If the $2.7 trillion money market fund business transitions to a “floating” net asset value and abandons the fixed $1 share value as some reports suggest, the move would have a huge impact on investors of all stripes.
Most long-term exchange traded fund investors maintain cash positions, often in money funds. ETF traders also keep powder dry in cash, so they could be affected as well.
One of the proposals being considered by the Securities and Exchange Commission is scrapping money funds’ $1 NAV and letting it float like other mutual funds, according to a recent Wall Street Journal article.
“As soon as you introduce a floating NAV, demand for the product is going to plummet,” said Mary Beth Fisher at BNP Paribas in a Reuters report. “You have no additional security by being in a money market fund.”