AFP on Road Less Traveled
The AFP wrote recently, "Money Funds: Navigating the Road Less Traveled." They say, "The current state of money markets reminds me of that old Robert Frost quote: 'Two roads diverged in a wood and I -- I took the one less traveled by, and that has made all the difference.' I just got back from the Crane Money Fund Symposium, and the view from the event is that money market deposit accounts (MMDAs) have largely supplanted money market funds, at least for the time being.... The utilization of MMDAs has outpaced money funds. While investment in prime money funds has fallen dramatically since the global financial crisis, deposits in MMDAs have skyrocketed. Over the past 10 years, MMDAs have increased by $5.2 trillion.... Many in the industry wonder whether we will ever see a move back to prime funds. Should the stable NAV be restored, a shift back to prime would be a no-brainer for many corporates. Under the Consumer Financial Choice and Capital Markets Protection Act (S.1117/H.R. 2319), money funds could elect to be stable value funds if they meet certain criteria. Some managers favor adopting a mix of prime funds and their similar counterparts (ultrashort bond funds) as a viable alternative to achieving pre-money fund reform investment options. But others favor only investing in stable NAV products -- namely government/treasury money market funds. Depending on which investment manager you ask, you will get a variety of opinions on the best way to proceed.... Separately managed accounts (SMAs) and ultrashort bond funds were highly discussed at the symposium. Many investment managers are having conversations with their clients regarding these as viable alternatives to money funds. This is because these options offer full transparency of investments and customizable investment styles. Ultimately, clients determine their best course of action, given their investment directives, the amount of cash they have to invest, and how much they want to segment that cash."
