A Floating NAV for Money Market Funds: Fix or Fantasy?

Fisch, Jill E.; Roiter, Eric D.

doi:10.2139/ssrn.1923828

Cited by 7 publications

(1 citation statement)

References 8 publications

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“…Money market mutual funds are unique among investment companies because under rule 2a-7 because they are allowed to maintain a stable net asset value (NAV) of $1.00 per share. That means that investors can redeem fund shares for $1.00 even if the NAV falls to $0.995 as explained by Fisch and Roiter (2012) and Birdthistle (2010). SEC (2014) required institutional prime and municipal funds to report NAV to the basis point (four decimal places) in an effort to make runs less likely.…”

Section: Introductionmentioning

confidence: 99%

Broken bucks: money funds that took taxpayer guarantees in 2008

Wilson

2020

J Asset Manag

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This is the first study to look at the characteristics of funds accepting the $2.7 trillion taxpayer guarantee of money market mutual funds during the 2008 financial crisis. Fund shares that benefited from Federal Reserve's asset-backed commercial paper program were significantly more likely to get bailed out by taxpayers and sponsors. The paper tests if funds adhering to the SEC's 2010 liquidity reforms prior to their enactment were less likely to be bailed out in 2008. Finally, it examines if funds subject to the 2014 floating NAV regulations were more likely to be bailed out in 2008.

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Section: Introductionmentioning

confidence: 99%

Broken bucks: money funds that took taxpayer guarantees in 2008

Wilson

2020

J Asset Manag

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Does the buck stop here? A comparison of withdrawals from money market mutual funds with floating and constant share prices

Witmer

2016

Journal of Banking & Finance

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Recent reform proposals call for an elimination of the constant net asset value (NAV) or "buck" in money market mutual funds to reduce the occurrence of runs. Outside the United States, there are several countries that have money market mutual funds with and without constant NAVs. Using daily data on individual fund flows from these countries, this paper evaluates whether the reliance on a constant NAV is associated with a higher frequency of sustained fund outflows. Preliminary evidence suggests that funds with a constant NAV are more likely to experience sustained outflows, even after controlling for country fixed effects and other factors. Moreover, these sustained outflows in constant NAV money market funds were more acute during the period of the run on the Reserve Primary fund, and were subdued after the U.S. Treasury guarantee program for money market funds was put in place. Consistent with the theory that constant NAV funds receive additional implicit support from fund sponsors, fund liquidations are less prevalent in funds with a constant NAV following periods of larger outflows. JEL classification: F30, G01, G18, G20 Bank classification: Financial markets; Financial stability; Market structure and pricing RésuméEn vue de réduire le risque de ruée, des propositions de réforme récentes appellent à l'interdiction des fonds communs de placement monétaires à valeur liquidative (VL) constante. Dans plusieurs pays en dehors des États-Unis, les fonds monétaires à VL variable et constante coexistent. À partir de données quotidiennes relatives aux flux financiers issus des fonds de ces pays, l'auteur évalue si le modèle à VL stable est associé à des sorties prolongées de capitaux plus fréquentes. Les résultats préliminaires semblent confirmer que les fonds à VL constante sont plus susceptibles de connaître des sorties prolongées de capitaux, même après prise en compte des effets fixes de pays et d'autres facteurs. En outre, les fuites ont été plus importantes lorsque le fonds Reserve Primary a subi une hémorragie de capitaux, et elles sont tombées après la mise en place par le Trésor américain d'un programme de garantie des fonds monétaires. En accord avec l'idée que les fonds à VL stable reçoivent de leurs promoteurs un soutien implicite supplémentaire, l'auteur constate que les fonds de cette catégorie enregistrent moins de liquidations après des sorties importantes de capitaux.

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Financial Firm Bankruptcy and Contagion

Helwege

Zhang

2012

SSRN Journal

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The Lehman bankruptcy highlights the potential for interconnectedness to cause negative externalities through counterparty contagion, but the externalities may also arise from information contagion. We examine contagion from troubled financial firms and find that counterparty contagion is greater during recessions and in cases of riskier firms and larger and more complex exposures. However, the counterparty exposures are small, especially among banks that face diversification regulations, and do not typically cause a cascade of failures.Information contagion is stronger for rivals in the same locale or the same line of business and is stronger in cases of distress than in bankruptcies.

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A Floating NAV for Money Market Funds: Fix or Fantasy?

Cited by 7 publications

References 8 publications

Broken bucks: money funds that took taxpayer guarantees in 2008

Broken bucks: money funds that took taxpayer guarantees in 2008

Does the buck stop here? A comparison of withdrawals from money market mutual funds with floating and constant share prices

Financial Firm Bankruptcy and Contagion

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