Rule 2a-7 “Floating NAV” Amendments and Alternatives

With amendments to SEC Rule 2a-7 going into effect in the fall of 2016, institutional prime money market funds will be required to adopt floating net-asset values (NAVs) as well as provisions for fees and gates on redemptions. Because floating NAV prime funds present new considerations for cash investors managing liquidity, risk and return, they are prompting many to take a fresh overall look at the cash management landscape as we head into the new year. Last month, Capital Advisors Group published “The New Era of Cash Management,” a book compiling our research reports into helpful guide for treasurers considering post-money fund reform cash management options.

This month, we will be introducing our new Capital Advisors Group 90-Day Liquidity Account^SM, a separately managed account that may be used as an alternative to prime money funds. We designed the 90-day account to address concerns cash investors may have about the new floating NAV prime funds: by limiting maturities to 90 days, all investments in our 90-Day Liquidity AccountSM are cash equivalents and can be booked at amortized cost instead of being marked to market; direct ownership of securities in the Liquidity Account^SM mitigates the risk of a shareholder run interrupting access through fees or gates; and to provide liquidity, the new 90-day account follows the same 10% daily and 30% weekly liquidity requirements mandated for prime money funds in Rule 2a-7.

This month’s research report takes a detailed look at how Rule2a-7 changes affect the liquidity/risk/return equation when considering the new floating NAV prime money funds and explains how and why our new 90-Day Liquidity Account^SM may be worth considering as an alternative.

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Best Regards,

Ben Campbell
President & CEO