News Archives: April, 2009

In a press release sent out Wednesday morning, Federated Investors announced that the Pittsburgh-based company will become the subadviser for several Nationwide Funds. The release says, "Nationwide Mutual Funds has selected Federated to sub-advise three Nationwide money market mutual funds representing approximately $5.6 billion in combined assets, effective April 2, 2009."

It continues, "Federated is providing subadvisory services for the Nationwide Money Market Fund, the NVIT Money Market Fund and the NVIT Money Market Fund II. All three taxable money market funds seek current income consistent with preserving capital by investing in investment-grade fixed-income securities including commercial paper, asset-backed commercial paper and other fixed-income securities issued by U.S. and foreign corporations; U.S. government securities and U.S. government agency securities; obligations of foreign governments; and obligations of U.S. banks, foreign banks and U.S. branches of foreign banks."

The company adds, "With more than 30 years of experience in the money market fund industry, Federated's goal is to preserve principal, maintain liquidity and provide competitive yields. Federated manages money market portfolios with a conservative bias, emphasizing experienced portfolio management and stringent credit research that includes a review of capital structure, liquidity structure, management structure and other key factors before investing in any issuer."

According to Crane Data's Money Fund Intelligence XLS, Nationwide ranks 52nd among 89 managers of money market funds. (We show them as managing just $2.5 billion -- $1.98 billion Nationwide MMF Inst (GMIXX) and the $519 million Nationwide MMF Prime (MIFXX). The other funds are variable annuity money market portfolios, which aren't tracked in MFI XLS.)

Crane Data's quarterly Money Fund Intelligence Distribution Survey, which tracks money fund sales trends and contains U.S. and global money fund family market share rankings, features a piece entitled, "Party Ending for Money Fund Asset Growth" in its most recent issue. The article explains, "Money fund asset growth stalled in the first quarter of 2009, following the most impressive run-up in history." Below are excerpts.

MFI's Distribution Survey says, "From 2004 through 2008, money fund assets grew by almost $2 trillion, increasing from $1.913 trillion to $3.830 trillion (a gain of $1.917 trillion, or 100%). The only period that comes close to that nominal pace of growth was 1995-2000, when money fund assets rose by $1.092 trillion, or 121%, in the 5 years."

It continues, "Since Dec. 31, 2008, however, money fund assets have stalled, rising a mere $4 billion, or 0.1%, in the weeks through April 2. Assets have declined by over $100 billion, or 2.6%, over the past 6 weeks (from March 18 through April 22, 2009), the biggest drop since a decline of $121 billion the week ending Sept. 17, 2008 (the week Reserve Primary Fund 'broke the buck')."

The Survey adds, "Though there are seasonal factors driving the current dip, and April 15 never helps, it's clear that the tailwind money funds have enjoyed due to falling rates has ended. The ultra-low rate policy of the Fed is beginning to push investors out on the risk spectrum."

Finally, our quarterly writes, "Nonetheless, all is not lost for money funds. Though we clearly won't be seeing the inflows we've seen over the past several years, it's not certain that we're in for large outflows. Rates likely won't be rising for some time still, and past periods of ultra-low then rising rates, such as 2003-2004, have shown relatively minor erosion in money funds' asset base."

The Investment Company Insitute has released its 2009 Investment Company Fact Book. As in the past, this year's edition contains a wealth of statistics and analysis on the mutual fund industry, including plenty of nuggets on money market mutual funds. In its section "Demand for Money Market Funds, the ICFB says, "Net new cash to money market funds, particularly those funds invested only in U.S. government securities, remained strong in 2008, likely reflecting the flight to safety by investors in response to a deepening of the crisis in financial markets. Retail money market funds, which are principally sold to individual investors, received net new cash of $112 billion in 2008, following an inflow of $172 billion the previous year."

It continues, "Money fund yields followed the pattern of short-term interest rates, dropping fairly steadily throughout the year. The difference between yields on money market funds and those on bank deposits narrowed significantly from a little over 300 basis points at the start of 2008 to only 16 basis points by the end of the year. In general, retail investors tend to withdraw cash from money market funds when the interest rate spread narrows to a low level. Flows to retail money market funds in 2008 likely were boosted by investors' reactions to negative developments in the stock and bond markets."

The Fact Book says, "Institutional money market funds -- used by businesses, pension funds, state and local governments, and other large investors -- had inflows of $525 billion in 2008, following inflows of $483 billion the previous year. Inflows to institutional money market funds likely were boosted by several factors. First, short-term interest rates fell considerably during 2008 as the Federal Reserve eased monetary policy. Institutional money market funds tend to receive inflows when short-term interest rates decline because the yields on these funds lag behind and are therefore higher than those available on competing products, such as direct investments in commercial paper and short-term U.S. Treasury instruments."

"Second, the turmoil and illiquidity in credit markets that began in August 2007 intensified in 2008 and likely prompted corporate treasurers to make even greater use of institutional money market funds. Some corporate treasurers -- cognizant of the lack of liquidity in short-term credit markets and concerned about their ability to adequately monitor and assess credit quality -- may have taken the opportunity to redirect some portion of their companies' liquid assets away from direct purchases of short-term instruments and toward institutional money market funds. At year-end 2008, U.S. nonfinancial businesses held a record 32 percent of their short-term assets in money market funds. Institutional money market funds also received inflows from investors moving from unregistered cash pools and other cash-like investments during the credit crisis," says the ICI.

Look for more coverage in our pending Money Fund Intelligence Distribution Survey, our upcoming May issue of Money Fund Intelligence, and in future Crane Data News briefs.

As he does now almost every quarter, Federated Investors' J. Christopher Donahue held forth on virtually all issues on money fund-related on the company's earnings call Friday. Donahue, Federated, investors and analysts discussed fund flows, fee waivers, consolidation and outsourcing, regulations and enhancements, and more. (See also: "Federated Investors Shows Continued Inflows Into Money Funds in Q1".)

Donahue said, "So far in the 2nd quarter, we have seen expected patterns with early quarter inflows, followed by mid-month outflows, most likely from April tax payments.... New business trends are favorable as we continue to benefit from consolidation and outsourcing.... We added a new $6 billion separate account to subadvise money market assets in early April from a major insurance company. Our MMF market share was about 8.5% at quarter-end, compared to just under 7% at the end of 2007 and up from about 5% back in the year 2000."

