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Thursday, November 15, 2012|
On Money Fund Reform, Fido's Disappointed, BlackRock's Not Enamored and BNY Mellon Sees Some Merit
Giant mutual fund shops are reacting to the threat of more money market mutual fund reform, which was renewed this week by U.S. Treasury Secretary Tim Geithner and his FSOC (Financial Stability Oversight Council).
On Tuesday the FSCO sent the SEC three ideas for reforming money funds, including ideas already dropped by the SEC this summer after insufficient support from the regulatory agency's commissioners. The ICI and the Chamber of Commerce quickly denounced the FSOC's recommendations. How are fundsters reacting?
Nancy Prior, head of money funds at Boston-based Fidelity [profile], told Bloomberg that she's "disappointed with both the FSOC process as well as the outcome of the meeting," accusing the FSOC of not striking "the proper balance" between minimization of risk and preservation of the benefits of money funds.
New York City-based BlackRock's [profile] president Robert Kapito reportedly said that he "wasn't enamored" with the FSOC's recommendations. Yet Reuters quotes Kapito as also calling the FSOC's work a "good starting place" for the "tough process" of reforming the business.
New York City-based BNY Mellon's [profile] Curtis Arledge, chief executive of investment management, also took a somewhat positive tone, describing the FSOC's proposals as having "some merit."
"I'm not saying I would do it exactly the way it was in the (FSOC) proposal, although I think there is some merit to it," Arledge said, according to Reuters. "We do actually hold economic capital against our money funds ... We're a winner in the scenario where risk is actually factored in to making money funds more resilient."
Pittsburgh-based Federated Investors [profile] grossed 47 percent of its third quarter revenue from money funds. Yesterday Federated's shares fell 4.4 percent to $18.48, according to the Associated Press.
How are money fund investors themselves reacting? The Wall Street Journal reports that, according to money market fundsters, money fund investors "shrugging" the FSOC's recommendations for now. A 60-day comment period for the FSOC's recommendations would be followed by a 90-day period for the SEC to adopt the recommendations or explain why not. And if the SEC did act, they'd have their own public comment and study period to go through, too.
"This suggests that final SEC regulations would come roughly in late Q2," RBC Capital Markets analysts wrote.
New York City-based Reich & Tang's [profile] chief investment officer Tom Nelson said that "it's way too early" and investors aren't reacting yet.
"Investors won't move money till they know what the rules are," said Alex Roever, head of short-term rates strategy at New York City-based J.P. Morgan [profile].
"Any change will come only a year from now," agreed Joseph D'Angelo, head of money funds for Newark, New Jersey-based Prudential [profile].
On the PM side, ratings agency Fitch Ratings yesterday released study results (see below) suggesting that U.S. prime money market funds have moved "to significantly increase their portfolio liquidity," possibly in expectation of more money fund reform.
Printed from: MFWire.com/story.asp?s=42048
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