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Rating:Money Funds Face a Reprise of 2003 Not Rated 0.0 Email Routing List Email & Route  Print Print
Thursday, October 23, 2008

Money Funds Face a Reprise of 2003

by: Sean Hanna, Editor in Chief

Is the money fund industry about to face yet another issue? The WSJ Fund Track points out that with the now low, and falling, Fed Funds rate does not leave money market mutual funds much room to maneuver. Money fund advisors may remember similar pain from the 2000-01 recession when some were forced to waive fees to keep yields in positive territory after steep rate cuts that lasted through 2003.

Highlighted in the article is Payden & Rygel's James Sarni, who points out that "Some may need to waive fees. And they may want to put a temporary cap on expenses." (An aside, Payden & Rygel has been noticeably promoting its funds on CNBC in recent days).

Pru's money market team head Joseph Tully has a more matter-of-fact take: "We already lived through this when the fed-funds rate was at one percent, so everybody had that on their playbook years ago."

How low have yields fallen? The average seven-day net yields for Treasury-only funds fell to roughly 30 bps for the week ended October 21, according to the Money Fund Report.

Fortunately for money fund advisors, their shareholders are likely to be more concerned with the return of their money than the return on their money. At least for now. 

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