July 30 U.S. money market fund assets grew a
week after U.S. regulators handed down changes to the $2.6
trillion industry in an attempt to avert the risk of runs in
case of another financial crisis, a private report released on
Assets of money funds, which consumers and corporations use
as an alternative to bank accounts, increased by $1.89 billion
to $2.589 trillion in the week ended July 29, the Money Fund
The main pillar of the rule changes requires 'prime' money
funds used by institutional investors to float their values,
instead of letting them maintain a stable value at $1 per share.
The goal is to prevent investors from getting spooked by the
prospect of funds breaking the buck, or their net asset value
falling below $1 per share.
In addition, fund boards will have discretion to lower
'gates' on redemptions, or charge fees of up to 2 percent if
market stress causes a fund's weekly liquid assets to fall below
Both measures are slated to take effect in two years.
"There is no rush to the exits," said Mike Krasner, managing
editor at iMoneyNet Inc. in Westborough, Massachusetts, which
publishes the Money Fund Report. "But you can't read too much
into the first week. People are still trying to absorb the
Prime institutional money funds, which could invest in
commercial paper and other short-term corporate debt as well as
U.S. government securities, saw inflows totaling $3.26 billion
in the latest week to $969.07 billion, iMoneynet said.
Retail and government funds are exempt from the floating NAV
Taxable retail fund assets fell in the latest week by $447.5
million to $674.33 billion.
Assets of government funds for institutional investors
dipped $14.6 million to $689.67 billion, while those for retail
investors edged up $20.7 million to $191.08 billion.
Tax-exempt municipal bond funds would not be required to
have floating net asset values if they meet the definition of a
'retail' fund. Between 70 and 85 percent of tax-exempt funds are
expected to qualify as retail.
Assets of tax-free funds tracked by iMoneynet fell $908.2
million to $255.84 billion in the latest week.
(Reporting by Richard Leong in New York and Sarah N. Lynch in
Washington; Editing by James Dalgleish)