Marketwatch's Chuck Jaffe writes "Your money-market fund is about to undergo some changes." The opinion piece says, "The [prime to government conversion] change is mostly under the radar, and will have no real impact on risk or return. It's part of an industry-wide overhaul of the money-fund business that would be getting a lot of attention if the group had a decent yield and investors felt it was anything more than a parking place for their cash.... Under the new rules, institutional and municipal money-market funds will move from the stable $1 share price to a floating net asset value. Retail funds sold to individual investors will maintain the buck as their pricing standard. Further, the rules allow for all money funds to temporarily prevent investors from making withdrawals -- or to impose fees on redemptions -- during times of extreme volatility. Funds are moving from prime funds to government funds because the rule changes don't apply to retail funds that invest only in the debt of the federal government and agencies such as Fannie Mae and Freddie Mac. Firms including Fidelity Investments, Franklin Templeton and others already have made the change, affecting billions of dollars. Shareholders barely noticed. This isn't like changing an asset allocation to buy a government bond fund; instead, it's deciding between safe and safer." The piece adds, "The difference -- the cost to you as an investor -- is "about 0.1 [percentage points] max," said Peter Crane of Crane Data, publisher of Money Fund Intelligence, "which isn't much in real terms, though it is a lot when it comes off a yield of about 0.2 max." Investors who don't want to lose that extra yield can stick with prime money funds."
