Big Asset Managers Start Implementing Floating NAVs

Big Asset Managers Start Implementing Floating NAVs
<a href="/wiki/User:Jmabel" title="User:Jmabel">Joe Mabel</a> [<a href="">CC BY-SA 3.0</a>], <a href="">via Wikimedia Commons</a>

Big Asset Managers Start Implementing Floating NAVs

Amid rising pressure from regulators to abandon the $1 fixed share price, four of the biggest U.S. money market funds have taken voluntary steps to disclose their net asset values (NAVs) on a daily basis. JPMorgan Chase & Co. (NYSE:JPM) will start revealing the daily NAVs for all its funds starting January 14. BlackRock, Inc. (NYSE:BLK) will also take this step on January 16. Goldman Sachs Group, Inc. (NYSE:GS) has started disclosing its values   today, starting with prime funds. The Bank of The Bank of New York Mellon Corporation (NYSE:BK) hasn’t given a date, but said it will make the values available in the near future.

The Securities and Exchange Commission, led by former chief Mary Schapiro,  had been mulling over the idea of imposing tighter restrictions on money market funds. The proposal of banning the $1 share price couldn’t be passed, as three aides of Schapiro argued that it would destroy the appeal of money market funds.

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Money funds purchase short-term debts and book them on the basis of their expected value at maturity. The funds usually round the prices to the nearest 1 cent, so it obscures small fluctuations in the market values.

SEC changed its regulations in 2010, which required money market funds to disclose their NAVs on a monthly basis with two months lag. However, Vanguard Group Inc. and Fidelity Investments opposed the regulation, saying that it will confuse investors. After JPMorgan Chase & Co. (NYSE:JPM) and Goldman Sachs Group, Inc. (NYSE:GS) announced their daily disclosure plan, and Fidelity said it will also consider daily disclose of per-share NAVs. Vanguard still doesn’t have any plan to increase the frequency of market values disclosure.

Mary Schapiro left SEC last month. The newly appointed Chairman, Elisse B. Walter, praised the initiatives taken by the New York-based fund managers. Though the shares will still trade at $1, investors can now see how the values fluctuate on the day-to-day basis. According to Peter Crane, the head of Crane Data LLC, people will now see lots of nines and zeros. It’s because even if the funds fluctuate between $1.0050 and $0.9995, their NAV will be rounded off to $1 per share.

The steps taken by these giant money market funds will pressure other providers to follow suit. Let’s see how other funds respond.

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