A new Prospectus Supplement filing for the $505 million "DWS ESG Liquidity Fund" tells us, "Upon the recommendation of DWS Investment Management Americas, Inc., the investment advisor for DWS ESG Liquidity Fund, the Board of Trustees of Investors Cash Trust has authorized, on behalf of the fund, the fund's termination and liquidation, which will be effective on or about August 14, 2024. Accordingly, the fund will redeem all of its outstanding shares on the Liquidation Date. The liquidation will be effected according to a Plan of Liquidation and Termination. The costs of the liquidation, including the mailing of notification to shareholders, will be borne by the fund but reimbursed by the Advisor, after taking into account applicable contractual expense caps then in effect by the Advisor to waive or reimburse certain operating expenses of the fund." This most recent notice makes DWS ESG the 7th Prime Institutional fund tracked by Crane Data to announce either its liquidation or conversion to a Government fund. (Note: There are just 3 weeks to go until our Money Fund Symposium in Pittsburgh! Our hotel block is sold out but we're still accepting registrations. We hope to see you there!)
DWS continues, "Shareholders who elect to redeem their shares prior to the Liquidation Date will receive the net asset value per share on such redemption date for all shares they redeem. Shareholders whose shares are redeemed automatically on the Liquidation Date will receive the net asset value per share for all shares they own on the Liquidation Date. As the Liquidation Date approaches, the fund's assets not already converted to cash or cash equivalents will be converted to cash or cash equivalents and the fund will not be pursuing its investment objective."
They add, "The fund will be closed to new investors effective immediately, though existing shareholders may continue to invest in the fund until the Liquidation Date. The liquidation is expected to be a taxable event for shareholders other than shareholders who are investing through a tax-advantaged arrangement or are tax-exempt." For more on liquidations in the ESG MMF space, see these Crane Data News stories, "UBS Latest to Abandon ESG Money Funds; JNL Liquidates Money Fund" (10/13/23) and "Morgan Stanley Latest to Abandon ESG MMFs; Weekly, ICI Portfolio Holds" (8/16/23).
For more on recent Prime Institutional MMF liquidations and conversions, see our May 13 News, "Dreyfus Files to Liquidate Cash Management Prime Inst MMF, Tax Exempt," which explains, "Another Prime Institutional money market fund filed to liquidate Friday, bringing the total of MMF portfolios liquidating or "going Government" to 6 to date. A Prospectus Supplement filing for the $6.6 billion Dreyfus Cash Management Fund, including its Admin (DACXX), Institutional (DICXX), Investor (DVCXX) and Preferred (DCEXX) Shares, explains, "The Board of Trustees of Dreyfus Cash Management has approved the liquidation of the Fund, effective on or about September 6, 2024. (See too these Crane Data News stories: "Goldman Files to Liquidate Prime Inst MMFs; Barron's: MMFs Tempting" (4/22/24), "Federated Liquidating Money Mkt Trust" (4/1/24), "Vanguard Market Liquidity Fund Files to Go Government, Joins American" (3/20/24) and "American Funds Central Cash to Convert to Govt to Avoid Liquidity Fees" (2/6/24).)
In other news, we recently found a pair of "basic training" articles on the money markets and money funds. SSGA published the primer, "Understanding Money Market Funds," while AFP posted, "Understanding Money Markets."
SSGA's article states, "A money market fund is a mutual fund that invests in cash equivalent short term high quality debt instruments. Money market funds have a key feature that distinguishes them from other cash options: most use amortized cost accounting, which enables them to maintain a consistent net asset value (NAV) of 1.00 per share in nearly all circumstances. To pursue that goal, they invest in very short term debt safety and liquidity as the primary objective."
It explains, "Organizations can hold their cash in a variety of vehicles. Each option offers a different combination of key characteristics, including: Safety: preservation of your principal value; Liquidity: the ability to withdraw your cash on demand; (and) Potential return: interest income the vehicle generates."
SSGA continues, "Money market funds are among the most common and useful tools for managing cash holdings. Any professional who may be asked to weigh in on decisions related to cash management can benefit from a basic understanding of money market funds -- what they are, how they work, and how they compare to other options."
They add, "Depending on the specific fund, eligible investments may include: Government/Sovereign Treasuries debt -- Securities issued and guaranteed by their respective government; Government agency debt -- Securities issued by government agencies like the US based Federal Home Loan Bank; Corporate or Financial Institution debt -- Securities such as commercial paper, certificates of deposit, medium-term notes, or other unsecured debt issued by some of the largest corporations and banks; (and) Repurchase agreements -- A form of short-term lending in which an investor agrees to loan money in exchange for collateral in excess of the loan. Most repurchase agreements are short-term loans with maturities of one day to one week."
AFP's piece says, "Money market securities have a maturity of one year or less and are typically debt instruments, such as negotiable certificates of deposit, banker's acceptances, government securities (e.g., U.S. Treasury bills, municipal securities), commercial paper, municipal notes and repurchase agreements. Participants in money markets include banks, corporations, governments and institutional investors, who borrow and lend money for short periods to meet short-term funding needs, manage liquidity or earn returns on surplus cash."
It tells us, "Money markets are important to treasury professionals as they play a crucial role in providing liquidity to the financial system and facilitating the efficient allocation of short-term funds. They serve as a key resource of short-term financing when flexibility and quick access to cash are needed."
