How Will Changes to the Money Fund Industry Affect You?

1 min read

In our view, one of the most effective government programs enacted during the credit crisis, and likely the one that impacted Treasurers’ cash management strategies the most, was the temporary government guarantee program for money market funds. This one-year program, which is set to expire on September 18th of this year, has helped in large part to stabilize the huge transfers by investors out of the prime money funds as the program effectively guaranteed a constant dollar share price for cash held in funds as of 9/19/08.

Against a backdrop of frozen, bailed out or broken funds, the program provided much needed stability to the money fund world. The potential risks in money funds were publicly exposed as never before when billions of dollars were injected into funds or pledged by fund parents to repair credit or liquidity issues. Massive fund transfers exposed shareholder risk and the aura of safety and security was stripped from the industry. Since the exposure of the previously little known risks of money funds, a number of recommendations have surfaced to “fix” the money fund world. The Money Market Working Group presented an extensive set of recommended changes to the Investment Company Institute (a money fund industry self-governing body) all of which attempted to materially reduce the risks associated with fund investing.

Given the impending expiration of the program and the variety of recommendations that are in the works, it appears likely that changes will affect current fund holdings and the strategy for liquidity needs going forward. In preparation for potential stand-alone exposure for money funds, we wanted to share our macro view of money fund risks and begin to explore the best practices of review and selection of money funds.

DOWNLOAD FULL REPORT

Best Regards,

Ben Campbell
President & CEO

Please click here for disclosure information: Our research is for personal, non-commercial use only. You may not copy, distribute or modify content contained on this Website without prior written authorization from Capital Advisors Group. By viewing this Website and/or downloading its content, you agree to the Terms of Use & Privacy Policy.

Similar Posts

dark mysterious landscape with many doors

Asset-Backed Securities in Cash Portfolios: Worth the Effort or Unnecessary Complexity?

Credit & Risk

18 min read18 min readFinancial markets have closely monitored consumers’ financial health following the COVID-19 pandemic to gauge when the exceptional economic tailwind provided by high levels of household savings would fade. Accounting for roughly two-thirds of GDP, consumer spending was juiced by pandemic era stimulus programs which ballooned household savings. These savings were later depleted as…

SMA website image

Credit Insight: The Backbone of Counterparty Risk Management

Credit & Risk

10 min read10 min readAbstract Changing credit landscapes, more complex financial products, multiple touchpoints with large financial intermediaries, and high profile bank failures are just some of the challenges treasury management professionals and cash managers face in counterparty risk management. An effective counterparty strategy should provide clarity on the counterparties’ credit strength individually and collectively, and have…

Credit Implications of The Digital Markets Act

Credit Implications of The Digital Markets Act

Credit & Risk

9 min read9 min read Introduction On March 7th, 2024, the European Commission (EC) began enforcing the Digital Markets Act (DMA), one of the most sweeping antitrust policies for Big Tech to date. Yet despite the broad scope covered under the legislation, the market reaction was relatively muted. This suggests a belief that the companies’ operational changes…

Apple Q2 Earnings: Share Buybacks, China, and AI

Apple Q2 Earnings: Share Buybacks, China, and AI

Credit & Risk

2 min read2 min readFor the quarter ending March 30th 2024, Apple reported net income of $23.6B, down 2.2% year-over-year, on revenues of $90.8B which were 4.3% lower over the same period. The change in revenues reflected a 14.2% increase in services revenue and a 9.5% decrease in product revenues. Of particular note, iPhone sales which accounted…

The Empire Strikes Back: Return of Oil and Gas Dominance for U.S. Integrated Energy

The Empire Strikes Back: Return of Oil and Gas Dominance for U.S. Integrated Energy

Credit & Risk

5 min read5 min readIntroduction Earlier this year, European oil majors BP and Shell announced that they would roll back their energy transition plans and keep oil and gas as relatively large parts of their portfolio. In October 2023, their American counterparts Exxon Mobil and Chevron doubled down on a collective $115 billion bet on fossil fuels….