Vanguard latest to close money fund to new investors

BOSTON, April 16 (Reuters) - Vanguard Group said on Thursday it closed its $39.5 billion Treasury Money Market Fund to new investors, becoming the latest big asset manager looking to protect the returns of existing clients.

Restricting the flow of new money helps reduce the amount of new securities paying lower yields that Vanguard will need to purchase, slowing the rate of dilution to returns for current shareholders.

“Vanguard is taking this prudent step to temper cash flows and will continue to monitor the Fund and employ additional measures if needed,” the company said in a statement. New money market investors would still have access to other funds in its $414 billion lineup, Vanguard said.

Other fund companies have taken similar steps including Fidelity Investments on March 31.

U.S. Treasury yields have fallen precipitously since the start of 2020 as a rolling economic collapse stemming from the COVID-19 pandemic has pushed investors into the securities and the cash-like funds that own them.

The yield on the benchmark 10-year U.S. Treasury note was at 0.6273% on Thursday afternoon, having reached close to 2% at the start of the year.

Dan Wiener, editor of a newsletter for Vanguard investors, said the newly-closed fund had net new deposits of $7.4 billion in March, up from $600 million of net new deposits in February, and another big money fund also saw a big increase.

In a note to investors Wiener wrote that “the huge jump in inflows into these money funds suggest someone, somewhere is going to cash.” (Reporting by Ross Kerber; editing by Grant McCool)