Money-market mutual funds, with $2.64 trillion in assets, are confronting their biggest challenges since they first appeared in 1971, Buasinessweek says.
Having survived withdrawals by investors following the September 2008 collapse of the $63 billion Reserve Primary Fund, they now must contend with Treasury yields near record lows, a shrinking supply of debt to invest in, and declining assets. “I haven’t seen an environment like this in my lifetime,” says Kevin Kennedy, who helps manage $114 billion in cash funds for the Western Asset Management unit of Baltimore-based Legg Mason (LM) and has been in the business for three decades.
As yields have come down, fund companies have had to cut their management fees to keep customers’ returns above zero. The average annual fee charged by money funds tracked by Crane Data fell to 0.18 percent in August from 0.37 percent three years earlier. Over the same period, assets have shrunk 23 percent. As a result, the industry’s annual revenue has fallen 62 percent since 2008, to $4.5 billion…
Learn more at http://www.businessweek.com/magazine/money-funds-feel-the-squeeze-10132011.html
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