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January 9, 2013 11:48 pm
BlackRock and JPMorgan have joined Goldman Sachs in publishing daily asset values for their money-market funds in an effort to boost transparency and address a major sticking point among regulators since the financial crisis.
Goldman Sachs Asset Management, with $130bn of money-market assets in the US, was the first to announce that it will provide a daily net asset value for its US-domiciled commercial paper funds from Wednesday. It plans to extend that to other funds in the near future.
That move was quickly followed on Wednesday by JPMorgan and BlackRock.
“It is our belief that this level of transparency will also benefit the ongoing dialogue around potential regulatory changes to money-market funds,” said Goldman Sachs.
But other large players in the industry say they do not plan to adopt a daily NAV.
“We have not seen an increased demand for more frequent disclosure from our clients, who are primarily retail investors,” said Vanguard. “Given the small degree of fluctuation and lack of demand from our clients, Vanguard has no plans to increase the frequency of money-market fund NAV disclosure.”
Regulators have long sought greater disclosure from money-market managers in order to reduce the systemic risk they pose to the financial system, which was highlighted in the wake of Lehman Brothers failing in 2008.
The $2.5tn industry has vigorously resisted efforts to reform their disclosure practices and successfully lobbied against tough rules proposed by the Securities and Exchange Commission last year.
The industry’s win was shortlived, though, as the body of US regulators charged with overseeing the financial system, the Financial Stability Oversight Council, quickly took over and made reform recommendations late last year.
The SEC had pushed for money-market funds to ditch their fixed price and instead adopt a floating share price. Regulators including those at the Treasury Department and Federal Reserve have supported daily mark-to-market valuations.
In recent years the SEC forced money-market funds to publicly disclose the “shadow” floating share price, but only after a 60-day delay.
Money-market funds, since their inception in the early 1970s, have been viewed by investors as a safe holding, akin to a bank deposit, as they are managed in order to show a stable net asset value of $1.
That perception was jolted in 2008 when the Reserve Fund fell below $1, known as “breaking the buck”. That sparked a stampede among investors out of the sector which in turn hurt financial institutions that relied on funding from money-market funds or the so-called shadow banking system.
“Daily disclosure of market-based NAVs will help investors better understand how day to day market movements or events can affect the value of the funds’ portfolios,” said Robert Deutsch, head of global liquidity at J.P. Morgan Asset Management. “Increased NAV transparency will allow investors to better understand the nature of money-market fund risks and to make more informed decisions regarding their investments while they continue to enjoy the benefits that money-market funds offer.”
Additional reporting by Tracy Alloway
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