The truth about money market mutual fund reforms

On July 23, the SEC adopted controversial reforms for money market mutual funds by a 3-2 vote. Some members of the financial media were quick to label the measure a death knell for these popular funds, which were created in 1970 by the Reserve Fund and became a major financial invention. So, let’s add perspective, which you may want to share with your clients.

The SEC amendments affect two areas. For institutional prime money market funds only, the SEC will require a floating NAV, starting in two years. These funds account for 35% of total assets of the $2.6 trillion U.S. money market fund industry. In addition, the SEC authorized non-government funds (retail and institutional) to impose liquidity fees or redemption gates to protect against runs. About 65% of industry assets are non-government (tax-exempt or prime).