Treasurers Aren’t Responding to Money Fund Changes – And That’s Bad News

Apr 22, 2015
Jeff Glenzer CTP, Vice President and COO, AFP

When you read the newspaper or, in today’s hi-tech equivalent, visit a news site or app, where do you go first? A lot of people I know turn to the sports section, or go to their favorite sports website or app.

But I’m not like most people. I’m a bit of a treasury and finance geek so I’m always looking for interesting news about corporate treasury.

These days, the hottest story in treasury and finance is the impending changes to money market funds. But what I find frustrating is that so many treasury and finance executives aren’t reacting to it. Instead, they’re skipping the big story – perhaps turning to the sports pages, I guess.

Here’s the thing: Money market funds are changing. Irrevocably. The Securities and Exchange Commission mandated the changes when it passed new regulations last summer. Come October 2016, treasury and finance executives will discover a whole new world of short-term investing.

This has been all over the news – and I’m proud that my organization, the Association for Financial Professionals, has covered the money market fund changes better than any for-profit news gathering organization.

We were at the SEC hearing when the new regs were finalized. And we had analysis and advice the next day to help treasury and finance executives figure out what to do next.

We’ve been in close contact with some of the biggest money market fund firms, talking to their executives to uncover how they are reacting to the impending changes.

And we’ve heard from our own members – treasury and finance executives like you – to get the practitioner perspective on what it all means.

I’m sorry to say that, of all the advice and analysis, the peer advice is the scarcest. It’s just hard to find many treasury and finance executives paying attention to the money market fund changes right now. No doubt they’re telling themselves, “We’ve got time. October 2016 is a long way off.”

No, it isn’t.

Just the other day BlackRock – one of the biggest money fund managers – announced it would consolidate and close some of its products in response to the new regs. Other fund managers are sure to follow. What are you going to do when you receive word that the fund your organization has thousands or even millions of dollars invested in will close? What is your plan?

On top of the money fund changes, interest rates likely will rise this year. Again, I ask treasury and finance executives: What is your plan? When are you going to discuss this with your investment committee? Your organization’s senior management?

Now is the time to begin having those discussions about your firm’s investing policy. You don’t have to act immediately, but you need to start talking – to your investing team, senior management and the board.

For years, short-term corporate investing was so easy. All treasury and finance executives had to do was park the money in a money market fund.

That’s old news.