T. Rowe Merging Away State Muni MFs
Barron's writes that, "T. Rowe Price Is Pruning Its Money Funds. Will It Stop There?" The article states, "In yet another example of how zero interest rates are hurting the money-market fund space, T. Rowe Price Group announced this week that it would be liquidating one money fund and merging two others out of existence. The two funds to be merged into the T. Rowe Price Tax-Exempt Money fund (PTEXX) on Aug. 23 are T. Rowe Price New York Tax-Free Money (NYTXX) and T. Rowe Price California Tax-Free Money (PCTXX). This should come as no surprise. 'You can't get a tax exemption on zero income,' jokes Peter Crane, president of Crane Data, a company that tracks money markets. 'In the muni space, the surprise is [T. Rowe] is not getting out entirely.'" Barron's explain, "Single-state money funds, which have the lowest yields and are costly to run on their own, are the most likely to be liquidated, as the recent closures of Vanguard Group's Pennsylvania and New Jersey money funds indicate. Crane has called such funds an 'endangered species.'" The piece also says, "The liquidation of the $21 million T. Rowe Price Institutional Cash Reserves (ICFXX), which the filing said would occur this May 7, makes more sense, but only if you understand the peculiar regulations of money-market funds. There is another much larger retail share class of Cash Reserves (TSCXX) with $4.1 billion in assets. Why not merge the two? While retail money funds have a stable $1 price or net asset value, institutional ones have a floating NAV because of a 2016 regulatory change. Despite an identical strategy, legally 'the Institutional Cash Reserves Fund can't be merged with the Cash Reserves Fund because it has a floating net asset value,' [T. Rowe spokesperson] Benintende says." For more on recent MMF liquidations, see these Crane Data News briefs: "March MFI: Liquidations, Changes; Ameriprise's Chris Melin; Deposits" (3/5/21); "SunAmerica Liquidating AIG Govt MMF; ICI, Weekly Portfolio Holdings" (2/18/21); "SEC's Blass on Push for More MMF Reforms; Vanguard Liquidating PA, NJ" (9/28/20); "Federated to Liquidate State Muni MFs" (9/4/20).
