scholarly journals Harnessing Whales: The Role Of Shadow Price Disclosure In Money Market Mutual Fund Reform

2013 ◽  
Vol 11 (4) ◽  
pp. 187
Author(s):  
Larry G. Locke ◽  
Ethan Mitra ◽  
Virginia Locke
Keyword(s):  
Mutual Fund ◽  
Financial Stability ◽  
Shadow Price ◽  
Money Market ◽  
Securities And Exchange Commission ◽  
Shadow Prices ◽  
Font Size ◽  
Money Market Funds ◽  
Fund Industry ◽  
The Impact

<span style="font-family: Times New Roman; font-size: small;"> </span><p style="margin: 0in 0.5in 0pt; text-align: justify; line-height: normal; mso-pagination: none;" class="MsoNormal"><span style="color: black; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 10pt; mso-themecolor: text1;">The money market mutual fund industry is experiencing a sea change.<span style="mso-spacerun: yes;"> </span>Thanks, in large part, to their role in the 2008 market break, U.S. securities regulators have targeted money market funds for a structural overhaul.<span style="mso-spacerun: yes;"> </span>Runs on money market funds by institutional investors in the wake of the Lehman Brothers bankruptcy weakened the short-term credit market to the point of collapse.<span style="mso-spacerun: yes;"> </span>The resulting intervention of the Federal Reserve and the Treasury may have saved the economy from further damage but came at such a perceived cost that legislation now forbids it.<span style="mso-spacerun: yes;"> </span>Both the Securities and Exchange Commission (SEC) and the Financial Stability Oversight Council (FSOC) believe restructuring is necessary.<span style="mso-spacerun: yes;"> </span>Their only question appears to be exactly what form the product will take.</span></p><span style="font-family: Times New Roman; font-size: small;"> </span><p style="margin: 0in 0.5in 0pt; text-align: justify; line-height: normal; mso-pagination: none;" class="MsoNormal"><span style="color: black; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 10pt; mso-themecolor: text1;"> </span></p><span style="font-family: Times New Roman; font-size: small;"> </span><p style="margin: 0in 0.5in 0pt; text-align: justify; line-height: normal; mso-pagination: none;" class="MsoNormal"><span style="color: black; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 10pt; mso-themecolor: text1;">One of the elements being considered in the reform effort will be increased disclosure of money market fund shadow prices.<span style="mso-spacerun: yes;"> </span>The regulators have posited that more frequent and more available disclosure of fund shadow prices will lead to more discipline being exerted on the fund industry, especially by the institutional market.<span style="mso-spacerun: yes;"> </span>A revamped disclosure regime, however, has been in effect since monthly shadow price disclosures were imposed by the SEC in December 2010.</span></p><span style="font-family: Times New Roman; font-size: small;"> </span><p style="margin: 0in 0.5in 0pt; text-align: justify; line-height: normal; mso-pagination: none;" class="MsoNormal"><span style="color: black; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 10pt; mso-themecolor: text1;"> </span></p><span style="font-family: Times New Roman; font-size: small;"> </span><p style="margin: 0in 0.5in 0pt; text-align: justify; line-height: normal; mso-pagination: none;" class="MsoNormal"><span style="color: black; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 10pt; mso-themecolor: text1;">This study looks at the impact of those 2010 disclosure regulations on different sectors of the market.<span style="mso-spacerun: yes;"> </span>It seeks to identify a correlation between shadow prices and changes in assets for both retail and institutional funds.<span style="mso-spacerun: yes;"> </span>The authors assess the findings of the study and discuss the implications of those findings for the impending regulatory restructuring.<span style="mso-spacerun: yes;"> </span></span></p><span style="font-family: Times New Roman; font-size: small;"> </span>

US SEC approves sweeping amendments to rules governing money market funds

2015 ◽  
Vol 16 (1) ◽  
pp. 25-39
Author(s):  
Jack Murphy ◽  
Stephen Cohen ◽  
Brenden Carroll ◽  
Aline A. Smith ◽  
Matthew Virag ◽  
...  
Keyword(s):  
Financial Services ◽  
Boards Of Directors ◽  
Financial Stability ◽  
Money Market ◽  
Content Type ◽  
Fund Managers ◽  
Money Market Funds ◽  
The Usa ◽  
To Come ◽  
The Impact

