Despite Reprieve, Money Funds Under Pressure

The SEC threw in the towel on tighter regs, but treasurers may lose interest given the funds’ very low yields.

Ben Campbell of Capital Advisors GroupMoney-market funds (MMFs) may have fought off tighter rules for now, but regulators have a variety of options if they opt to continue the fight. Regardless of regulatory efforts, the age of money funds as havens for corporate cash may have passed.

Securities and Exchange Commission Chairman Mary Schapiro called off the commission’s vote on money fund reforms when it became clear there weren’t enough votes to pass it. The proposal aimed to stymie runs on money funds by requiring them to establish capital buffers and let their share prices float instead of being fixed at $1 per share.    

Heath Tarbert of Weil Gotshal MangesThe pendulum may swing in money funds’ favor when the unlimited FDIC insurance expires, but given DDA advantages, the pendulum may not swing that far. Neshat says companies are comfortable using DDAs, but as with money funds, will have to “look under the hood” of their cash management banks to verify their credit strength.

Aron Chazen, co-founder of Treasury Curve, which offers a web-based platform accessing information and trading from multiple asset managers, notes that investing in a money fund requires only a single wire to execute the trade and one journal entry.

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