Money Market Reform

Money Market Reform: What you need to know

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In response to the financial crisis that occurred in 2008, the Securities and Exchange Commission (SEC) adopted a series of amendments to the rules that govern money market funds, first in 2010 and again in 2014.

The amendments made structural and operational changes, which were intended to “address risks of investor runs in money market funds, while preserving the benefit of the funds.”¹ While most of the compliance dates for the amendments has passed, the final compliance date for the remaining amendments is October 14, 2016.

All money market funds must comply with the amendments. However, government and retail money market funds are exempt from certain requirements of the amendments, as long as they comply with certain limitations:

  • Government money market funds must invest at least 99.5% of their total assets in cash, government securities and/or repurchase agreements collateralized by cash or government securities.
  • Retail money market funds must establish policies and procedures reasonably designed to limit all of their beneficial owners to “natural persons.” The chart to the left outlines the types of accounts deemed to be beneficially owned by natural persons and the types of accounts deemed to be beneficially owned by non-natural persons (i.e., institutional investors).

Money market funds that do not fall within the definitions of a government or retail money market fund are considered “institutional money market funds” under the amendments. Institutional money market funds are permitted to have a broader range of investments and investors and are required to price their shares using current market values of their portfolio securities (i.e., float their net asset values). Government and retail money market funds are not required to float their net asset values and can continue to seek to maintain a stable net asset value per share.

Money Market Reform Account Examples

The amendments permit money market funds to impose liquidity fees or temporarily suspend redemptions (i.e., impose “gates”) depending on the percentage of a fund’s “weekly liquid assets” as described below:

  • Liquidity Fee. If a money market fund’s weekly liquid assets were to fall below 30% of its total assets, the fund’s board has the discretion to impose a fee of up to 2% on all redemptions for up to 10 business days in a 90-day period, if it determines that imposing a fee is in the fund’s best interests. If a fund’s weekly liquid assets were to fall below 10% of its total assets, the fund is required to impose a fee. The default liquidity fee shall be one percent (1%) [at the 10% threshold]. The Board, including a majority of the Independent Trustees, however, determines, at the time of initial imposition or later, that a higher (up to 2%) or lower fee level is in the best interests of the Fund.
  • Redemption Gate. If a fund’s weekly liquid assets fall below 30% of its total assets, the fund’s board may temporarily suspend redemptions for up to 10 business days in a 90-day period, if it determines that the redemption gate is in the fund’s best interests.

Any liquidity fee or redemption gate must be lifted automatically after the money market fund’s level of weekly liquid assets rises above 30% of its total assets. Under the amendments, a government money market may, but is not required, to be subject to liquidity fees or redemption gates.

Changes to Ivy Investments’ funds

Ivy VIP Money Market and Ivy Money Market Fund will operate as government money market funds on or before October 14, 2016. The names of these funds will be changed to Ivy Government Money Market Fund and Ivy VIP Government Money Market, and the funds’ underlying structures will be changed to meet the definition of a government money market fund, as described above. These changes may affect the overall yield of the funds, as government securities generally have a lower yield than corporate debt securities. As government money market funds, the funds will continue to seek to maintain a stable net asset value per share.

Changes to Waddell & Reed Advisors' fund

Waddell & Reed Advisors Cash Management will operate as a retail money market fund beginning on or about October 14, 2016. At that time, only accounts beneficially owned by natural persons may be invested in the fund. Under certain circumstances, the fund may impose liquidity fees and redemption gates, as described above. As a retail money market fund, the fund will continue to seek to maintain a stable net asset value per share.

What this means

Each of Ivy VIP Money Market, Ivy Money Market Fund and Waddell & Reed Advisors Cash Management will continue to seek to maintain a stable net asset value per share.

Ivy VIP Money Market and Ivy Money Market Fund will operate as government money market funds, which will be limited in the types of investments they can make, but they will be open to all investors.

Ivy VIP Money Market and Ivy Money Market Fund will operate as government money market funds, which will be limited in the types of investments they can make, but they will be open to all investors.

Waddell & Reed Advisors Cash Management will operate as a retail money market fund that can invest in corporate debt securities, but it will be limited to accounts beneficially owned by natural persons. In addition, Waddell & Reed Advisors Cash Management may impose liquidity fees and redemption gates in certain circumstances.


¹ See SEC Press. Rel. No. 2014-143 (July 23, 2014), available at http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370542347679

Past performance is not a guarantee of future results.

Waddell & Reed Advisors Cash Management: You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. The Fund may impose a fee upon the sale of your shares or may temporarily suspend your ability to sell shares if the Fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.

Ivy Government Money Market Fund and Ivy VIP Government Money Market: You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.

Please remember that an investment in a mutual fund involves risk. Investment return and principal value of a mutual fund investment will fluctuate, and shares, when redeemed, may be worth more or less than their original cost.

The Waddell & Reed Advisors Funds are distributed by Waddell & Reed, Inc., and IVY FUNDS® mutual funds are distributed by Ivy Distributors, Inc.

IVY INVESTMENTS℠ refers to the financial services offered by Ivy Distributors, Inc., a FINRA member broker dealer and the distributor of IVY FUNDS® mutual funds, and those financial services offered by its affiliates.

Waddell & Reed Investments refers to the investment management services offered by Waddell & Reed Investment Management Company, the investment manager of the Waddell & Reed Advisors Funds, distributed by Waddell & Reed, Inc.

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