Some US wealth managers are slashing fees on money market funds so their investors don't lose money because returns are so low
to financial-crisis level at between 0% and 0.25% during the heat of the pandemic in mid-March as the US went into lockdown mode, and the coronavirus hit all sectors of the economy. This pulled the 3-month US Treasury yield to a meager 0.
14%, and the benchmark 10-year yield to an all-time low of 0.318% in March. Although returns on short-term Treasury instruments remain negligible, worried investors are still flocking to invest their cash into money market funds, which are generally low return, but extremely low risk. Assets in money markets have risen by over $1 trillion to $4.8 trillion since the start of March, the FT said, citing data from the Investment Company Institute. That huge flow has led asset managers in the industry to buy debt with near-zero yields, significantly pulling down overall returns.MORGAN STANLEY: Buy these 23 high-growth stocks that look poised to deliver market-beating returns over the long term So low are returns on some funds now that a handful of money managers have had to cut or remove fees on their products so that investors don't lose money just by investing in the funds. Three firms that handle some of the largest short-term debt funds in the US have already cut fees on many products, the FT said. These are: Federated Hermes, Fidelity, and TIAA-CREF. Pittsburgh-based Federated Hermes has cut fees on over 30 money market funds, while New York-headquartered TIAA-CREF cancelled its charges on two funds invested in government debt and government-backed securities, the newspaper reported. Fidelity, one of the biggest asset managers, has waived fees on some funds, and told the FT it was closely monitoring yields on its money market mutual funds before cutting further. Having to bow to pressure from falling interest rates, short-term debt funds are faced with a risky future if the Fed decides to go the way of pushing interest rates into negative territory.
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