He continued, "Consistent with industry patterns, we have seen a migration from Treasury money funds to government agency and prime funds. At quarter-end, Federated's MMFs by type were: $67 billion in Treasury funds (down $25 bil.), $131 billion in government agency (up $9 bil.), $94 billion in prime (up $16 bil.), and $36 billion in muni (up $1. bil.). In April, we have continued to see Treasury funds continue to decrease, agency funds have decreased slightly, and prime have continued to increase."

On waivers, Donahue said, "Low market interest rates continue to impact yields for money funds and Federated continues to incur waivers in certain money funds in order to maintain positive or zero net yields. During the first quarter, the impact of these waivers ... was a little over $5 million in reduced operating income. Based on current market conditions, we expect waivers to impact operating income by about $1.5-2 million per month over the next several months. Of course, there remains a wide spectrum of potential outcomes given the multiple variables involved." He cites market yields, asset changes, Fed actions, expense changes, custom mix changes, and the company's willingness to continue waiving as variables.

Donahue also said, "In terms of MM regulations and enhancements, Q1 saw an important development with the issuance of the ICI Working Group Report on Money Market Funds.... Federated supports the recommended enhancements and will work to implement [them] in the few areas where we are not already in conformance.... We believe that the report makes a vital contribution to the discussions on the important role of money market funds in our capital markets with a focus on enhancements designed to further strengthen the resiliencey of MMFs. Recent comments from Fed Chairman Bernanke, Treasury Secretary Geithner, and SEC Chair Shapiro indicate that the government and regulators appreciate the role of money funds and the importance of strengthening these funds."

Finally, in the Q&A session, Donahue said, "It's our view and the ICI's view that the marketplace should be in a good enough position to enable that [Treasury] insurance to lapse and we go back to the way we have successfully run money funds for 35-plus years.... In terms of capital charges, we think they are unnecessary and unwarranted in this business. Our idea is to focus on the competance and credit work and knowledge of your customer ... in order to, as Bernanke puts it, 'enhance the resiliency of money funds'.... These are investment products and should be evaluated as such."

Federated Investors, the third largest money fund manager, reported Q1 earnings last night and revealed "continued flows into money market funds" in the first quarter and relatively minor damage from fee waivers used to maintain zero or positive yields. Earlier this week, BlackRock, the fourth-largest money fund manager, reported large outflows from its money funds in its earnings release. This was surprising given that overall money fund assets continued to increase, albeit barely, in the period. But as April outflows pushes the YTD asset totals negative (see our "Link of the Day"), the current quarter may not be so mixed. Federated will host a conference call at 9am Friday morning.)

Federated's press release says, "Money market assets in both funds and separate accounts were $360.1 billion at March 31, 2009, up $82.6 billion or 30 percent from $277.5 billion at March 31, 2008 and up $4.4 billion or 1 percent from $355.7 billion at Dec. 31, 2008. Money market mutual fund assets were $328.8 billion at March 31, 2009, up $86.5 billion or 36 percent from $242.3 billion at March 31, 2008 and up $1.5 billion from $327.3 billion at Dec. 31, 2008."

The Pittsburgh-based company reported "Increases in revenue of $59.9 million from higher average money market managed assets" and a decrease of "$9.7 million in fee waivers recorded in Q1 2009 on certain money market funds in order to maintain zero to positive net yields." It explains, "These fee waivers were offset by a related reduction in marketing and distribution expenses of $4.6 million such that the net impact on operating income was a decrease of $5.1 million."

Federated, which in Q1 2009 "derived 71 percent of its revenue from money market assets," adds the disclaimer, "Fee waivers to produce positive or zero net yields may increase and such increases could be significant. The specific level of these waivers will be determined by a variety of factors including market yield levels for money market investments, asset levels within money market funds, changes in the mix of money market assets by type of fund, changes in the expense levels of money market funds and the willingness of the fund adviser to sustain these waivers."

Look for comments from Federated and look for our analysis of quarterly asset growth and money fund market share in our quarterly Money Fund Intelligence Distribution Survey publication early next week.

In the April issue of our monthly Money Fund Intelligence newsletter, Crane Data interviewed Thomas Poppey, Senior Vice President, Relationship Management, with Brown Brothers Harriman (BBH), America's largest private bank and prominent asset servicer and securities lending agent. Securities lending has been of growing interest to money market funds due to the tremendous investment balances coming from these programs, and due to the stress being felt by some of the 'shadow 2a-7' and 'enhanced cash' reinvestment pools.

On the state of the securities lending business, Poppey says, "From BBH's perspective, the securities lending business remains fundamentally strong. We feel this is a direct result of our program philosophy and approach to the business. Since the inception of our securities lending program in 1999, we have chosen to focus on returns driven from the intrinsic value of the securities, rather than on the reinvestment of collateral. We feel it is important to educate our clients and prospects about the differences between the securities lending business and the securities financing business, because they're very different. Providers that have focused on the 'financing' or reinvestment of cash collateral to generate returns are most likely the ones that have experienced program challenges and in many cases, client losses."

He continues, "Historically, in the U.S. cash has been king, so lenders have accepted cash as the predominant form of collateral. In Europe, cash has only recently started to become more common and is still less prevalent. Non-cash, or securities, collateral, is more widely used. So the acute collateral problems have occurred mostly in the U.S. Also important to note are the types of entities that are participating in lending. Speaking generally, given the risk profile of U.S.-registered investment companies, they have favored either 2a-7 registered funds or funds that have risk profiles similar to a 2a-7 fund for the reinvestment of cash collateral."

Poppey explains, "Public and corporate pension plan sponsors have increasingly accepted enhanced cash vehicles or cash plus vehicles. The investment profiles of these vehicles are much less conservative than the 2a-7 guidelines, so they may have more credit and interest rate risk. They might go out 2-3 years, possibly longer, and as a result generally have more structured products in their portfolios. Within the BBH program, our clients have always trended towards funds that are compliant with 2a-7 guidelines, understanding they can still generate meaningful returns without taking on additional investment risk. However, we also allow clients to self-manage collateral if they so choose."

Finally, Poppey tells us, "While BBH does not directly manage cash collateral, I can tell you that the pools in which our clients are invested have not realized NAV impairment during the course of the last 20 months. Most of our clients have a very conservative risk profile as it relates to collateral investment, and this goes back to our core program philosophy: When you are lending securities, you should be making your money from the lending of securities and not the reinvestment of collateral."

In the first major quarterly earnings release and call to shed light on money fund assets and issues, BlackRock showed outflows from its funds in Q1 and Chairman & CEO Larry Fink responded to several questions related to money markets on yesterday's conference call. BlackRock's release said, "Cash management experienced net outflows of $15.7 billion since year-end, although average assets were approximately 4% higher than during the fourth quarter of 2008. Over 92% of the outflows were in government money market funds, where rates are hovering near zero and we have waived a portion of our fees to avoid negative yields. We continued to expand our presence internationally, adding $2.9 billion of AUM during the quarter from clients in Europe and increasing our global market share slightly."

