Invesco Aim is the latest money market mutual fund complex to begin producing a regular quarterly communication for clients. The company writes in its most recent "Investment Perspective, Cash Management," an article entitled, "Regulatory reform and low yields face money markets in 2010". The piece says, "Invesco is managing their money market funds through a historically low interest rate environment and pending regulatory reform while continuing to focus on safety and liquidity into 2010."
The Perspective, written by a group led by Tony Wong, Head of Short-Term Investment Grade & Municipal Credit Research at Invesco Aim, describes the "Credit crisis impact on [the] money fund industry," and says, "As you may recall, subsequent to the bankruptcy of Lehman Brothers in September 2008, the Reserve Primary Fund, a U.S. registered 2a-7 money market fund 'broke the buck'.... On September 19, 2008, U.S. government authorities responded by providing support to the broader short term credit markets and to restore the confidence of money market investors. These government policy responses in our opinion were enormously effective and arguably have been the most successful policy actions taken during the crisis to stabilize the marketplace.
Describing the "Dawn of a new regulatory environment, they write, "Along with this unprecedented support, policymakers entered 2009 calling for material changes in the regulatory framework for money funds. However, some of these suggestions called for money funds to be organized and supervised like banks, including access to central bank lending windows and regulatory capital requirements. Other proposals called for money funds to abandon the use of stable NAVs and instead require funds to switch to floating NAVs. Neither of these were attractive for investment advisors who manage money funds or for issuers that rely on the short-term credit markets as a source of capital. But most importantly, some of these policymaker suggestions would be harmful to the millions of investors, both retail and institutional, that rely on money funds as an investment option for their liquidity needs."
Finally, they say, "While Invesco originally had anticipated that the SEC would announce its final rules by the end of 2009, the timetable of the expected release has been pushed into the first quarter of 2010. Additionally, we increasingly believe the Rule 2a-7 reform process will be a multi-step process and that a broader re-examination of the floating NAV concept will occur later in 2010. Alongside the Rule 2a-7 reform process in the U.S., a similar process is occuring in Europe.... Invesco is part of a small group of investment managers invited to engage with the U.S. Treasury, Federal Reserve, and other foreign central banks in developing private sector solutions to ensure the long-term safety and resiliency of money funds."
