Bloomberg and RIABiz on Fidelity Exits
Website RIABiz and Bloomberg covered the news that Fidelity is exiting the Prime Inst MMFs space. (See our June 22 News, "Fidelity to Liquidate Prime Instit Money Funds; Cites Investor Behavior.") Bloomberg's article, "Fidelity to Drop Prime Institutional Money Funds in August," tells us, "Fidelity Investments plans to liquidate its two prime money market funds that cater to institutional investors in August, a decision taken after a market panic in March saw significant withdrawals amid wider distress in short- term credit markets. The funds -- the Fidelity Prime Money Market Portfolio and Fidelity Prime Reserves Portfolio -- hold about $13.9 billion, according to Bloomberg data." The piece continues, "Money funds that cater to retail investors, and those that hold only U.S.-government backed securities, remained largely stable through the panic. [Nancy] Prior said Friday that Fidelity believes its institutional clients' liquidity needs are better addressed by government-only funds. Boston Fed President Eric Rosengren, whose bank oversaw the emergency facility for money funds and who has long called attention to concerns about the money fund industry, welcomed the announcement. 'We should not have to keep creating facilities because of unsound money market fund structures,' he said in an interview. 'So, I'm very pleased from a financial stability standpoint that they're deciding not to have this type of money fund.' Rosengren said he hoped other prime institutional money fund providers would follow Fidelity's lead. Peter Crane, president of Crane Data, said he doubted the rest of the industry would take the same step, but said it 'certainly could cause others to inch away from the segment. It's not good news for the prime space.'" Finally, Bloomberg writes, "Fidelity's Prior said it was too early to say the March panic showed prime institutional funds should have had even tougher rules applied. 'It's too early to draw any conclusions,' she said 'We should do some more analysis around specific funds and how specific funds performed.'" In other news, the Financial Times writes, "Bullish investors pull $105bn from US money market funds in four weeks," and, finally, see also CNBC's "There's nearly $5 trillion parked in money markets as many investors are still afraid of stocks". The latter says, "The stock market's rapid rally from its March lows has brought the Nasdaq Composite back to record highs and the S&P 500 nearly positive for year, but trillions in cash remain parked on the sidelines. The coronavirus sell-off sent investors fleeing into money market funds, which ballooned well above $4 trillion, surpassing the peak of the financial crisis, according to research by LPL Financial."
