick told Bloomberg News in a telephone interview.
The company, which had opposed the idea, published a report Friday outlining how regulators could make a floating net- asset value, or NAV, acceptable to investors and managers.
The fund industry’s leading trade group, the Investment Company Institute, has rejected the floating NAV idea, saying it would destroy the $2.6 trillion industry.
The federal government had to intervene to prop up the industry in September 2008. That was when the nation's oldest money fund, the Reserve Primary Fund, "broke the buck" on its shares.
That fund could not maintain its $1 share value, when the value of its holdings in Lehman Brothers assets slipped precipitously.