Regulators on both sides of theAtlantic have been looking at ways of making the money market fundindustry more robust, and one of the options they've focused on ismoving from a stable, or constant, net asset value (CNAV) model toa floating or variable (VNAV) model.

The prospect of a move to floating NAV faltered in the U.S. inAugust when Securities and Exchange Commission Chairman MarySchapiro called off a vote on proposed reforms to money-marketfunds that included moving to a floating NAV and imposing a capitalbuffer. Nevertheless, regulators in both the U.S. and Europecontinue to focus on a floating NAV as a possible outcome. InOctober, the International Organization of Securities Commissionpublished a report that suggested, among other things, that stableNAV funds should be converted to floating NAV where workable.

Floating NAV funds do not maintain a share price of $1 (or €1 or£1), unlike stable NAV funds. Instead, the pricefluctuates in line with mark-to-market valuations. While somebelieve this type of fund is more robust and less susceptible toredemptions during a liquidity crisis, the floating NAV model isunpopular among many corporate treasurers. Numerous surveys haveshown the majority of treasurers would shift assets out of moneymarket funds if the only type available were the VNAV model. Butare their fears justified?