Update on Money Market Reform: Changes Coming to Fidelity Accounts

The money market sweep funds used in our clients’ Fidelity accounts will likely be changing in the coming months.  In a recent call, Fidelity highlighted the changes they have made to their Core Sweep money funds to convert or merge them into U.S. government-only products. By maintaining 99.5% of all investments in U.S. government securities (in addition to fulfilling all other 2a-7 fund regulatory requirements), these funds will be exempt from transitioning to the new floating NAV requirement by October 2016. This means that clients of Fidelity, while likely earning less than those invested in Prime Money Market Funds, will be able to maintain the stable-value $1 NAV sweep funds they are accustomed to in Core Sweep products (where excess cash in trading accounts is invested – or "swept" – daily until utilized or transferred out of the account). Retail money market funds (or those primarily utilized by "natural persons") are not beholden to the new floating NAV standard, but are allowed liquidity fees and redemption gates under certain conditions. As of the end of 2014, U.S. government Money Funds accounted for 14% of the $6.6 trillion of qualifying short-duration U.S. government available maturities (Treasury & Agency instruments), while Fidelity money funds in aggregate accounted for roughly $400 billion of all 2a-7 qualifying assets (both U.S. government and qualifying credit and repo positions as of March of this year). While not providing a set date for the transition, Fidelity said the changes will be made “well before” the October 2016 deadline.     

Source: Fidelity