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Is a Half-Trillion-Dollar Exodus on the Horizon for Money Funds?

Bank of America predicts $500 billion will leave money funds for short-term Treasuries within two years, in light of floating NAV requirement.

By Liz Capo McCormick and Daniel Kruger, Bloomberg | Updated on August 04, 2014

One of the biggest winners in the push to make money-market funds safer for investors is turning out to be none other than the U.S. government.

Rules adopted by regulators last month will require money funds that invest in riskier assets to abandon their traditional $1 share-price floor and disclose daily changes in value. For companies that use the funds like bank accounts, the prospect of prices falling below $1 may prompt them to shift their cash into the shortest-term Treasuries, creating as much as $500 billion of demand in two years, according to Bank of America Corp.

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