On BlackRock's earnings call, one questioner asked about BlackRock's view on the `ICI MMWG recommendations. Fink responds, "What I've said in the past is I do believe there's going to be a need for capital to be held back in our money market fund business. Right now, the industry is very dependent on having the government guarantee at 4 basis points on our money market funds as a backstop. As a money market industry, we should not think this is going to last forever, and we need to self-regulate and build up our own capital. I would argue though, if we are going to have to impose a capital charge to our own platform, it's going to raise the cost of the money market business."

He continues, "It may commodotize it, but it will also make it more of a scale business. The smaller parties are going to have to be weeded out because, between the risk of taking all of the liability on yourself but more importantly building up that capital base, it just reduces your overall profitability in that business. We have been very much willing to accept some form of capital charge to build up the resources to withstand any credit losses on behalf of our clients. And so ... it would make it even more of a scale business, and there are going to be fewer players. Even in a commodity business then, you're going to be differentiated by your full client service, and if you have an overall relationship and ... I believe we're going to be a net winner in that. I believe we're extremely well-positioned in the future money market fund business."

Another questions asked about fee waivers. Fink says, "The biggest area where we had fee waivers was in the government funds, and this is where we saw outflows. That is the biggest risk where we have issues with the low rates. On the non-government 2a-7 funds where now you have the government insurance backing you, because we're not as big in retail, we're not making fee waivers in those businesses yet. Obviously, if we continue to see very low interest rates and if rates go down, and investors appetites begin to be a little more upbeat, we're going to see outflows in everyting, whether we have fee waivers or non-fee waivers."

"This is what the Federal Reserve wants people to do, that's why they have low interest rates. They want investors when they feel comfortable to get out of liquidity funds into more risk-based assets. Ultimately, that's going to happen and that's going to work out. Our challenge is to make sure that we get some of the slice when they go into long-dated assets.... We will see, whether it's in six weeks or two years, some large-scale outflows out of money market assets into long-term assets."

Today's issue of American Banker contains yet another editorial arguing against regulating money funds as banks, a comment piece entitled, "Money Market Funds Have No Place on Banking Sheets". The comment was written by Arnold & Porter LLP partner and former comptroller of the currency John D. Hawke Jr. and David F. Freeman Jr..

The piece describes briefly describes money funds and their history and says, "Proposals for more regulation of money market funds have come from several sources. Both the Federal Reserve Board and the Treasury Department have stressed the importance of measured enhancements to regulation while recognizing the role the funds play.... The SEC and ICI approaches would strengthen the money fund industry while preserving the utility and desirability of these funds."

Hawke and Freeman continue, But a very bad idea has been presented by the Group of 30, a private organization of academics, industry executives and retired central bank officials from around the world." In January it issued a report that suggested money market funds be forced either to give up their stable net asset value and transactional and withdrawal features -- in essence, to become fluctuating-value short-term bond funds -- or to become special-purpose banks, subject to regulation and supervision by banking regulators, with capital and reserve requirements and access to loans from the central bank. This proposal would bring about the end of money market funds as we know them."

They say in American Banker, "The current leaders of the Fed, the Treasury and the SEC have been cool to this proposal, and with good reason -- it would needlessly deprive investors, the credit markets and the banking system of an extremely useful and minimally risky product.... Money market funds have been the cash management vehicle of choice for individuals and large and small businesses alike for years. Many have chosen the funds because they are seen as more convenient and a better investment than other options."

Finally, the editorial says, "Moving the funds into the regulated banking system would present major problems. Bank balance sheets, already under severe capital pressure, do not have the capacity to take on an additional $3.9 trillion of deposits.... In addition, removing these products as providers of funding in the credit markets would deprive both business and governmental borrowers of an extremely important source of short-term credit.... Money funds have become a ready source of short-term credit to major borrowers. If these funds were removed as a source of credit and liquidity, the shock to our financial system and our economy would be grave. This is not the time for such a draconian change.... Banks as a whole, despite FDIC insurance, are not safer than money market funds -- they are far riskier."

Last week, the Securities & Exchange Commission issued a "no-action" letter on the College Retirement Equities Fund's Money Market Account, which says the SEC would not "take any enforcement action ... if the College Retirement Equities Fund (CREF) ... values the securities in its Money Market Account portfolio using the amortized cost method under rule 2a-7 ... if the Money Market Account operates in accordance with rule 2a-7 but does not maintain a stable price per share at a single value." The enormous CREF MMA is a variable annuity and not a traditional "money market mutual fund".

The no-action letter, posted in a new "Money Market Portfolio Valuation" section, says to TIAA-CREF Counsel Dechert, "You state that CREF issues variable annuity certificates that are funded by eight portfolios, one of which is the Money Market Account. You state that the Money Market Account is, and holds itself out as, a money market fund within the definition of rule 2a-7(b) and that the Money Market Account complies with the risk limiting requirements of rule 2a-7(c)(2), (c)(3), and (c)(4) and all other applicable requirements of the rule. Unlike most money market funds, the Money Market Account does not make distributions of income, and therefore does not maintain a stable net asset value. In addition, unlike most money market funds, the Money Market Account does not use the amortized cost method to price its portfolio securities with a remaining maturity of more than 60 days."

The SEC's response continues, "CREF has determined that it would be in the best interests of the Account and CREF participants investing in the Account to begin using the amortized cost method to value all of the MMA's portfolio securities. CREF is concerned, however, because it believes that two provisions of rule 2a-7 could be read to limit use of the amortized cost method to money market funds that maintain a constant price per share at a single value. First, rule-2a 7(c)(1) states that a money market fund may use the amortized cost method, if the board of directors determines, in good faith, that it is in the best interests of the fund and its shareholders to maintain a stable net asset value per share or stable price per share, by virtue of the amortized cost method, and that the fund will continue to use such method only so long as the board believes that it fairly reflects the market-based net asset value per share. Second, rule 2a 7(c)(7)(i) provides that the fund's board shall establish written procedures reasonably designed, taking into account current market conditions and the fund's investment objectives, to stabilize the money market fund's net asset value per share at a single value."

