Investors Exit Prime Funds Ahead of Changes

Back in 2014, the Securities and Exchange Commission adopted new rules to try to curb future runs on money funds. In addition to requiring that prime funds let their NAVs float, instead of using a constant $1-a-share value, the new rules mandate that funds’ boards consider imposing redemption fees and gates if a fund’s weekly liquidity falls below 30%.

There were predictions earlier this year that institutional prime funds could see up to half their assets exit ahead of the changes. Between last October and this May, assets held by institutional prime funds shrank by more than $150 billion, a shift that mostly reflected fund companies’ conversions of prime funds into government funds because they thought the changes would make prime funds less popular.