Potential money market fund reforms could deter investors, triggering consolidation in the money market, and push others to alternative options, like short-duration bond exchange traded funds.
According to a Moody’s Investors Service, we will likely witness a “reshaping of the industry,” with providers forced to consolidate or exit the business, reports Joe Morris for Ignites. [Money Market Reform Could Drive Hundreds of Billions to Short-Duration Bond ETFs]
“Any shift from the [constant net asset value]fund’s ability to deliver its ‘all-in-one’ benefits will result in funds moving to a proliferation of products with differing risk characteristics to meet the multiple needs of the liquidity investor,” the Moody’s report said. “These products will include bank deposits, separately managed accounts, short-duration bond funds, cash-plus funds and cash exchange-traded funds.”
The Securities and Exchange Commission has been working on a proposal to float the net asset value for institutional prime funds. Reform talks have gained momentum after SEC Chairman Mary Jo White took over after former-SEC Chairman Mary Schapiro’s failed attempts to enact reforms last year. [Money Market Fund Reform and Short-Duration Bond ETFs]