The letter says, "You state that there is no fundamental policy reason that the use of the amortized cost method by a money market fund should be tied to maintenance of a single value per share. You represent that before implementing the amortized cost method, CREF's board of directors ... instead will have determined that it is in the best interests of the Account and its beneficial owners for the Account to provide additional stability in the Account's price per share by using the amortized cost method and complying with the requirements of rule 2a-7, except that the Account would not maintain a stable net asset value at a single value. You also state that CREF's board of directors will adopt written procedures reasonably designed to provide stability in the Account's price per share. The procedures will include all of those required by rule 2a-7(c)(7) for funds using the amortized cost method other than procedures designed to enable the Account to maintain a stable net asset value at a single value. In addition, CREF's prospectus will make clear that the Account does not maintain a constant value per share, and that the value will fluctuate. You maintain that by complying with all of the requirements of rule 2a-7 other than maintaining a stable share price, CREF will provide investors in the Account with all of the protections against dilution that rule 2a-7 provides for money market funds that maintain a constant share price."

Finally, the SEC "no-action" letter concludes, "Based on the facts and representations contained above and in your letter, we will not recommend enforcement action to the Securities and Exchange Commission against the Account under section 2(a)(41) of the Act and rules 2a-4 and 22c-1 thereunder if the Account uses the amortized cost method to value all of its portfolio securities. Because our position is based on the facts and representations above and in your letter, you should note that any different facts or representations may require a different conclusion. This response expresses our views on enforcement action only and does not express any legal conclusions on the issues presented."

Today's includes the story "Gov't Money Funds Ditch Treasury Guarantee", which features a table of Crane Data info showing which types funds are participating in the latest extension of the U.S. Treasury Temporary Guarantee Program for Money Funds.

The article says, "Like Fidelity, about half of the largest money fund managers have now decided not to guarantee their government funds, says Peter Crane, CEO and president of Crane Data, which tracks money market funds. That includes Dreyfus, Schwab and Vanguard. On the other hand, Federated, Wells Fargo and Morgan Stanley are among the groups that have elected to continue the guarantee on their government funds. Morgan Stanley seems to be the lone group also renewing the guarantee on its Treasury funds."

It adds, "The Treasury announced at the end of March that it was extending the guarantee program once again -- this time until Sept. 18. It does not have the authority to extend it beyond that date. This time around, fund firms have weighed multiple factors in determining whether to renew the guarantee for government and Treasury funds, say Swirsky and Crane."

See Crane Data's previous stories: "Largest Money Funds All Renew Treasury Guarantee for Prime Funds", "Fidelity, Federated, AIM Renew Treasury Guarantee; Drop Govt Funds?", "Treasury Money Funds, Most Govt, Dropping Temporary Guarantees".

Here is the most recent list of links to notification letters: Fidelity Investments; JPMorgan; Federated Investors; BlackRock; Dreyfus; Goldman Sachs; Schwab; Vanguard; Columbia; Wells Fargo; Western (Legg Mason/Citi); Northern; Invesco AIM; DWS; Morgan Stanley; First American; Evergreen; SSgA Funds; Barclays; RidgeWorth; T. Rowe Price; and American Century. The only company to decline to renew coverage to date is Credit Suisse, which is liquidating its money funds (see filing) and which has already lost the majority of its assets.

E-mail to request the most recent version of Crane Data's Treasury Guarantee Extension Participation Excel table.

Yet another mutual fund industry heavyweight, Dechert LLP, has weighed in on the debate surrounding possible changes to money market mutual fund regulations. The law firm's most recent "Dechert OnPoint" newsletter features an article entitled, "Report of the ICI Money Market Working Group and Other Money Market Fund Reform Proposal. The update discusses the ICI MMWG's recent proposals in detail, and suggests that funds should begin implementing these recommendations.

Dechert's Financial Services Group writes, "In response to the financial crisis, various governmental authorities and non-governmental organizations have made proposals to reform the regulation and oversight of money market mutual funds. On March 17, 2009, the Investment Company Institute's Money Market Working Group released its report, which includes a series of recommendations designed to "respond directly to weaknesses in current money market fund regulation, identify additional reforms that will improve the safety and oversight of money market funds, and ... position responsible government agencies to oversee the orderly functioning of the money market more effectively.""

They add, "The report notes that many of its recommendations can, and should, be implemented voluntarily by money market funds in advance of formal SEC rulemaking, and that "[i]t should be the goal of all money market funds to substantially implement [the Report's] recommendations by September 18, 2009.""

Dechert explains, "While the ICI Report represents the most comprehensive of the money market fund reform proposals released to date, various other parties have issued their own proposals for money market fund reform. Earlier in the year, a steering committee of the Group of Thirty released a series of financial reform recommendations that included proposals to completely change the way money market funds are structured and regulated. More recently, Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke separately outlined their own proposals for reforming the regulation of money market funds."

The article summarizes, "This update discusses the recommendations in the [ICI] Report, and compares them with the reform proposals offered or outlined by the G30, Chairman Bernanke, and Secretary Geithner."

PricewaterhouseCoopers just released a whitepaper entitled, "Why Change Money Market Funds?" which calls for a "balanced approach in regulations for money market funds". The press release says, "The paper ... highlights the important role that money market funds have played since their inception in the 1970s and provides an objective overview of recent proposals for changing the money market fund regulatory model. PwC contends that the risks of money market funds need to be evaluated, but the benefits that money market funds provide to individual investors and to the broader financial markets need to be preserved."

The release explains, "According to the paper, money market funds totaled $3.8 trillion in assets by the end of 2008, representing 40 percent of the mutual fund industry's net assets. The funds provide investors income from investing in Treasury bills, jumbo certificates of deposit and other short-term instruments that are not available to them directly. In addition, they have become an increasingly important source of nonbank short-term financing for companies as well as for municipal governments and the U.S. government and its agencies."

It continues, "However, in the latter part of 2008, the liquidity crisis in the credit markets caused turmoil in money market funds, and the bankruptcy of Lehman Brothers led to the first significant money market fund in the industry's history to 'break the buck.' Given that money market funds have become such a significant contributor of short-term liquidity to the financial markets, they do represent a risk to the stability of the financial markets if their investors were to redeem in enormous amounts. As a result, the Federal Reserve Board, the U.S. Treasury Department, the Securities and Exchange Commission and the Internal Revenue Service all stepped in to provide relief. Now the U.S. Congress is debating how to address calls for additional regulation."

Barry Benjamin, U.S. leader of PricewaterhouseCoopers Investment Management Group says, "We learned in 2008 that money market funds are not immune to catastrophic market events -- from the sudden credit downfall or from market panics -- even when issuers are continuing to meet their obligations. Extraordinary redemption levels by money market fund investors placed significant stress on the financial markets, and these risks need to be evaluated." He says a "balanced approach" is needed for regulation, adding, "It is clear that money market funds have provided investors and the U.S. and global financial markets with significant benefits since the 1970s, and any changes to the money market fund business model need to balance the interests of savers and investors with the need for the safety and soundness of our financial institutions and markets."

