Money fund disclosures not just about need to know
Each of the more than 200 funds that Crane Data tracked through Jan. 22 posted net asset values above $1 a share. On average, the funds published market values of $1.0002, or a dollar and two-hundredths of a penny. Typically, values are rounded off to four decimal places.
‘‘Anyone tracking this should expect to see a lot of zeros,’’ Crane says. ‘‘So far, there have been no nines, and that’s good.’’
For example, a fund reporting a value of 99.9999 cents means there was temporarily a slip below the $1-a-share benchmark, measured by the latest value. However, investors withdrawing cash from the fund could still get back $1 for each dollar they invested, because the disclosures reflect the market’s latest asset pricing, rather than how much investors get when they redeem.
A fund with a value slightly below $1 wouldn’t ‘‘break the buck’’ unless it fell below 99 and a half cents. That’s what happened with the Reserve Primary Fund, which collapsed during the financial crisis.
It’s not surprising that the new daily asset value disclosures haven’t revealed any funds to be at risk of breaking the buck. Markets aren’t currently under stress, as they were in 2008.
The next time there’s trouble, Crane will check to see whether any funds appear to be at the risk of breaking the buck. For now, however, average investors have little need to pay attention to the new disclosures.
‘‘Anything happening in the world that’s important enough to noticeably move a fund’s net asset value is probably something that’s important enough to be in the newspapers,’’ Crane says. ‘‘So you can just stay alert that way, rather than watching all these zeros.’’
Questions? E-mail investorinsight(at)ap.org