Released at an event discussing the SEC’s proposal on money market funds, this report 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).

Since their inception more than 40 years ago, money market funds (MMFs) have become a vital short-term cash management tool for public and private sector entities. Several distinctive characteristics make MMFs the favored short-term investment and finance vehicle for these organizations.

  • Principal Preservation—The safety of MMFs is one of their most critical characteristics. Principal preservation is a primary objective within most institutional investment policies, and MMFs are able to meet that requirement.
  • Same-Day Liquidity—The ability to redeem shares and receive cash on a same-day basis makes MMFs a practical way to fund daily cash disbursements such as payroll and supplier payments.
  • Risk Diversification—Given regulations requiring diverse underlying assets within MMFs, they provide an effective and efficient way for organizations to hold a diverse portfolio of high-quality, short-term securities.
  • Administration—The stable $1 net asset value (NAV) share price dramatically eases the accounting and administrative burden for investors.

Download PDF