PricewaterhouseCoopers says, "The paper raises a series of questions that should be addressed to assess the known and unknown risks that money markets may pose." The release adds, "According to PwC, the key questions for America's political and regulatory leaders is whether money market funds are advantaged because they do not have the same regulatory requirements as other financial institutions that provide similar services and, if so, whether this represents a systemic risk to the U.S. and global financial systems. The PwC whitepaper also says U.S. leaders will need to consider whether money market funds offer, at relatively low risk and cost, opportunities for more innovation and choice to both investors and major borrowers, such as governments and businesses, and whether any regulation that curtails money market funds might result in greater concentration of financial market activity in banks and other financial institutions, which exhibited at least equal levels of stress and systemic risk in 2008."

All of the largest managers have signed up to renew their Prime funds' participation in the U.S. Treasury's Temporary Guarantee Program for Money Market Funds, which has extended protection until Sept. 18, 2009. But fund families have unanimously dropped coverage for Treasury funds, and half have dropped coverage for Government funds. Below, we list the declarations regarding coverage for the largest managers, and include links to the press releases to date. (To see the Treasury's release, click here.)

Among the Top 5 managers of money funds, Fidelity Investments, which manages $503 billion in money funds, will cover Prime and Tax-Exempt funds, but will not cover Government and Treasury funds. (See "Fidelity Investments Extends Participation for Certain Money Market Funds in U.S. Treasury Temporary Guarantee Program".) JPMorgan, which manages $381 billion, will renew coverage on Prime and Tax-Exempt, but not Treasury and Government funds. Federated Investors, which manages $315 billion, will renew coverage on Prime, Tax-Exempt and Government money funds, but not Treasury. BlackRock, which manages $247 billion, will cover Prime, Tax-Exempt and some Government, but will exclude Treasury and some Government funds (see "Shareholder Update on US Treasury Plan"). Dreyfus, which manages $238 billion, will cover Prime and Tax-Exempt, but not Government and Treasury (see "Dreyfus and BNY Mellon ... Filed for Extended Coverage in the U.S. Treasury Department's Temporary Guarantee Program for Money Market Funds through September 18, 2009").

Among those money fund managers ranked 5 to 10, Goldman Sachs, which manages $217 billion, will cover Prime and Tax-Exempt but not Government and Treasury funds. Schwab, which manages $209 billion, and Vanguard, which manages $206 billion, will cover Prime and Tax-Exempt only. Columbia, which manages $146 billion and which declined to cover Government funds last time, will cover Prime and Tax-Exempt funds only. Wells Fargo, which manages $133 billion, will cover Prime, Tax-Exempt and its Government funds.

Other managers that have posted statements saying they will renew coverage for Prime and Tax-Exempt funds include: Western (Legg Mason/Citi), which manages $105 billion and will cover all but Treasury funds; Northern, which manages $79 billion and will cover Government funds too (but not Treasury); Invesco AIM, which manages $78 billion and will exclude Government and Treasury funds; DWS, which will insure all but Treasury; Morgan Stanley, which will insure everything including its Treasury fund; First American, which will also exclude Government and Treasury funds; Evergreen, which exclude Treasury funds; SSgA Funds, which will insure Prime and Tax-Exempt funds only; Barclays, which is insuring its Prime funds only.

Other letters declaring coverage include those from: RidgeWorth, T. Rowe Price, and American Century. The only company to decline to renew coverage to date is Credit Suisse, which is liquidating its money funds (see filing) and which has already lost the majority of its assets. Check back for additional updates later today.

Fidelity Investments, the country's largest money fund manager with over $500 billion, Federated Investors, the third-largest with almost $315 billion, and Invesco AIM joined the growing list of fund companies confirming their renewed participation in the U.S. Treasury Temporary Guarantee Program for Money Market Funds. While these companies, and the industry as a whole, continue to cover Prime and Tax-Exempt money funds with the insurance, Fidelity and AIM dropped coverage on Government and Treasury funds, while Federated dropped coverage on just Treasury funds. The only company to decline to renew coverage to date is Credit Suisse, which is liquidating its money funds (see filing).

Fidelity's press release, entitled, "Fidelity Investments Extends Participation for Certain Money Market Funds in U.S. Treasury Temporary Guarantee Program" says, "Fidelity Investments and the Board of Trustees of Fidelity's money market funds have determined that Fidelity's general purpose taxable and tax-exempt money market funds will continue to participate in the U.S. Treasury Department Temporary Guarantee Program for Money Market Funds for the duration of the program, which ends on September 18, 2009. Fidelity money market funds that invest primarily in U.S. Government and Treasury securities will not participate in the program beyond April 30, 2009."

The Fidelity release continues, "Under the program, the U.S. Treasury will guarantee the share price of any publicly offered eligible money market mutual fund that applies for and pays a fee to participate in the program. The coverage applies only to investments held in participating money market funds as of the close of business on September 19, 2008. On March 31, 2009, the U.S. Treasury announced a final extension of the program until September 18, 2009, for those funds that elect to continue to participate in the guarantee program. The program will continue to only provide coverage to shareholders for the lesser of either the number of shares held as of the close of business on September 19, 2008, or the amount held on the day that a guarantee event occurs. If a shareholder closes his or her account, any future investment in the fund will not be guaranteed."

Fidelity says, "Our funds continue to invest in money market securities of high quality, and our customers continue to have full access to their investments any time they wish. Most importantly, we have been proactive in keeping our money market funds safe and in protecting the $1.00 net asset value (NAV), which has always been our No. 1 objective in managing these funds. That's what our clients and customers expect from us, and what we continue to be dedicated to providing for them."

As we wrote previously -- see Crane Data's April 9 News, "Treasury Money Funds, Most Govt, Dropping Temporary Guarantees" -- almost all Treasury money market funds, and many Government money market funds, will decline continued participation but virtually all Prime and Tax-Exempt money funds are expected to sign up. We should have a full list of participants by Tuesday night's deadline, which we will make available to subscribers of Money Fund Intelligence.

Below, we except from the April issue of Money Fund Intelligence, which "profiles" Joe Lynagh of the T. Rowe Price Group. Lynagh, who had managed TRP's tax-exempt money funds, took over the taxable funds from his predecessor, veteran James MacDonald, in January 2009. The fund management team overseas about $22 billion in money market funds, including the $6.7 billion T. Rowe Price Prime Reserves and the $6.4 billion T. Rowe Price Summit Cash Reserves, as well as separately managed accounts for its stock funds.

