Jeff Hutchens—Getty Images
By Richard Leong / Reuters
Updated: October 5, 2016 5:31 PM ET

Assets of U.S. prime money market funds for institutional investors posted a drop of over $100 billion in assets in the latest week as new regulations are scheduled to go into effect next week, the Money Fund Report said on Wednesday.

A number of institutional prime money funds have been converting to funds that own only U.S. government securities in an effort to be exempted from the new Securities and Exchange Commission rules that will be implemented on Oct. 14.

These rules on share-value and fees are the final phase of domestic money fund reform that is intended to safeguard a sector rattled by the collapse of Lehman Brothers in September 2008 during the global credit crunch.

Institutional prime funds, which could invest in riskier securities in addition to government debt, saw a $122.30 billion asset drop to $223.33 billion in the week ended Oct. 4, according to the report published by iMoneyNet.

Institutional government-only funds experienced an $87.27 billion increase, bringing their total assets to $1.506 trillion in the latest week.

Since October 2015, institutional investors and fund managers have shifted about $860 billion of assets into government-only funds from prime funds.

Short-term corporate borrowing costs have risen with the contraction of institutional prime funds. These funds had been major buyers of commercial paper and other short-term debt from banks and other corporations, which use proceeds to fund trades or finance their payrolls and inventories.

In the latest week, overall fund assets fell by $35.19 billion to $2.623 trillion.

Taxable money market fund assets decreased by $30.11 billion to $2.494 trillion, while tax-free assets decreased by $5.09 billion to $129.32 billion.

The iMoneyNet money fund average 7-day simple yield for all taxable funds rose to 0.13% from 0.12% the previous week.

The iMoneyNet average 7-day simple yield for all tax-free and municipal money-market funds jumped to 0.32% from 0.27% a week earlier.

 

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