NEW YORK--(BUSINESS WIRE)-- Wall Street Webcasting has prepared and provided for you an exclusive broadcast of Wells Fargo Securities own, Rich Gordon. Gordon is highly recognized for his weekly narrates regarding the fixed income strategy at Wells Fargo Securities (NYSE: WFC). This week, Gordon discusses the SEC’s money market regulation’s proposal and the different possible ramifications for investors.
There was some concern surrounding the SEC’s proposal on new money market regulations. If money market reforms are approved and executed as is, then there may be a large exodus from money market funds into other alternatives; meaning the outgoing funds would split between investors who want no risk to their principal, and those that will permit some variation. Bank deposits and treasury bills become the only feasible alternatives for investors who want no change to their principal. Various types of short duration funds will get the lion’s share of inflows for investors who are willing to accept some fluctuation. Some investors may respond by moving money into fully allocated risk strategies; with the mindset that they might as well try and capture the upside in the market if they’re at risk of some principal loss.
The redemption limits contained in the SEC’s money market reforms are perhaps the most alarming facet of the proposal. There may be either a fee to redeem shares, or they may implement limits on withdrawals in times of stress. Not only may investor’s experience a loss to their principal, but with these limitations, they may not be able to get their money out at the time when they are most in need. Also, if assets were to, in fact, leave money market space, yields for alternative short duration assets could see thorough downward pressure. Treasury repo rates could become negative, which would imply a loss of principal for those trying to invest funds overnight.
To hear a more in depth explanation of the disadvantages to the SEC’s current proposal and possible solutions that the Wells Fargo analysts’ suggest, please tune into Wells Fargo’s latest video.
Please visit the following link to view the video:
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Source: Wall Street Webcasting