Purpose – To explain the background and details and to discuss the implications of the USA Securities and Exchange Commission’s (SEC’s) July 23, 2014 amendments to Rule 2a-7 and other rules that govern money market funds under the Investment Company Act of 1940. Design/methodology/approach – Explains the background, including problems during the financial crisis, the USA Treasury’s temporary guarantee program in 2008, earlier SEC proposals, and the USA Financial Stability Oversight Council’s recommendations. Details the amendments to Rule 2a-7, including the authorization to impose liquidity fees and redemption gates, the floating net asset value (NAV) requirement, the impact of the amendments on unregistered money funds operating under Rule 12d1-1, guidance on fund valuation methods, disclosure requirements, requirements for money fund portfolios to be diversified as to issuers of securities and guarantors, stress testing requirements, and compliance dates. Findings – The Amendments set forth sweeping changes to money fund regulation and will have a profound effect on the money fund industry. Although the most significant provisions of the Amendments – the floating NAV requirement and the imposition of liquidity fees and redemption gates – will not go into effect for two years, the changes to the industry will be apparent almost immediately. Practical implications – Money fund managers and boards of directors should begin assessing the potential impact of the Amendments and develop a schedule to come into compliance. Originality/value – Practical guidance from experienced financial services lawyers.

SEC staff issues money market fund reform frequently asked questions

2015 ◽  
Vol 16 (4) ◽  
pp. 47-54 ◽  
Author(s):  
Jack Murphy ◽  
Brenden Carroll ◽  
Stephen Cohen ◽  
Joshua Katz ◽  
Justin Goldberg
Keyword(s):  
Financial Services ◽  
Boards Of Directors ◽  
Decimal Place ◽  
Money Market ◽  
Securities And Exchange Commission ◽  
Content Type ◽  
Fund Managers ◽  
Money Market Funds ◽  
Fund Industry ◽  
To Come

Purpose – To explain the background and details of the responses from the Staff of the Division of Investment Management of the US Securities and Exchange Commission (SEC) to certain frequently asked questions (FAQs) regarding the July 23, 2014 amendments to Rule 2a-7 and other rules that govern money market funds under the Investment Company Act of 1940 (1940 Act). Design/methodology/approach – In July 2014, the SEC adopted sweeping amendments to Rule 2a-7 and other rules that govern money market funds under the 1940 Act (Amendments). The Amendments (i) require “institutional” money funds to operate with a floating net asset value (NAV), rounded to the fourth decimal place (e.g. $1.0000) and (ii) permit (and, under certain circumstances, require) all money funds to impose a “liquidity fee” (up to 2 per cent) and/or “redemption gate,” once weekly liquidity levels fall below the required regulatory threshold. The article briefly discusses the background and the events leading up to the FAQs and describes key responses from the Staff on a variety of issues. Findings – The Amendments set forth sweeping changes to money fund regulation and will have a profound effect on the money fund industry. Although the most significant provisions of the Amendments – the floating NAV requirement and the imposition of liquidity fees and redemption gates – will not go into effect for two years, the changes to the industry will be apparent almost immediately. The FAQs provide clarity on a number of issues that are relevant to the money fund industry. Practical implications – Money fund managers and boards of directors should begin assessing the potential impact of the Amendments and develop a schedule to come into compliance. Originality/value – Practical guidance from experienced financial services lawyers.

scholarly journals Performance and Evaluation of Portfolio of Mutual Funds

2015 ◽  
Vol 2 (2) ◽  
pp. 1-5
Author(s):  
Agha Ammad Nabi ◽  
Umair Zuhair
Keyword(s):  
Mutual Funds ◽  
Mutual Fund ◽  
Money Market ◽  
Sharpe Ratio ◽  
Money Market Funds ◽  
Equity Funds ◽  
State Of Mind ◽  
Fund Industry ◽  
Mutual Fund Industry ◽  
Performance And Evaluation

The basic approach of any kind of investor is to handle and minimize the risk and increase their profits. It is common fact that to manage the risk is not to have all eggs in a basket in monetary markets and this saying is familiar as diversification. The diversifications need decision regarding which basket to have which eggs and how much eggs should have in the basket. The lack of financial expertise in the context of mutual funds for making investment in markets has introduced mutual funds with the state of mind of financial experts. The experts of financial markets have only advantage since the fact that it is always win-win situation for them who don’t know about investment and decreasing the risk via managing funds in effective way by bigger portfolios and sufficient amount of money. As the mutual fund industry of Pakistan expanded with some pace in first decade of this century and due to this reason the performance evaluation of this industry become critical and hot topic. The study aims to measure the performance of Pakistani mutual fund industry from 2014 to 2017. There are total 233 mutual funds operating in the mutual industry of Pakistan, out of 233 mutual funds, total 45 mutual funds were selected for the study; 23 mutual funds were from equity while only 22 mutual funds were selected form money market. Sharpe ratio was used to measure the risk-adjusted performance of mutual funds and the Sharpe ratio in both equity funds and money market funds are positive, thus indicating that funds managers have the ability to diversify investment to decrease the risk.

