Goldman Changes Money Fund Lineup to Comply With Regulations

Goldman Sachs Asset Management, which supervises more than $1 trillion in assets, is starting two money market funds and making changes to two others to comply with stricter rules for funds that offer a stable $1 net asset value.

The Goldman Sachs Investor Money Market Fund, the firm’s first retail fund under the new rules, will be sold to individuals only, allowing it to maintain a stable $1 share price, the bank’s asset-management unit said Wednesday in a statement from New York. The Goldman Sachs Financial Square Federal Instruments Fund will invest in government securities only and cater to investors seeking state-tax-exempt income.

The changes are part of “our continued effort to help liquidity investors navigate through the changing regulatory landscape,” James McNamara, president of mutual funds at the bank, said in the statement.“We will continue to evolve in this space and you can expect future product launches in line with client needs.”

Goldman Sachs, BlackRock Inc. and Federated Investors Inc. are among money fund providers changing their lineup to respond to new rules for how non-government and institutional money market funds should operate. Under the system, which takes effect in October 2016, institutional funds that invest in non-government securities will have to have a floating share price and impose redemption fees and gates in times of market stress.

Reducing Risks

The SEC has said floating share prices will reduce the risk of runs in money market funds in times of panic. Opponents of the rules argued that the regulations will cause investors to look elsewhere, possibly moving their money to unregulated funds.

Goldman Sachs also said that it’s converting the VIT Government Money Market Fund, aimed at insurance investors, from a prime fund into one that can only buy government securities. The Goldman Sachs Financial Square Federal Fund is being changed to appeal to “Treasury-only” investors concerned with market-capacity constraints.

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