A new report conducted the by the independent treasury management firm Treasury Strategies and released by the U.S. Chamber of Commerce Center for Capital Markets Competitiveness (CCMC) could have some fundsters in a tizzy.

“Operational Implications of a Floating NAV across Money Market Fund Industry Key Stakeholders” considers the compliance costs across key stakeholders if money market funds transition to a floating net asset value (NAV). As of now, the report suggests, the SEC is woefully unprepared for the challenges of implementing a floating NAV insofar as money market funds are concerned.


See the full press release below.

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Company Press Release

U.S. Chamber Report Outlines Costs, Operational Challenges of Floating NAV for Money Market Mutual Funds 

Estimates Costs to Move from Stable to Floating NAV?Could Reach $2Billion For Investors

?WASHINGTON, D.C.—A new U.S. Chamber of Commerce Center for Capital Markets Competitiveness (CCMC) report released today finds that the operational complexity, systems alterations, and business process changes needed to support a floating NAV threaten the vitality of money market funds for most investors, including businesses and municipalities.

The report titled, “Operational Implications of a Floating NAV across Money Market Fund Industry Key Stakeholders,” examines the compliance costs across key stakeholders if money market funds (MMFs) transition to a floating net asset value (NAV).??“The current proposal doesn’t yet adequately address the challenges of implementing a floating NAV,” said David Hirschmann, president and CEO of CCMC.

“The SEC must tackle the operational, tax, and accounting implications and the same day settlement issue. If the Commission fails to adopt a proposal that preserves the utility of MMMFs, business, cities, and states will be left searching for alternative, less regulated, cash management tools.”??The report, conducted by independent treasury management firm Treasury Strategies, estimates total upfront cost for investors to move from a stable to a floating NAV would be between $1.8 and $2 billion. Further, new estimated annual operating costs would be an additional $2 to $2.5 billion. States, municipalities, and other public institutions, already operating within tight budgets, would have to absorb these and additional costs for compliance.  ??Additionally, because of the complexity and interdependence of various fund service providers, the time required by market participants to fully comply with a floating NAV would be more than two years.??

“While the SEC’s proposed change might seem to be a small change in the large scheme of things, the impact is actually quite dramatic in both cost and operations,” said Hirschmann. “This proposed change represents a fundamental redesign of the structure and nature of MMFs making them undesirable to institutional investors trying to manage liquidity.”

 

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