“The data show that the only funds that experienced large sudden redemptions were institutional prime funds, and therefore regulators need to narrowly tailor any additional reform to those funds,” Nancy Prior, Fidelity’s president of money markets, said in the WSJ article.
In 2012, the SEC was considering more stringent requirements, such as forcing all funds to float their share price or require funds to hold bank-like capital reserves. Earlier this year, the 12 regional Federal Reserve presidents also endorsed the idea of a floating share price, arguing that it reduces the advantage of investors who cut and run right before funds dip below $1.
Nevertheless, White maintains that the SEC will develop meaningful money market fund reforms.
“Our goal is to preserve the economic benefits of the product while addressing potential redemption pressures and the susceptibility of these funds to runs – runs in which retail investors are especially likely to suffer losses,” White added.
If regulators push for a floating price, investors could also turn cheap to short-term bond exchange traded funds as a viable alternative, including:
- PIMCO Enhanced Short Maturity Strategy (NYSEArca: MINT): effective duration 0.97 years; 0.58% 30-day SEC yield
- SPDR Barclays 1-3 Month T-Bill (NYSEArca: BIL): modified adjusted duration 0.16 years; -0.08% 30-day SEC yield
- iShares Barclays Short Treasury Bond (NYSEArca: SHV): effective duration 0.42 years; 0.00% 30-day SEC yield
- Guggenheim Enhanced Short Duration Bond (NYSEArca: GSY): average duration 0.37 years; 1.04% 30-day SEC yield
For more information on the money markets, visit our money markets category.
Max Chen contributed to this article.