Many Firms Abandon Prime Institutional Funds | Fred Teufel Insights
VIGILANT INSIGHTS
Introduction
As the SEC’s new liquidity and fee requirements went into effect Wednesday, October 2nd, 2024, many Firms have decided to terminate or merge their existing Prime Institutional Funds into a Government Fund.
Compliance challenges are a major consideration, as the portfolio pricing and redemption fee calculations are at a minimum, required daily and create too much of a burden.
In an Ignites article, Vigilant Director, Fred Teufel, CPA, MBA, CGMA, provided insights into changes Firms have made.
Fred Teufel Insights
Major players, such as Vanguard and Schwab, converted their Prime Institutional Funds into other products this year. Over $355 billion in assets have left that market this year.
Fred mentions that the few Firms that have stayed the course have moved their pricing from end-of-day to3pm to complete the calculations required. He assesses that in most cases the compliance requirements and resources required are not worth the benefits of providing Prime Institutional Funds Money Market Funds in the marketplace at all, and particularly hourly priced Funds.
Vigilant’s Conclusion
These regulations occurred due to the stress Funds have faced in the past when investors rapidly exited the money market.
SEC Commissioner, Hester Peirce, dissented, saying that this Rule Adoption would kill Prime Institutional Funds.
It is essential for the Firms that have continued to offer Prime Institutional Funds to be sure that they meet the requirements and compliance challenges.
If you require assistance in assessing the benefits and risks of continuing in this market, please reach out to Vigilant today.