Three of the biggest managers of U.S. money market funds said on Wednesday they will start disclosing fund values each day rather than monthly, a move that could boost investor confidence and blunt new regulations.
Goldman Sachs Group Inc, JPMorgan Chase & Co and BlackRock Inc, which together oversee $489 billion of money market funds, or almost 20 percent of the industry, all said they wanted to give investors a clearer picture of the quality of their funds' holdings.
The moves come as the entire industry has been groping for the right strategy to avoid more drastic rules regulators are considering to beef up money funds, which suffered a wave of panicked withdrawals during the financial crisis.
The U.S. Financial Stability Oversight Council, or FSOC, is pressing a plan that could require funds to set aside capital against losses or price shares at funds' actual net asset value, or NAV, instead of being fixed at $1.
Money fund managers have argued in the past that those kinds of rules would drive away investors. But Wednesday's moves to at least disclose funds' daily net asset values - and just how little they change most of the time - could get investors ready for a shift to actually buy and sell fund shares at the floating values.
"Get people used to seeing it. Then as change comes down the pipeline, say floating NAV, people are a little more prepared," said Bret Barker, portfolio manager at TCW in Los Angeles.
The moves, if well received by investors, could also bolster the industry's argument that a shift to a floating share price is not needed, according to Pete Crane, a long-time money fund analyst and co-founder of Crane Data, which tracks the industry.
"They're trying to pre-empt the floating NAV," Crane said. "The point is to show that NAVs don't float."
The U.S. Securities and Exchange Commission, the direct regulator of the funds and a participant in the FSOC, said it was pleased with the moves.
"Chairman (Elisse) Walter is encouraged when industry voluntarily takes steps to provide greater transparency for investors," agency spokesman John Nester said. SEC staff are continuing to work on possible reform plans, he said.
Currently, money funds report their actual net asset value per share only monthly, with a 60-day lag. Fluctuations of the share prices are typically seen in tenths of a cent or less. Investors buy and sell shares at a fixed price of $1.
During the financial crisis, however, one major money fund suffered losses on Lehman Brothers debt it owned and could not maintain the $1 per share price. When the Reserve Primary Fund "broke the buck" because of those losses, investors stampeded out of all funds that potentially could have also owned Lehman debt, threatening to freeze much of the U.S. borrowing system.
By giving investors more regular updates, fund firms could assuage the fears that led to the panic. Clients have been asking for more details lately, David Fishman, co-head of Goldman's money fund business, said in an interview.
"There's a lot of talk about 'shadow banking' and 'shadow NAV,' the implication being that things are more hidden," Fishman said. "By bringing this out into the open, we can say these are high-quality products."
JPMorgan said three of its U.S. funds will start to disclose their daily closing NAVs on the following business day, and that its other money funds will soon follow.
The bank is the second-largest manager of U.S. money market funds, trailing only Fidelity Investments, according to Lipper, a Thomson Reuters unit. Goldman ranks seventh and BlackRock ninth, according to Lipper.
BlackRock said it would begin disclosing daily NAVs by January 16 for all its U.S. funds. The firm last month offered a different approach to head off regulation with a new fee that would be charged on investor withdrawals in times of crisis.
Fidelity is considering moving to a daily disclosure of the NAVs of its money funds, spokesman Steve Austin said.
Vanguard Group, the Pennsylvania fund firm ranked fourth in money fund assets by Lipper, has no plans to increase the frequency of its NAV disclosures. One reason is its retail investors have not sought more disclosures, spokesman John Woerth said in an email. Changes in the NAV of its largest money fund, the $122 billion Vanguard Prime Money Market Fund, have been "de minimis," the firm said.
Federated Investors Inc, the third-largest manager of U.S. money funds, declined to comment.
Goldman said it will disclose the previous day's NAV of its three U.S. commercial paper funds daily, starting on Wednesday. It will begin disclosing daily NAVs of its six U.S. government and tax-exempt funds next week. The daily price of its six offshore funds will be available by the end of the year.
(Reporting by Avik Das and Tanya Agrawal in Bangalore, Ross Kerber and Aaron Pressman in Boston and Richard Leong in New York; editing by Matt Driskill, Supriya Kurane, Matthew Lewis, Andrew Hay and Richard Chang)