scholarly journals The SECs Attempted Use Of Money Market Mutual Fund Shadow Prices To Control Risk Taking By Money Market Mutual Funds

2012 ◽  
Vol 10 (6) ◽  
pp. 345
Author(s):  
Larry G. Locke ◽  
Virginia R. Locke
Keyword(s):  
Mutual Funds ◽  
Risk Taking ◽  
Shadow Price ◽  
Market Value ◽  
Money Market ◽  
Policy Implications ◽  
Share Price ◽  
Shadow Prices ◽  
Money Market Funds ◽  
Money Market Mutual Funds

One of the major advantages of money market mutual funds as a short term cash investment vehicle is that they are always purchased and sold for $1 per share. That constant $1 share price is maintained, despite the obvious fact that the funds holdings are frequently changing value, through a permissive SEC regulation that entitles money funds to value their portfolio securities at amortized cost rather than market value. At the same time, funds have always monitored their true market value in what is referred to as the funds shadow price, disclosed on a semi-annual basis. Starting in December, 2010, the SEC ordered money funds to publish their shadow prices monthly in hopes that investors would take notice and provide market discipline to money funds that failed to keep the funds market value sufficiently close to $1 per share. The expressed intention of the SEC was that investors would restrain money market fund managers from taking undue risks. This study analyzes whether the SECs strategy is working. By assessing the relationship between money market funds shadow prices and subsequent changes in net assets, the authors can look for evidence of whether the market is performing the function the SEC intends. The authors have examined monthly disclosures of shadow prices and asset changes for over 100 money market funds since the funds commenced reporting. Through a series of linear regression analyses, the authors have found no relevant correlation between money funds shadow prices and investor activity. The ramifications of this lack of correlation are potentially significant, particularly now as financial regulators are concerned that money fund holdings of European banks might transmit the current credit deterioration in Greece to U.S. markets. The SEC and other financial regulators are counting on disclosure of shadow prices as a tool to avoid the kind of risk taking that ultimately contributed to the credit market freeze experienced in 2008. If that tool is, in fact, not working, the SEC may be obliged to attempt alternative strategies. The authors discuss the policy implications of their findings.

A Study on Investment Decision of Investors With Reference to Penetration of Mutual Funds in India

2016 ◽  
Vol 5 (2) ◽  
Author(s):  
Ratish C Gupta ◽  
Dr. Manish Mittal
Keyword(s):  
Decision Making ◽  
Real Estate ◽  
Mutual Funds ◽  
Capital Markets ◽  
Mutual Fund ◽  
Financial Services ◽  
Investment Decision ◽  
Fund Industry ◽  
Mutual Fund Industry ◽  
The Impact

The Indian mutual fund industry is one of the fastest growing and most competitive segments of the financial sector. The extent of under-penetration in the market is a sore point with the financial services industry, with a large amount of savings being channelized into fixed deposits, gold and real estate rather than the capital markets. The mutual fund industry is yet to spread its reach beyond Tier I cities. The top fifteen cities contribute to 85% of the pie, with the remaining 15% distributed among other cities. The study seeks to determine the impact of decision making of investors on current situation of mutual fund industry.

scholarly journals Money Market Funds in Europe and Financial Stability

2012 ◽  
Author(s):  
Julie Ansidei ◽  
Elias Bengtsson ◽  
Daniele Frison ◽  
Giles Ward
Keyword(s):  
Financial Stability ◽  
Money Market ◽  
Money Market Funds

scholarly journals Mutual Fund Performance and the Impact of Superannuation and Financial Regulation

2018 ◽  
Author(s):  
James M. Cooper ◽  
Russell Gregory-Allen
Keyword(s):  
New Zealand ◽  
Mutual Funds ◽  
Open Economy ◽  
Mutual Fund ◽  
Financial Regulation ◽  
Positive Impact ◽  
Small Open Economy ◽  
Fund Industry ◽  
Mutual Fund Industry ◽  
The Impact

