Institutional Investment & Fiduciary Services - August 25 - Weekly Market Update

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Early last week, the Fed turned its sights toward the new regulations approved by the Securities and Exchange Commission (SEC) regarding money market funds, namely the ability for such funds to impose withdrawal fees or limit redemptions altogether. The aim of the regulation is to help avoid investors stampeding out of such funds during times of crisis as they did in September 2008 when institutional investors pulled nearly 40% of institutional assets out of the money market fund market. Several economists, however, have warned that such fees will have the opposite effect, potentially giving investors a strong incentive to pull investment from money market funds when they anticipate restrictions or fees being imposed on redemptions.