Geared towards the executive membership of AFP, Executive Guides take an in-depth look at specified topics that are developed via interviews with treasury executives. They are presented as studies, with practical applications and tools such as models and checklists.

Money Fund Reform: The Broader Implications

Underwritten by Allspring Global Investments

EXECG-22_ Money Fund Reform header

The 2022 AFP Executive Guide: Money Fund Reform: The Broader Implications, underwritten by Allspring Global Investments, identifies the likely effects of the various SEC proposals to help treasurers prepare for possible change. The guide also discusses wider market issues and suggests you review investment strategies and policies as we head into 2023.

For corporate treasurers, money funds play a dual role: they are a popular vehicle for investing corporate cash, and by actively investing in short-dated securities, they provide a market for corporate issuers of commercial paper. 

This guide explores:  

  • Overview of SEC Reforms
  • What are the Broader Implications of Reform?  
  • What You Can Do Now 
  • What’s Coming Up?  
  • Takeaways  

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    OVERVIEW OF SEC REFORMS 

    Following an analysis of investor behavior in March 2020, the SEC identified pressures on the money markets and institutional prime money market funds. In response, it has proposed a series of reforms to reduce the risk that a future market event will result in a similar outcome. The proposed reforms include four key measures: 

    1. The removal of redemption gates and liquidity fees. 
    2. An increase in portfolio liquidity requirements.  
    3. A requirement for swing pricing for institutional prime and municipal funds. 
    4. Additional provisions to address the effect of potential negative interest rates. 
    Learn more about the SEC reforms.
     

    WHAT ARE THE BROADER IMPLICATIONS OF REFORM?  

    Any time new money market fund regulations are considered, treasury practitioners want to know how the reforms will affect the availability and risk profile of money market funds. While some specific elements of reform will affect treasury departments directly, wider changes in the economy may also influence the use of money market funds.  

    WHAT CAN YOU DO NOW?  

    The prospect of money market fund reform is just one of several issues causing uncertainty for corporate treasury practitioners. So, what can you do?  

    1. Review the investment strategy 
    2. Set objectives for each bucket of cash 
    3. Review the short-term investment policy and procedures  
    Find out more about what treasury practitioners can be doing.

    WHAT’S COMING UP?   

    With the economic outlook for 2023 uncertain, organizations will be implementing strategies to build resilience to help them manage the effects of a recession. As part of such strategies, companies will review their target liquidity levels and work to ensure they have access to cash, should it be needed. 

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    Published November 15, 2022