A $750 billion industry still struggling to bounce back from the last crisis is cracking under the Federal Reserve's lower-for-longer mantra on U.S. interest rates.

Prime money-market funds—a long-time favorite for anyone seeking a cash-like investment with a little extra yield—are facing an existential challenge, just four years after a regulatory overhaul to restore confidence in the wake of the global financial crisis. Earlier this year, assets in these vehicles dropped 20 percent in just six weeks, spurring talk of new reforms. But some of the industry's leaders are opting for another solution: Shutting them down.

Vanguard Group, the world's second-largest asset manager, is converting a $125 billion fund to buy government debt rather than the short-term corporate notes it's invested in for decades, and Northern Trust Corp. and Fidelity Investments have recently axed altogether funds with a similar focus. The decisions entrench a prolonged decline for prime funds and could hurt a market that thousands of companies rely on for funding.

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