Lynagh tells us, "Fund management is and has always been about security selection. We maintain a very rigorous credit selection process. It's always been internally done. We certainly will reference the rating agencies, but we don't rely upon them. Anything that I buy in a money fund has to be scrubbed and scrutinized and approved by our credit analysts. Our investment process is such that I can't touch anything without it having first been reviewed by the credit team."

On T. Rowe's success in the money markets, he says, "Success requires that you be able to repeat an investment process consistently. You create an investment process that is attentive to the product's mission, that you can replicate and which will deliver yield, all the while being able to deliver that yield at an attractive expense ratio. So when I think about T. Rowe Price, it's really the culture in terms of how we run things and how we approach it."

"Success is not only in terms of your asset flows or how big you've gotten, but it's also about, especially in the current environment, whether you have been able to dodge bullets that others have taken.... We've been very fortunate. We've got a lot of really good people who have kept us out of the trouble that has really hit some of our peers hard," says Lynagh.

We asked, "Can money funds recover [from Reserve]?" Lynagh answers, "I definitely believe that they can and will recover. I think it will be a different environment though. Investors will be asking different questions, or maybe have slightly different priorities. I think managers will be a little more careful on how they are running their fund, and will maybe rethink the place of this product, within a larger investor profile."

Finally, he adds, "The good thing about the ICI recommendations is that the industry taking a hard look at itself and admitting that maybe there are some changes that need to be made here. What we all thought was perhaps common practice, is perhaps not the way everybody was doing it." To request a full copy of the interview, e-mail Pete.

Standard & Poor's Ratings Services yesterday attempted to correct some misperceptions about recent ratings comments regarding TLGP or FDIC-backed debt. In a publication entitled, "Treatment Of FDIC-Guaranteed Commercial Paper In Rated Money-Market Funds," S&P says it, "[B]elieves that commercial paper (CP) guaranteed by the Federal Deposit Insurance Corp. (FDIC) would fit within our minimum guidelines for securities rated 'A-1+' or equivalent for its principal stability fund ratings (PSFRs) regardless of our credit rating on the issuer." They say, "This would include rated government and treasury money-market funds, as long as certain conditions are met."

Yesterday's release says, "We are publishing this article to help market participants better understand our approach to reviewing PSFRs.... On April 6, 2009, we published an article titled "The Ratings Approach To U.S. Financial Institutions' FDIC-Guaranteed Commercial Paper." Here we stated that due to timing and settlement concerns, we will not assign an 'A-1+' short-term rating to CP programs based on the FDIC guarantee."

It continues, "However, because we expect payment on the guaranteed CP to be made within the seven-day liquidity window for money-market funds, for PSFR purposes, we believe that regardless of our credit rating on the issuer, these investments fit within our minimum credit quality guidelines for an 'A-1+' or equivalent rating as long as the following conditions are met: No more than 5% is invested with any one issuer; and, We have evidence or documentation from each guaranteed CP issuer held in the fund that CP is eligible and part of the FDIC guarantee program."

"Recognizing the potential delay in receiving payment from the FDIC under its guaranty and to provide us with the most accurate liquidity snapshot of the fund, we will include an additional five days on the final maturity date of each FDIC-guaranteed CP holding to determine whether the rated fund is within the weighted average maturity guidelines for its respective rating category. This incremental maturity is based on our general criteria for timely payment of sovereign-guaranteed debt: It must be during the grace period or within five business days of the due date," says the S&P report written by Primary Credit Analyst Peter Rizzo and Secondary Credit Analysts Joel Friedman and Mark Puccia.

In other news, see ICI Reports Money Market Mutual Fund Assets, which shows money fund assets increasing by $12.20 billion to $3.846 trillion in the week ended April 8, and see ICI's new "Money Market Fund Resource Center".

Early indications are that almost all Treasury money market funds, and many Government money market funds, will decline continued participation in the U.S. Treasury's Temporary Guarantee Program for Money Market Funds. But virtually all Prime and Tax-Exempt money funds are expected to sign up with Treasury to extend coverage through the new Sept. 18, 2009, deadline. Of those that have declared publicly so far, Dreyfus, First American, Schwab and Vanguard have gone with coverage on Prime and Tax-Exempt funds only, while Northern and Wells Fargo are covering all but their Treasury money funds. Funds have until Tuesday, April 13, to declare, so expect the rest to declare either tomorrow or Monday. (Funds are closed Friday due to the Good Friday Holiday.)

Dreyfus says in its "Update on Dreyfus Money Market Funds," posted April 8, "Dreyfus and BNY Mellon 'Prime' and 'Tax Exempt' Money Market Funds Have Filed for Extended Coverage in the U.S. Treasury Department's Temporary Guarantee Program for Money Market Funds through September 18, 2009. On March 31, 2009, The U.S. Treasury Department announced a further extension of Treasury's Temporary Guarantee Program for Money Market Funds until September 18, 2009. Only the Dreyfus and BNY Mellon 'prime' and 'tax exempt' money market funds have filed for extended coverage."

The Dreyfus release continues, "For shareholders of one of these funds, the Treasury's Temporary Guarantee Program will continue, through September 18, 2009, to provide a guarantee to participating shareholder accounts based on the number of shares held in such accounts as of the close of business on September 19, 2008. Any increase in the number of shares held in an account after the close of business on September 19, 2008 is not guaranteed. If the number of shares held in an account fluctuates over the period, even to 'zero,' investors will be covered for the number of shares held as of the close of business on September 19, 2008 or the current amount, whichever is less." View the list of participating Dreyfus funds here. For the Treasury's FAQ, click here.

On April 3, Schwab, the first to declare, said, "All Schwab money funds, with the exception of the Schwab U.S. Treasury Money Fund (SWUXX) and the Schwab Government Money Fund (SWGXX), intend to participate in the extension of the program." They add, It is important to note that Schwab money market funds continue to meet their two primary objectives: 1) always maintain a $1.00 net asset value; and, 2) continue to meet all daily redemption requests by clients. In order to meet our two primary objectives, the funds, as required by the regulations governing money market funds, invest only in high quality money market instruments that present minimal credit risk, meet strict diversification requirements, and mature in 13 months or less."

