Are You Prepared for Money Fund Reform? Coming October 16, 2016.
Capitalizing on Money Fund Reform
Forward thinking bankers, brokerages, and trust/investment managers and their clients are the likely beneficiaries of money market mutual fund reform. The waning allure of money funds since the SEC announced its mandated reforms that will take effect on October 16, 2016, has many investors and advisors looking for a simple, safe, and non-administratively burdensome alternative. It is clear that this solution is FDIC insured investments.
Money Fund Reform Overview
- Fluctuating NAV for institutional investors in prime or municipal money funds
- Retail investors, defined as “natural persons” exempt from fluctuating NAV
- Funds’ boards of trustees have sole authority to impose liquidity fees and/or redemption gates in times
- Potential liquidity issues for shareholders and investors outside the manager’s control
- Small or mid-size foundations, corporate accounts, etc., in prime or municipal funds will be treated the same
as large institutions and will move to a fluctuating NAV
- Added level of compliance in an attestation that shareholders are appropriately invested in proper types of
funds (retail or institutional)
- Massive moves from prime funds to government money market funds will keep government fund yields
- Regulatory environment significantly favors FDIC investments compared to money funds from a yield and risk
perspective (competitive yields with less risk)
- Bank trust/wealth management departments can seamlessly fund the bank with client cash balances (not
possible with money funds)
- Investor activity out of money funds into FDIC deposits will likely continue providing significant client
With money fund reform occurring in just a few months, most bankers, investment managers, and investors are looking to get ahead of the curve with an alternative that can be implemented now. Reich & Tang’s Demand Deposit MarketplaceSM (DDM) program, which is integrated on most core and major trust platforms, provides an immediate and effective solution to address this increasingly pressing issue.