Demand for VRDNs fell substantially as municipal money market fund (MMF) assets decreased ahead of last October's money market reforms.
In this environment, municipal money market funds have an important role to play in the portfolios of corporations and institutional investors.
The Wells Fargo Advantage California Municipal Money Market Fund, Wells Fargo Advantage Money Market Fund, Wells Fargo Advantage Municipal Money Market Fund, and Wells Fargo Advantage National Tax-Free Money Market Fund will take steps to qualify as retail money market funds under the new regulations.
Wells Fargo (WFC) Advantage Funds has announced that its board of trustees has approved changes to its money market funds lineup to conform with regulatory changes from the SEC in July of 2014 pertaining to retail prime and municipal money market funds; institutional prime and municipal money market funds; and government money market funds.
As of last October, the Securities and Exchange Commission required institutional prime and municipal money market funds
to implement a floating net asset value, rather than the constant NAV of $1 a share that had been typical for U.S.
Prime and retail municipal money market funds
for retail investors can try to maintain a stable $1 net asset value but have the option of imposing fees or restrictions on redemptions during times of crisis.
Both prime and municipal money market funds
may be subject to liquidity fees and redemption gates in the event weekly liquid assets fall below a designated threshold.
Indeed, Charles Schwab announced recently that, in times of major market stress-such as that which inspired the coming changes-its retail prime and municipal money market funds
will be able to implement liquidity fees or redemption gates.
Typically, these issues trade at a yield 50 to 60 basis points (.6 percent) higher than municipal money market funds
. They're bought and sold at par, and the issuer absorbs the investment banking cost to maintain the issue.
Federated said it expects to offer four institutional prime and national municipal money market funds
Under the new rules, prime and municipal money market funds
available only to retail investors will be permitted to continue to transact at a constant, or stable, net asset value (CNAV) of USD1.00 per share.
Starting on October 14, 2016, institutional prime and municipal money market funds
will no longer trade at a fixed $1 per share value; instead, the NAV will float, directly reflecting the value of the underlying assets.