“Rosengren and the other presidents suggested that investment firms that sell money markets could choose among various alternatives,” according to a story posted on the newspaper’s website. “For instance, he said, a fund complex could offer money market funds with a floating price – rather than the traditional $1 per share model – and offer others on which it holds more capital, for safety.”
Short-duration bond ETFs such as PIMCO Enhanced Short Maturity Strategy (NYSEArca: MINT) are getting a closer look from investors frustrated with rock-bottom yields in money market funds. Reports that the SEC is taking another stab at reforming the money fund business are also driving interest in the ETFs.
Other ETFs in the category include SPDR Barclays 1-3 Month T-Bill (NYSEArca: BIL), iShares Barclays Short Treasury Bond (NYSEArca: SHV) and Guggenheim Enhanced Short Duration Bond (NYSEArca: GSY). [SEC Money Market Fund Reform Drives Interest in Short-Term Bond ETFs]
The SEC could propose stricter rules for the $2.7 trillion money fund industry as soon as the first quarter.
Although money market funds are yielding essentially zero, some investors like them because at least they know they can’t lose money because the funds are required to maintain a $1 share value. A “floating” NAV for money funds would take away that safety and could make short-duration bond ETFs a more appealing alternative.