Money market mutual fund providers Fidelity, Federated to boost disclosure
Fidelity Investments and Federated Investors Inc. will make daily disclosures of the values of money market mutual funds, cementing an industry shift to greater transparency in a product regulators say poses a threat to financial stability.
Fidelity, the biggest provider with almost $430 billion, will reveal the previous day's closing value for all of its funds beginning Wednesday, the Boston-based company said on Friday in a statement.
Federated will do the same for five funds that invest in commercial paper by Jan. 25, said Meghan McAndrew, a spokeswoman for the Pittsburgh-based firm.
Charles Schwab Corp. will start providing daily values later this quarter, the San Francisco-based firm said on Friday.
Companies managing $1.5 trillion in money fund assets, or more than half of the U.S. market, have introduced the change in the past three days, increasing pressure on the rest of the industry to follow.
Goldman Sachs Group Inc. was the first to take the step on Wednesday, followed on the same day by JPMorgan Chase & Co., BlackRock Inc. and The Bank of New York Mellon Corp.
“The companies are hearing from their client base, and investors who shop among different funds want them to be on a level playing field in terms of transparency,” said Michael Krasner, managing editor at money fund research firm iMoneyNet in Westborough, Mass.
Goldman Sachs' decision caught competitors by surprise and angered some, said people from three money fund providers who asked not to be named because they were not authorized to speak publicly on the matter.
The voluntary shift means that the industry has given away a bargaining chip in the ongoing fight over money fund regulation, the people said.
Regulators led by former Securities and Exchange Commission Chairman Mary Schapiro have worked to impose tighter restrictions on money funds since the September 2008 collapse of the $62.5 billion Reserve Primary Fund. Its closure triggered a wider run on funds that helped freeze global credit markets.
The SEC enacted rules in 2010 that introduced liquidity minimums, reduced the average maturity of holdings and set higher standards for credit quality.
Schapiro has since argued that funds are still prone to investor runs that can destabilize financial markets. Her plan to make the funds stronger would have required that funds either abandon their fixed $1 share price or adopt capital buffers to protect against losses and withdrawal restrictions to discourage rapid investor redemptions.
Money fund providers have argued that abandoning the $1 share price would destroy the appeal of the product.