The asset management industry’s chief trade group said it would support temporary withdrawal restrictions for US money market mutual funds, but said in comments to regulators Thursday that bigger changes are not needed to help sustain financial markets during crisis.
Standing its ground, the Investment Company Institute reiterated positions it had previously spelled out for the $2.6 trillion industry, and offered few of the compromises presented by some fund sponsors recently.
Instead, the organization – known as the ICI – outlined a more limited plan resembling one pushed by BlackRock Inc , the largest asset manager. It lets money funds put ”gates” – or temporary redemption limits – in place during times of market stress, along with extra redemption fees. Coupled with reforms to the money funds in 2010, the fees would act as circuit breakers to slow heavy withdrawals, the ICI said.
”A lot of members believe that if something more is needed, this is a way to stop redemptions,” said Karrie McMillan, the ICI’s general counsel, in a telephone interview.
Other financial firms have been more flexible. Last week Charles Schwab Corp outlined a plan to let some prime money funds ”float” their net asset values away from a fixed price of $1 per share, for instance, as a way to make it easier to cope with a deluge of shareholder redemptions.
McMillan said such tweaks would require sweeping accounting changes that could be hard to put into practice. Among the ICI’s biggest members are money fund sponsors Fidelity Investments and Federated Investors Inc, which have been much less enthusiastic about changes.
The ICI filed its comments to the Financial Stability Oversight Council. The risk council is led by the US Treasury Department and includes officials from the Securities and Exchange Commission and the Federal Reserve. (Reuters)