Preliminary results of the 2012 AFP Liquidity Survey
released Wednesday reinforced what corporates have been saying for months: If any or all of the three rules rumored to be proposed by the U.S. Securities and Exchange Commission are enacted, companies will shed their money market fund investments.
No less than 77 percent of survey respondents said they would stop investing in MMFs if the NAV were allowed to float, with 56 percent immediately liquidating all or some of their current MMF holdings. Fully 80 percent of companies would stop investing if MMFs were subject to redemption holdback provisions, with 73 percent immediately liquidating all or some of their current holdings. Lastly, 66 percent of respondents said they would stop investing if fund companies were required to raise reserve capital (e.g., through fees), with 55 percent immediately liquidating all or some of their holdings.
“These scenarios would have a profound effect on the economy,” said Jim Kaitz, AFP’s president and CEO. “Overwhelmingly, treasurers would trim money fund holdings. Money funds are a main purchaser of commercial paper. Without a market for commercial paper, many companies would have a harder time funding operations.”
The full Liquidity Survey will be released in July.