Morgan Stanley Investment Management has launched the Morgan Stanley Institutional Fund Trust (MSIFT) Ultra-Short Income Portfolio, a conservatively managed fund that may be appropriate for cash investors.
The reforms to SEC Rule 2a-7 which govern money market funds and are effective this October will require institutional Prime money market funds to operate with a floating net asset value (NAV) and face the possible imposition of liquidity fees and/or redemption gates. As a result of these reforms, investors in prime money market funds who are concerned about the potential imposition of liquidity fees and gates will be forced to re-evaluate their current cash investment strategies. Conservatively managed ultra-short funds are being considered by many cash investors as a potentially intriguing vehicle for cash investments.
“This is a member of a new category of funds, Conservative Ultra-Short,” says Jonas Kolk (pictured), Managing Director and Chief Investment Officer for Global Liquidity. “Because the ‘ultra-short’ category lacks specificity – with some funds managed very conservatively and others aggressively, with durations close to a year and credit quality that dips into the high yield space – it is critical for investors to look under the hood of ultra-short funds to see how their investment engines run. Not all ultra-short funds are created equal.”
The MSIFT Ultra-Short Income Portfolio provides a compelling alternative for cash investors. It focuses on capital preservation and liquidity, has an initial NAV of USD10.00 that may float, a maximum weighted average maturity of 90 days, a conservative investment approach, daily liquidity, a diversified portfolio, AAA/V rating and the same experienced and specialised team that manages the Morgan Stanley Institutional Liquidity Funds.
“In many ways, a very conservatively managed ultra-short income fund can provide great utility to a cash investor,” says Fred McMullen, Managing Director and Head of Client Engagement for Global Liquidity. “We’re advising clients to expedite their analysis and expedite their decision-making timeframe, because a lot is going to change between now and October.”