Financial innovation such as a new superannuation scheme can allow for broader participation in retirement savings by individuals, but might also impact existing investments. On the other hand, mutual fund regulation involves a balancing act between protecting investors, and allowing fund managers to exercise their skills. Some recent changes in the fund environment of New Zealand allows an examination of the impact on performance from those changes in a small, open economy. Using a sample of New Zealand mutual funds, we compared performance before and after the introduction of two significant changes in the financial environment of New Zealand. In 2007, a state-sponsored investment scheme called KiwiSaver was introduced, providing significant incentives for more and more New Zealanders to save. Participation was substantial, and by 2015 KiwiSaver funds under management had exceeded traditional open-end funds. At the time of KiwiSaver’s introduction, mutual fund regulations was quite lax, particularly in the area of financial disclosure. However, in 2013 a new law was introduced, substantially increasing the disclosure requirements for those funds participating in the KiwiSaver scheme. First we examined, the impact on the New Zealand mutual fund industry upon the introduction of KiwiSaver, and then on the introduction of the increased KiwiSaver regulations, in order to determine if these harmed the overall New Zealand mutual fund industry. We found that the New Zealand mutual funds which focused on New Zealand or Australian equities experienced some negative performance after the introduction of KiwiSaver, but the impact on the overall industry was not significant. We also found that the increased regulations had some positive impact on performance, particularly for those funds emphasising global equities.  

scholarly journals FACTORS INFLUENCING THE INVESTORS TO INVEST IN MUTUAL FUNDS: AN EMPIRICAL ANALYSIS

2020 ◽  
Vol 6 (9) ◽  
pp. 45-52
Author(s):  
Bishwajit Rout ◽  
Sangeeta Mohanty
Keyword(s):  
Mutual Funds ◽  
Mutual Fund ◽  
Exchange Traded Funds ◽  
Equity Fund ◽  
Index Funds ◽  
Money Market Funds ◽  
Wide Range ◽  
Different Types ◽  
Fund Industry ◽  
Mutual Fund Industry

Indian mutual fund industry started with traditional products like equity fund, debt fund and balanced fund and later significantly increased it’s product base. Today, the industry has introduced a wide range of products such as money market funds, sector specific funds, index funds, gilt funds, insurance linked funds, exchange traded funds, and marching towards reality funds. The different types of schemes offered by the Indian mutual fund industry provide several options of investment to common man. What is noteworthy is that bulk of the mobilization has been by the private sector mutual funds rather than bank sponsored mutual funds. Through this paper the author has attempted to focus on the the factors that motivate the investors to invest in mutual funds.

Can mutual fund flows serve as market risk sentiment?

2017 ◽  
Vol 18 (2) ◽  
pp. 159-185 ◽  
Author(s):  
Hsin-Hui Chiu ◽  
Lu Zhu
Keyword(s):  
Mutual Fund ◽  
Risk Perceptions ◽  
Money Market ◽  
Fund Flows ◽  
Equity Fund ◽  
Content Type ◽  
Market Sentiment ◽  
Money Market Funds ◽  
Primary Driver ◽  
Mutual Fund Flows

Purpose This paper aims to examine the information content of mutual fund flows and its indication on investors’ preference/tolerance toward risk. Design/methodology/approach Mutual funds are grouped into different categories based on assets with different levels of risk perceptions (e.g. equity fund, money market fund), and this information is publicly accessible. This paper examines the correlation patterns between fund flows and changes in credit default swaps (CDS) spreads. In addition, it also examines such a relation by dividing the samples into different fund types (e.g. retail vs institutional fund flows). Findings This paper suggests that equity fund flows are negatively related to CDS spreads, whereas money market fund flows are positively related to CDS spreads. Furthermore, it indicates that retail fund flows provide insightful information and serve as the primary driver behind the relation between fund flows and CDS spreads. Originality/value The findings of this paper indicate that flows into equity and money market funds could serve as a risk sentiment in credit markets. And this is the first study, to the best of the author’s knowledge, to establish such a linkage between fund flows and CDS spreads to help investors gauge credit market sentiment.

A Study on Factors for Investor Dissatisfaction towards Mutual Funds in Bhopal City

2016 ◽  
Vol 5 (1) ◽  
Author(s):  
Ms. Pooja Gupta
Keyword(s):  
Mutual Funds ◽  
Mutual Fund ◽  
Investment Option ◽  
Fund Industry ◽  
Mutual Fund Industry ◽  
The Impact

Mutual fund as an investment option still needs to be accepted by the investors as an instrument in their basket of investment. Presence of the mutual fund industry has been more than 5 decades old and yet efforts are made, to strive hard, for its existence and survival in the market. Despite that more than 1300 schemes are marketed to meet the investor objectives by 44 AMC’s in India, yet the industry is unable to gain the trust and satisfaction of investors. This paper attempts to evaluate the factors that contribute to investor dissatisfaction in Bhopal city and also the impact of dissatisfaction on the tenure of investment in mutual funds.

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