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Survey of Investor Views on Money Market Reforms

Treasury Strategies has released a survey, commissioned by the Investment Company Institute, investigating corporate treasurers' and other institutional investors' views and likely reactions to changing the fundamental nature of money market funds.  The authors surveyed more than 200 organizations about how they use money market funds; their views on floating net asset values, capital requirements, and redemption holdback concepts; and how those concepts would change their use of these funds. 

Estimates based on the survey results indicate that a floating net asset value or a redemption holdback will drive 60 percent or more of institutional assets out of money market funds.  The results show that imposition of capital buffers on money market funds will have a much smaller impact on institutional assets (a reduction of 13 percent) when the question makes no mention of any loss of yield caused by the buffers.  Follow-up questioning, however, shows that if a buffer reduced the yield of those funds by just 2 to 5 basis points, a large majority of the respondents would decrease their use or discontinue their use altogether.  The survey provides the first clear analysis of the degree to which institutional investors would move their short-term investments away from money market funds if the SEC puts these concepts in place. 

Treasurers who responded to the survey reported that they would move their holdings currently invested in money market funds to a variety of options, including bank checking accounts; separately managed outside accounts; government securities; commercial paper; local government investment pools; unregistered cash pools; repurchase agreements; and offshore funds.  The ICI's cover letter to the SEC noted:

To the extent that these products or investments are either less regulated or less transparent than money market funds, implementing these reforms could well increase the risks to the financial system and reduce regulators' ability to monitor financial markets.  

The survey is available on the SEC's website, here:  http://www.sec.gov/comments/4-619/4619-166.pdf