New Shadow Price Disclosure Rules for Money Market Funds Reveal Price Fluctuations

As the Securities and Exchange Commission adopts new disclosure rules for money market mutual funds, there’s plenty at stake for fund sponsors. Money market funds invest in short-term, highly liquid securities, with the goal of maintaining a stable $1.00 net asset value. The new regulations require them to publish mark-to-market share prices monthly on the SEC web site. Unlike commonly used NAV figures, these so-called shadow prices reveal small fluctuations as a result of market conditions.

In the U.S. money market funds claim about $2.75 trillion in assets, nearly 25 percent of the $11.2 trillion in mutual funds. The industry’s main worry is over institutional assets, which account for two thirds of investment in U.S. money market funds. “Institutional money market investors are particularly sensitive to net asset value fluctuations, and they have the size to cause market disruptions,” says Peter Rizzo, global fund ratings team leader at Standard & Poor’s. “Retail money market investors, in contrast, are primarily focused on yield and are less likely to flee the funds in the face of minor price movements.”

尽管如此，基金管理人员确信对影子价格的过渡将平稳地进行。“我们预计它是一个无限制的，”J.P.摩根全球流动资金的Robert Deutsch说。（美国金钱市场基金资产2835亿美元，JPMORGON Chase＆Cope是国家第二大的金钱基金赞助商和世界上最大的资助。）到目前为止，德意志是对的。在影子价格于1月31日公开的两周内，金钱市场基金资产增长156.4亿美元;根据基于Massachusetts的金钱基金跟踪器起重机数据，这据根据韦斯特伯勒的说法，这跟随总计约7.4亿美元的过度流出。

Publicly registered money market funds used to report shadow prices to the SEC semiannually; now they must disclose them each month, with a 60-day lag. This delay helps calm industry fears that the data will be misunderstood. “It’s intended to mitigate the potential for investors to act irrationally after seeing price fluctuations,” says George (Gus) Sauter, CIO of Valley Forge, Pennsylvania–based Vanguard Group, which manages $165.7 billion in money market funds.

The shadow price disclosures are part of a set of money market fund reforms adopted by the SEC in February 2010. The rules are meant to stop a repeat of the 2008 run on money market funds. That September the $60 billion, New York–based Reserve Primary Fund — the oldest U.S. money fund — broke the sacrosanct buck when its nearly $800 million stake in Lehman Brothers Holdings commercial paper became worthless. In just three days money market funds lost about $169 billion in assets as investors bolted for the exits. To stop the crisis from spreading to other fixed-income sectors, the U.S. Department of the Treasury temporarily guaranteed all money fund deposits.

So far most of the February 2010 reforms have set tighter standards for credit quality, maturity and liquidity. But the shadow price disclosure requirements aim to increase transparency so investors and regulators can better understand money market funds’ risk.

“Transparency is critical for investor confidence and the integrity of the product,” says Simon Mendelson, co-head of BlackRock’s global cash and securities lending group. New York–based BlackRock is the fifth-largest money market fund sponsor in the U.S., with some $184 billion in money market assets.

影子价格 - 基金证券的价值除以优秀股份数量 - 代表了真正的每股市场价值。相比之下，导航不会反映日常变更，因为它在购买价格上的每股股票，在安全的整个生命中摊销折扣或溢价。尽管如此，标准导航始终履行货币市场资金的标志市场股价 - 因此“影子价格”。

Money market fund sponsors, as well as analysts and rating agencies, have long computed shadow prices to ensure that the funds’ amortized-cost-based NAVs weren’t straying too far from actual per-share market value. But now shadow prices must be reported to the fourth rather than the second decimal place. Historically, the second-decimal-place standard has been crucial to money market funds’ keeping a $1.00 share price.

The move to shadow prices won’t mark the end of money market funds’ struggles to retain and grow assets in a tougher regulatory environment.  The SEC is weighing deeper changes, including a floating NAV, which the industry strongly opposes.