Fidelity Investments provided another update on its fund lineup changes related to money fund reforms, sorting funds into retail or institutional and announcing plans for its Prime Institutional money market fund lineup on Wednesday. These latter changes include converting the $65.5 billion Fidelity Institutional Money Market Portfolio, the 4th largest money fund portfolio overall, to Prime Retail. Fidelity will retain one Prime Institutional fund, the $47.8 billion FIMM Prime Money Market Portfolio, the 7th largest in our universe. Fidelity will also convert its $2.2 billion FIMM Tax Exempt Portfolio to Retail. Nancy Prior, President of Fidelity's Fixed Income Division said in an interview, "I want to emphasize and reiterate that Fidelity is committed to the money market business. Money market funds continue to be an integral part of our business, so we are going to offer a wide variety of investment options that includes Retail and Institutional funds, Prime and Muni funds, as well as Government and US Treasury funds."
Prior also told us that the conversion of the $111 billion Fidelity Cash Reserves fund from Prime Retail to Government will be complete around December 1. (See yesterday's News for more on Fidelity Cash Reserve's shift to Government Agencies from CDs.) Fidelity announced back in January that it was going to merge 6 money funds into funds with similar strategies, and convert 3 prime Retail funds into Government funds, including Cash Reserves. (See our story, "Fidelity Announces Major Changes to MMFs; Staying Stable, Going Govt.") Fidelity also provided a recap of its earlier changes in a shareholder update.
The latest update, released Wednesday afternoon, says, "After a thorough evaluation of our funds and their shareholders, we have now determined which Fidelity prime and municipal money market mutual funds will be designated as retail funds and which will be designated as institutional funds." As previously mentioned, only the $47.8 billion FIMM Prime Money Market Portfolio will remain Prime Institutional, subject to floating NAV and gates and fees when the new rules are implemented in October 2016. Two funds have been designated as Prime Retail: Fidelity Money Market and FIMM Money Market Portfolio. The $65.5 billion FIMM Money Market Portfolio is currently categorized as Prime Inst., while Fidelity Money Market is and will stay Prime Retail.
Further, Fidelity will have no Tax Exempt Institutional funds as the $2.2 billion FIMM Tax Exempt Portfolio will be classified as Retail. The other Tax Exempt Retail funds include: Fidelity Tax-Exempt Fund, Fidelity Arizona Municipal Money Market, Fidelity California AMT Tax-Free Money Market, Fidelity California Municipal Money Market, Fidelity Connecticut Municipal Money Market, Fidelity Massachusetts AMT Tax-Free Money Market, Fidelity Massachusetts Municipal Money Market, Fidelity Michigan Municipal Money Market, Fidelity New Jersey AMT Tax-Free Money Market, Fidelity New Jersey Municipal Money Market, Fidelity New York AMT Tax-Free Money Market Fidelity New York Municipal Money Market, Fidelity Ohio Municipal Money Market, and Fidelity Pennsylvania Municipal Money Market.
The release continues, "In November 2015, we will begin to notify current fund shareholders of their status as retail or institutional investors, based on the new SEC rules, and provide information about the Fidelity money market fund investment choices that will be available to them. Separate, advance notice of account status and investment options will be provided to advisors and other intermediaries whose clients are current fund shareholders. Additionally, on or about January 1, 2016, the retail funds will close for purchases by new accounts that are not beneficially owned by natural persons."
In an interview, Prior explained how Fidelity approached classifying funds as Retail or Institutional. "Over the last several months we have looked at all of our Prime funds and all of our Muni funds and we focused in on the shareholder base of each of those funds, how the shareholders use those funds. We looked at the assets and we looked at the accounts and based on that analysis, determined which funds will be designated retail and which funds will be designated institutional. We are going to have 2 funds in the Prime space that will be designated retail -- which will have the stable NAV and be subject to the potential for gates and fees -- and we will have one Institutional prime fund, subject to the floating NAV and the potential for gates and fees. In our Muni lineup, we are going to designate all of our existing funds as retail funds. We will have 3 national Muni funds and 13 state Muni funds."
She added, "We looked at the underlining account set ups in all of our retail funds and when we did that due diligence it became pretty clear that a significant amount of the assets weighed one way or another -- toward the natural persons or institutional. But we also wanted to make sure that we had a full product lineup for our institutional shareholders and with respect to that, we'll have a Treasury-only fund, a Treasury fund, a Government fund, and a Prime fund, so we will be offering our institutional investors a full product lineup."
Prior continued, "We're going to begin the process in November of reaching out to each of the shareholders in our retail prime and retail muni funds to begin to share with them what their account designation is and review the eligibility requirements of the funds. We will use the remainder of 2015, into the first half of 2016, to complete the designation processes and the process of aligning shareholders with their appropriate funds based on eligibility." She added, "There certainly will be some shareholders that will no longer be eligible to be in the fund based on the SEC definition, but the preponderance of the assets in the funds aligned with the designations that we came up with."
Finally, Prior said that around December 1, 2015, Fidelity is expecting to complete the fund mergers, name changes and conversions (including Cash Reserves' shift to Government). On January 1, 2016, Fidelity expects to close retail prime and municipal funds to new institutional investors, and in Q3 2016 Fidelity will implement potential liquidity fees and redemption gates on prime and municipal funds and a floating NAV on institutional fund. (October 14, 2016 is the final SEC compliance deadline for fees/gates and floating NAV.) Fidelity has not yet determined the frequency and the time of the day that it will be having settlements on the floating NAV fund.
