Wells Fargo Advantage Funds is making changes to its money market fund lineup to address the regulatory changes adopted by the US Securities and Exchange Commission (SEC) in July 2014.
These changes will become effective on or prior to 14 October, 2016.
“We aim to offer a broad money market fund lineup that best meets the cash management needs of both our retail and institutional clients,” says Karla Rabusch, president of Wells Fargo Advantage Funds. “After speaking at length with clients, we are confident that we are offering them the right mix of options, without wavering from our long-standing investment approach that combines a rigorous credit analysis with steadfast attention to preservation of capital and liquidity.”
Wells Fargo Advantage Funds managed USD110.5 billion in money market assets as of 31 March, 2015.
Under the new SEC regulations, retail prime and municipal money market funds are required to maintain policies and procedures that are reasonably designed to limit all beneficial owners of the fund to natural persons. These funds are permitted to continue to use amortized cost to transact at a stable USD1.00 net asset value (NAV) but may be subject to liquidity fees and/or redemption gates in the event that their weekly liquid assets fall below 30 per cent.
Wells Fargo Advantage Funds intends that the following funds will take steps to qualify as retail money market funds:
• Wells Fargo Advantage California Municipal Money Market Fund
• Wells Fargo Advantage Money Market Fund
• Wells Fargo Advantage Municipal Money Market Fund
• Wells Fargo Advantage National Tax-Free Money Market Fund
Institutional prime and municipal money market funds will no longer be permitted to maintain a stable USD1.00 NAV but will instead be required to transact at their market-based NAVs, rounded to four decimal places. They may also be subject to liquidity fees and/or redemption gates in the event that their weekly liquid assets fall below 30 per cent.
Wells Fargo Advantage Funds intends to offer the following funds as institutional money market funds:
• Wells Fargo Advantage Cash Investment Money Market Fund
• Wells Fargo Advantage Heritage Money Market Fund
• Wells Fargo Advantage Municipal Cash Management Money Market Fund
Under the new SEC regulations, government money market funds are permitted to continue to maintain a stable USD1.00 NAV. However, such government money market funds will be required to invest at least 99.5 per cent of total assets in government securities, cash, and/or repurchase agreements that are fully collateralised by government securities or cash. The Wells Fargo Advantage 100 per cent Treasury Money Market Fund, the Wells Fargo Advantage Government Money Market Fund, and the Wells Fargo Advantage Treasury Plus Money Market Fund invest exclusively in these securities and thus already comply with this new requirement.
Additionally, the new SEC regulations do not mandate liquidity fees and redemption gates for government money market funds. The Board has determined that it has no current intention of adopting liquidity fees or redemption gates on the government money market funds.
Wells Fargo Advantage Funds intends to continue offering the following funds as government money market funds:
• Wells Fargo Advantage 100 per cent Treasury Money Market Fund
• Wells Fargo Advantage Government Money Market Fund
• Wells Fargo Advantage Treasury Plus Money Market Fund
Rabusch says: “We also continue to evaluate opportunities for new product development. We remain actively engaged in discussions with our distribution partners and clients in an effort to understand how our investors’ liquidity and cash management needs will change as a result of the new regulations. These discussions are helping us gather information so that we may better adapt to these regulatory changes and offer our clients the optimal mix of liquidity management solutions.”