Money Funds Face Off Over the $1 Share Price

Money market funds were once considered bastions of safety—until the failure of Lehman Brothers in 2008, when one major player “broke the buck” and lost a few pennies per share, setting off a financial market panic. These days there’s animated debate about whether it’s time for the $2.6 trillion business to abandon the practice of fixing share prices at $1 and allow them to fluctuate.

Fidelity, the largest manager of money funds, says eliminating the fixed share price would “destroy” the industry. Federated Investors, Vanguard, and the fund industry’s main trade group have issued similar warning. BlackRock, the seventh-biggest player, has a less dire view. “We think there will be some shrinkage, but we don’t think it would eliminate the product,” says Barbara Novick, BlackRock’s co-founder and vice chairman.