A majority of U.S. corporate treasurers would decrease or discontinue their use of money-market mutual funds if the Securities and Exchange Commission follows through with plans to reform rules governing the $2.6 trillion industry.
Seventy-nine percent of treasurers said they would pull at least some money from the funds if the SEC forces them to abandon their traditional $1 share price, according to a survey conducted by consulting group Treasury Strategies and paid for by the Investment Company Institute, a fund industry trade group in Washington.
Should the SEC restrict redemptions, 90 percent would withdraw money, while 36 percent would pull out money if the SEC institutes capital buffers that would force firms to hold a certain amount of cash as reserves against losses.
“The large cross section of treasurers surveyed gives this report the ‘voice of the treasurer’ -- a voice that spoke out with an overwhelmingly negative response to each reform concept,” Cathy Gregg, a partner at Treasury Strategies, said in a statement today.
Regulators and asset managers have been debating steps to make money funds safer since the September 2008 collapse of the $62.5 billion Reserve Primary Fund. Its closing triggered a run on prime money funds that helped freeze global credit markets. The run was halted only after the Treasury Department guaranteed fund investors against losses for a year, a step that no longer exists.
In 2010 the SEC introduced liquidity minimums, average maturity limits and new disclosure requirements. SEC Chairman Mary Schapiro has since said additional steps are necessary to strengthen the funds.
The SEC is working on two proposals. The first would strip money funds of their traditional fixed $1 share price, substituting a floating value. The second would impose capital requirements and restrict redemptions.
Four of the agency’s five commissioners, a majority of whom must approve any new rule, are evenly split over the plans, while Democrat Luis A. Aguilar is uncommitted.
Fund executives and the ICI have argued that the SEC’s plans would destroy the appeal of money funds for investors and have been lobbying Aguilar to reject the reforms.
Treasury Strategies, which also opposes the proposed changes, surveyed 203 corporate treasurers who control approximately $176.5 billion in short-term investment assets and $58.5 billion in money-market fund assets, according to the statement.
Editors: Rick Levinson, Sree Vidya Bhaktavatsalam.