FT News Briefing Prime money markets funds are in trouble
Apr 12, 2024
Regulators are widening their investigation into Morgan Stanley amidst looming changes in U.S. money market funds. Managers plan to shut or convert $220 billion in prime funds before new SEC rules take effect. Meanwhile, a remarkable court ruling favors sanctioned Russian oligarchs, challenging the EU's sanctions policy. The podcast dives into the complexities of fund management and the potential repercussions for investors and the broader economy, highlighting the critical nature of regulatory compliance.
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Prime Money Market Funds and New Regulations
- New SEC regulations are impacting prime institutional money market funds, which hold short-term securities like commercial paper.
- These funds are attractive in high-interest rate environments but carry more risk than government-focused funds.
Impact of the SEC Rule
- The new SEC rule will impose fees on investors withdrawing from prime funds when daily redemptions exceed 5% of total assets.
- This aims to prevent investor stampedes and stabilize the funds during market volatility.
Manager Response to SEC Rule
- Money managers are converting prime funds to government funds or closing them due to increased costs from the new rule.
- This shift may reduce investor diversification and impact the commercial paper market.