John Sajdak, head of fixed income at MainStreet Advisors, points out that the temporary losses and high-profile closures during the 2008 financial crisis “tarnished money markets as an investment option for many income investors,” reports Murray Coleman for the Wall Street Journal. [Money Market Reform May Shift Cash to Short-Duration ETFs]
“We’re also seeing more interest in alternatives to money-market funds as regulatory efforts in Washington increase,” Sajdak added.
The SEC has proposed that institutionally held “prime” funds should float their net asset value, essentially breaking the buck and allowing the funds to dip below the $1 mark.
“The probability of something bad happening in the money market is slight but the consequences of that … are fatal,” John Bogle, founder of Vanguard, said at the 25th annual Morningstar investment Conference, MFWire reports. “What’s the industry’s problem? They don’t want the world to know that the asset value fluctuates.”
For the year through April, Morningstar data reveals that money-market mutual funds experienced $111.3 billion in outflows, whereas ultra-short bond funds have attracted $5 billion in inflows for the year through May.
“In our view, actively managed short-term fixed income strategies will become increasingly important for liquidity management going forward,” Jerome Schneider, head of short-term bond strategies at Pimco, said in teh article.
For more information on the money markets, visit our money markets category.
Max Chen contributed to this article.