Vanguard's release says, "Trustees of the eight funds concluded that continued participation in the program would further help stabilize the short-term corporate and municipal credit markets, to the benefit of investors in all money market funds. Three Vanguard funds that invest primarily in high-quality, short-term U.S. government or government agency securities -- Admiral Treasury Money Market Fund, Treasury Money Market Fund, and Federal Money Market Fund -- will discontinue participation after April 30, 2009."

The April 2009 issue of Money Fund Intelligence, which was sent to subscribers yesterday, features the articles "ICI's MMWG Writes The Book on MFs," "T. Rowe Price Confident in Money Market Funds," and "Talking Sec Lending with BBH's Poppey." Every issue of MFI ($500 a year) also includes comprehensive money fund news, indexes, performance, and statistics. We also sent subscribers the brochure to our new conference, Crane's Money Fund Symposium, which will be held Aug. 23-25 in Providence, Rhode Island. (Visit for more details. Let us know if you'd like to request the full MFI issue or conference brochure.) We share some MFI excerpts below.

Regarding the recently-released ICI Money Market Working Group Report, MFI writes, "Though it's unclear exactly how money market funds and money fund regulation will look later this year, the release of the Investment Company Institute's Money Market Working Group Report appears to have decreased the odds of dramatic changes significantly. While the group's proposed changes are myriad and should reduce the risk in funds significantly, the report strongly opposes radical changes such as floating NAVs, permanent insurance, and capital reserves for money funds."

Our latest monthly newsletter also interviews T. Rowe Price Vice President and Portfolio Manager Joseph Lynagh, who tells us, "Obviously, the current rate environment makes the operation of money funds very challenging. You layer onto that the credit environment, so you have two challenges that run at odds with each other. One is trying to maintain a yield for your investors, and at the same time the universe of viable investments is a lot smaller than it once was given the problems with banks and other corporate issuers, and the breakdown of liquidity, etc. All of these problems are subordinate to the central problem of being in a very low rate environment. You want to provide yield to your shareholders, but certainly the credit environment is the dominant concern right now, which makes product management a real challenge."

Finally, the April Money Fund Intelligence discusses the state of the securities lending business with Brown Brothers Harriman's Thomas Poppey. MFI writes, "Securities lending has been of growing interest to money market funds due to the tremendous investment balances coming from these programs, and due to the stress being felt by some of the 'shadow 2a-7' and 'enhanced cash' reinvestment pools." Poppey tells MFI, "From BBH's perspective, the securities lending business remains fundamentally strong.... Providers that have focused on the 'financing' or reinvestment of cash collateral to generate returns are most likely the ones that have experienced program challenges and in many cases, client losses."

Look for more excerpts in coming days, and let us know if you'd like to see the full issue. Also, look for an update on money fund family participation in the Treasury's Temporary Guarantee Program for Money Funds soon. As we said in MFI, "We expect continued full participation, though more Treasury funds and some Government funds should shed coverage." But we hope to have a more formal count by tomorrow.

Late last week, Andrew "Buddy" Donohue Director of the Division of Investment Management of the U.S. Securities and Exchange Commission, the main regulator of money market funds, gave the Keynote Address at the Practising Law Institute's Investment Management Institute 2009. Donohue said, "[M]oney market funds have been one of the most important innovations within the mutual fund industry. In the 1970s, money market funds served as the vehicle that essentially introduced many investors to the mutual fund industry."

He continued, "Currently, with almost $4 trillion in assets, money market funds are of fundamental importance to the financial system as they serve to meet the liquidity and capital preservation needs of all types of investors -- both individual and institutional by maintaining a stable net asset value of $1.00. While money market funds are an innovative product that provided a great benefit to the fund investors, events of the past eighteen months have presented a challenge to the traditional money market fund model."

He describes the problems with SIVs and the protection put forth by advisors. "However, in September of 2008 during a period of extreme tightening of the credit markets we saw the first 'breaking of the buck' by a widely-held money market fund. It is gratifying to note that in the wake of adverse market conditions of September 2008, many intervened in the money market arena swiftly, dealing with such adversity for the greater good of investors and the market. Specifically, many money market fund sponsors or their parent firms were willing to voluntarily step in and assist money market funds facing credit or liquidity challenges by entering into asset purchase or credit support arrangements benefiting fund investors."

Donohue continues, "Furthermore, money market funds have also had to address the challenges posed by low or non-existent yields in treasury securities -- in fact, we have been seeing the lowest yields on Treasuries in 50 years.... As a result we have seen a number of treasury money market funds close to new investors and we understand funds have waived fees and expenses in order to avoid negative yields. As a result of these events, the Commission staff and the primary industry trade association for money market funds, the Investment Company Institute, have stated the need to review the current money market fund model in light of investor protection concerns that have emerged."

He says, "Many assert that the stable $1.00 NAV has been important to the development and popularity of money market funds. While the popularity of the stable $1.00 NAV is understandable, it does present certain potential drawbacks to investors.... These problems could be addressed by the adoption of a $10.00 NAV or a floating NAV. I believe these important issues must be considered when approaching money market fund reform."

Finally, he says, "As the review of the money market fund model and its regulatory regime is one of our top priorities in the Division of Investment Management this year, the staff is exploring these issues and we look forward to pursuing this area of reform in cooperation with the fund industry and fund investors.... The Division will recommend that the Commission update those regulatory requirements where and as necessary.... I appreciate the work the mutual fund industry has performed in this area through the Investment Company Institute's Money Market Working Group .... I view this as a good first step towards real reform in this area. I look forward to quickly developing recommendations for changes to protect money market investors."

Last month's issue of Treasury & Risk magazine contained an article entitled, "Cash: Irrational Insecurity?, which says that "Corporate investors are rethinking previous paradigms and still settling for low rates of return, although some see that beginning to change." The piece cites several industry experts on the current state of corporate cash investing. It says, "[F]or the foreseeable future extreme safety is in and return is out."

The article quotes Lee Epstein, president and CEO of Money Market One, "For years, corporate investors stuck to what were considered safe investments. Now we know that nothing is safe. You have to consider that the unthinkable can happen. It's the new paradigm."

It also cites, Mike Gallanis of Treasury Strategies, "Companies still are willing to take very little risk with their cash and are settling for incredibly low rates.... We definitely have not turned the corner yet."

Ben Campbell, president and CEO of Capital Advisors Group disagrees. He tells the magazine, "The flight to quality is over and the market has stabilized.... Confidence is starting to build in the money-fund arena. The market today is quite different than it was in early October, when the flight was in full swing." He adds, "Investment portals really don't give a lot of background information on the risk and credit processes used by the money funds."

