BlackRock Inc. and Western Asset Management Co. are offering anew twist on traditional money-market funds as regulators are setto impose sweeping changes on the $2.58 trillion industry.

BlackRock, the world's biggest money manager, and Legg MasonInc.'s Western Asset unit have started bond funds designed to workmuch like money funds, with a key difference. The new “ultra-short”funds have share prices that fluctuate along with the value oftheir holdings, rather than a fixed net asset value, or NAV, adistinguishing feature of money funds. They also have shortermaturities than similar ultra-short bond funds that ran intotrouble when credit markets froze in 2008.

The firms are preparing for what could be a seismic reallocationof assets by institutional investors and corporate treasurers ifregulators overhaul money funds for a second time in three years ina bid to make them safer after the 2008 collapse of the ReservePrimary Fund. The U.S. Securities and Exchange Commission plans toorder a floating NAV on institutional prime money-market funds, orthose that invest in corporate debt, overriding opposition from theindustry.