From the September/October 2012 issue of Treasury & Risk magazine

Despite Reprieve on New Rules, Money Funds Lose Their Luster

Treasurers look at other investments; ECRs may keep companies in demand deposit accounts.

The Securities and Exchange Commission threw in the towel on tightening regulations on money-market funds in August, although regulators have a number of options to continue the fight. Still, money funds' role as one of the main havens for corporate cash may have passed.

Companies’ use of money funds appears to be waning. Ben Campbell, president and CEO of Capital Advisors Group, says the SEC’s Rule 2a-7 effectively reduces the weighted average maturity of money fund investments to 60 days, and in practice maturities are now under 50 days. That’s down from an average of 90 days prior to the financial crisis and 120 days before 1991, Campbell says, and puts money fund yields at about 0.1%.

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