In other news, see the new Kiplinger's Personal Finance "Not as Good as Cash," which wonders whether there is something wrong with ultra-short bond funds. Jeffrey Kosnett writes, "[T]he average ultra-short-term fund lost 8% last year. That's not my idea of a low-risk investment. From the middle of 2007 through the end of 2008, many of these funds lost more than 20%. No money-market fund, not even the impaired Reserve Fund, ever came within a step of a 20% loss."

The most recent issue of Vanguard's shareholder newsletter "In the Vanguard" features the article, "Jack Brennan discusses industry-wide money market reform effort," which interviews the Vanguard and ICI Money Market Working Group Chairman on the "group's effort, its findings, and the outlook for money market funds."

Brennan says the "goal of the Money Market Working Group ... was to get industry participants together, study the situation, and make recommendations for improvement and change without waiting for regulators or politicians to act. Money market funds have been a great success story for investors over the past three decades, but that doesn't mean we can't make them even better. We want to make sure that investors never lose confidence in these critical components of our financial system and, frankly, our economy."

He continues, "The recommendations for improving the stability of money market funds focused on five key themes: Mandating daily and weekly liquidity requirements for funds and requiring regular stress tests to evaluate a fund's ability to meet redemptions in all market scenarios. Limiting maturity of fund holdings from an average of 90 days to 75 days, which will reduce interest-rate risk. Requiring money market fund advisors to adopt 'know your client' procedures.... Raising minimum quality standards ... and giv[ing] special scrutiny to new money market instruments.... Enhancing disclosure to investors and transparency to regulators."

Brennan adds, "These concepts are nothing new. When properly followed, they've resulted in the extreme stability money market funds have offered since their introduction. The guidelines, once adopted, would raise the minimum industry standards currently in place to a 'best practices' level.... We anticipate this industry-wide effort will help restore a lasting confidence in money market funds and ensure they should not again have to be supported by short-term insurance policies at a cost to shareholders."

Finally, he says, "It's interesting when commentators from outside the industry describe money market funds as 'loosely regulated.' I feel that viewpoint is ironic and uninformed. Few financial products are as tightly regulated as money market funds. There are very tight limits in the way funds can invest; fund distribution practices are overseen by the Financial Industry Regulatory Authority (FINRA); the SEC regulates these funds; and every fund has an independent board of directors responsible for the implementation of investment policies and strategies. I hope the regulatory regime remains largely unchanged. The changes that the Working Group recommends build on a success story of funds, independent directors, and the regulators that is perhaps too rare in today's environment."

Crane Data LLC, the publisher of the monthly Money Fund Intelligence newsletter, announces the launch of a "beta" version of its newest and most comprehensive product for monitoring money market mutual funds, Money Fund Wisdom. The new Money Fund Wisdom, available to subscribers and trial users via the website, allows users to select custom money fund peer groups, to choose among dozens of data points to display, and to run current and historical queries.

For example, money fund managers, marketers and investors are able to select a category, such as Treasury Institutional funds, with assets over $1 billion and expense ratios under 0.20%, and display these funds' 7-day yields over the past 24 months, along with rankings, assets, and ratings. Users may save queries, choose from a library of "canned queries," and select from any of the extensive data fields contained in Crane's Money Fund Intelligence XLS.

The initial test version of Wisdom contains over two years worth of monthly performance and offers 7-day and 30-day yields, 1-month, 3-month, YTD, 1-year, 3-year, 5-year, 10-year and since inception returns, assets, expense ratios, average maturities, ratings, rankings, and much more. Subscribers also gain access to the current and archived issues of the monthly Money Fund Intelligence newsletter and the Money Fund Intelligence XLS spreadsheet, as well as to additional website features like fund "profile" pages.

Since launching Crane Data almost three years ago, the money fund tracking company has introduced its flagship Money Fund Intelligence newsletter, its MFI XLS complement, Money Fund Intelligence Daily, Brokerage Sweep Intelligence, and the new Money Fund Intelligence International. The company also of course provides extensive free and premium resources via its website at and will soon announce its first conference event, Crane's Money Fund Symposium.

E-mail Pete Crane or call us at 1-508-439-4419 if you're interested in participating in or learning more about our Money Fund Wisdom free "beta" test. We will be adding daily money fund information and "offshore" money fund information in separate modules in coming months, and we look forward to hearing your feedback.

Yesterday at 4:00pm, the U.S. Treasury Department "announced an extension of its temporary Money Market Funds Guarantee Program through September 18, 2009, in order to support ongoing stability in financial markets." The Program, originally launched on Sept. 19, 2008, had been scheduled to end on April 30, 2009. Most funds will continue to pay 1.5 basis points for coverage and will have until April 13 to reapply. We expect a number of Treasury and government funds to drop coverage, but we expect prime and tax-exempt funds to virtually all reenlist.

Treasury said in its press release, "As a result of this extension, the temporary guarantee program will continue to provide coverage to shareholders up to the amount held in participating money market funds as of the close of business on September 19, 2008. All money market funds that currently participate in the Program and meet the extension requirements under the Guarantee Agreements are eligible to continue to participate in the Program. Funds that are not currently participating in the Program are not eligible to participate."

It continues, "The Extension Notice attached below provides the procedures for participating funds to follow to ensure continued participation in the Program as well as instructions for making the Program extension participation payments. Funds are required to submit a program extension payment, an extension notice and an updated Annex A by April 13, 2009, and a Bring-Down Notice by May 11, 2009. The amount of the payment for the extension period will be based on a fund's net asset value as of September 19, 2008."

"For funds that had a market-based net asset value greater than or equal to 99.75 percent of their stable share price, the payment will be 0.015 percent, or 1.5 basis points, multiplied by the number of shares outstanding on September 19, 2008. For funds that had a market-based net asset value less than 99.75 percent of their stable share price but greater than or equal to 99.50 percent of their stable share price, the payment will be 0.023 percent, or 2.3 basis points, multiplied by the number of shares outstanding on September 19, 2008. The Program extension payment amounts, when combined with prior payment amounts, equate to 4 or 6 basis points (on an annualized basis) of the fund's asset base over the entire extended Program term," says the Treasury.

They add, "While the Program protects the accounts of investors, each money market fund makes the decision to participate in the program. Investors cannot sign-up for the Program individually. The Program currently covers over $3 trillion of combined fund assets."

The Investment Company Institute recently advised money market mutual funds in its Report of the Money Market Working Group, "It should be the goal of all money market funds to substantially implement these recommendations by September 18, 2009, when authorization for the Treasury Temporary Guarantee Program for Money Market Funds expires. This will provide additional assurance to money market fund investors and help facilitate an orderly transition out of the Guarantee Program."

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