Two major banks and the country's largest asset manager took steps to make their money market mutual funds more transparent to investors.
Goldman Sachs, JPMorgan and BlackRock announced they will publish, on a daily basis, the previous day's closing net asset value, or NAV, of several of their money market funds. While the NAV, or share price, of these funds might fluctuate, the funds will continue to buy and redeem shares for investors at the industry standard $1 a share price.
The firms' move is seen as a way to get ahead of regulators, who despite setbacks, continue to push for reforms to this $2.7 trillion dollar industry.
"From a PR (public relations) move it is genius," said Pete Crane, president of Crane Data, which tracks the money market fund industry. "They are combating the myth regulators are spreading that the NAV is a fiction."
Crane said once investors get to see how little a money market's NAV fluctuates, they will reject what he sees as the false perception that many of these funds are being run with a $0.99 NAV, with parent companies putting in the needed capital to maintain the dollar a share price.
Long seen as an alternative to bank savings accounts, money market mutual funds are not backed by the FDIC, and do not guarantee the dollar a share price. There has, however, been an implicit guarantee by fund managers to maintain the dollar a share price even as the underlying value of the fund moves up or down.
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This implicit guarantee has been broken a few times in the industry's history, most recently during the financial crisis in 2008 when a money market fund, Reserve Primary Fund, "broke the buck" or redeemed shares for less than a dollar a share.
Seen as systemically important, there have been efforts to reform the money market fund industry in the wake of the crisis. Among the reforms was a rule requiring money funds to publish once a month a fund's NAV from the last 30 days.
More recently, an effort led by SEC Chairman Mary Schapiro to propose other reforms failed. That proposal included allowing the NAV to float or fluctuate, or mandating money funds put aside capital to assure the dollar a share price in times of crisis.
The money fund industry has opposed these reforms maintaining that requiring the funds to set aside capital would hurt the industry's profitability and cut the yield paid to investors. The industry also opposes allowing the NAV to float, fearing it would result in investors pulling money out of what have been traditionally safe investments.
The Investment Company Institute, which represents the mutual fund industry, declined comment.