BANGALORE: Goldman Sachs Group Inc and JPMorgan Chase & Co on Wednesday said they will disclose the value of their money market mutual funds each day rather than monthly, seeking to boost investor confidence and head off new regulations.
The change marks a major shift in the $2.6 trillion industry. Two other large money fund sponsors, Vanguard Group Inc and BlackRock, said they would not increase their disclosures.
The split shows big fund firms groping for the right strategy to avoid more drastic rules regulators proposed in November to avert liquidity problems like those the funds suffered during the financial crisis.
Officials at the Federal Reserve and the Securities and Exchange Commission are discussing requiring funds to set aside capital against losses or price shares at funds' actual net asset value, or NAV, instead of being fixed at $1.
Many companies that offer money funds worry new rules could drive away investors.
Goldman's daily disclosures are meant to show the quality of the funds and their holdings, David Fishman, co-head of the firm's money fund business, said in an interview.
"There's a lot of talk about 'shadow banking' and 'shadow NAV,' the implication being that things are more hidden," Fishman said. "By bringing this out into the open, we can say these are high-quality products."
Goldman Sachs' money fund assets total about $200 billion, including more than $130 billion in US-based funds.
JPMorgan, which manages $481 billion of money markets and related products, said three of its US funds will start to disclose their daily closing NAVs on the following business day, and that its other money funds will soon follow.
The bank is the second-largest manager of US money market funds, trailing only Fidelity Investments, according to Lipper, a Thomson Reuters unit.
The additional information "will help investors better understand how day to day market movements or events can affect the value of the funds' portfolios," Robert Deutsch, head of Global Liquidity at J.P. Morgan Asset Management, said in a statement.
Currently, money funds report their actual net asset value per share only monthly, with a 60-day lag. Fluctuations of the share prices are typically seen in tenths of a cent or less. Investors buy and sell shares at a fixed price of $1.
During the financial crisis, however, one major money fund suffered losses on Lehman Brothers debt it owned and could not maintain the $1 per share price. When the Reserve Primary Fund "broke the buck," investors stampeded out of all funds that potentially could have also owned Lehman debt, threatening to freeze much of the US borrowing system.
By giving investors more regular updates, Goldman could assuage the fears that led to the panic. Clients have been asking for more details lately, Fishman said.
Regulators have been considering whether the funds should go farther and use the actual daily net asset value when investors buy and sell shares.
But few major fund families are likely to follow Goldman's move, according to Pete Crane, a long-time money fund analyst and co-founder of Crane Data, which tracks the industry.
Investors have shown little interest in the current monthly disclosures, Crane said. Almost all the time, the data shows little difference between actual mark-to-market prices and the fixed $1 per share price, he added.
Vanguard Group, the Pennsylvania fund firm ranked fourth in money fund assets by Lipper, has no plans to increase the frequency of its NAV disclosures. One reason is its retail investors have not sought more disclosures, spokesman John Woerth said in an email. Changes in the NAV of its largest money fund, the $122 billion Vanguard Prime Money Market Fund, have been "de minimis," the firm said.
Among other big fund sponsors, a spokeswoman for BlackRock Inc said it plans no changes at present. BlackRock last month offered a different approach to head off regulation with a new fee that would be charged on investor withdrawals in times of crisis.
A spokeswoman for Federated Investors Inc, the third largest manager of US money funds, declined to comment. Fidelity spokesman Steve Austin said the firm is considering moving to a daily disclosure of the NAVs of its money funds.
Goldman said it will disclose the previous day's NAV of its three US commercial paper funds daily, starting on Wednesday. It will begin disclosing daily NAVs of its six US government and tax-exempt funds next week. The daily price of its six offshore funds will be available by the end of the year.
Center>Copyright Reuters, 2013
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