Bloomberg: Low Rates Put Prime Funds in Jeopardy

A report by Bloomberg sees continuing decline for prime money market funds, a source of funding for thousands of companies. Prime funds have been battered by outflows and Fed policy in the current economic uncertainty, with high levels of outflows in the last several months. Bloomberg reports that Vanguard is converting a $125 billion fund to buy government debt rather than the short-term corporate notes the fund has invested in for decades, and Northern Trust and Fidelity recently terminated funds with a similar focus. The report attributes low interest rates, redemption gates, and other liquidity concerns among the factors making prime funds less attractive. In addition, several fund managers including T. Rowe Price and Federated Hermes Inc. have waived their fees on these funds making the future of these funds seem even less certain.