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Money Markets Have a $750 Billion Problem in Zero-Rate World

  • Prime funds see investor exodus amid ultra-low interest rates
  • Sector has been pummeled since the global financial crisis

A $750 billion industry still struggling to bounce back from the last crisis is cracking under the Federal Reserve’s lower-for-longer mantra on U.S. interest rates.

Prime money-market funds -- a long-time favorite for anyone seeking a cash-like investment with a little extra yield -- are facing an existential challenge, just four years after a regulatory overhaul to restore confidence in the wake of the global financial crisis. Assets in these vehicles dropped 20% in just six weeks earlier this year, spurring talk of new reforms. But some of the industry’s leaders are opting for another solution: Shutting them down.