[Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Blake7
Posts: 284
Joined: Fri Mar 30, 2018 2:52 pm
Location: USA

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by Blake7 »

Now I’m wondering about the relative safety of Stable Value Funds?
User avatar
mickeyd
Posts: 4824
Joined: Fri Feb 23, 2007 3:19 pm
Location: Deep in the Heart of South Texas

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by mickeyd »

Today I took advantage of changing from Investor shares to Admiral shares, as my PMMF investment is less than $5 mil and I like reducing my ER from 0.16% to 0.10%. I'm OK with no checking writing provision.
Part-Owner of Texas | | “The CMH-the Cost Matters Hypothesis -is all that is needed to explain why indexing must and will work… Yes, it is that simple.” John C. Bogle
frankie7447
Posts: 2
Joined: Thu Aug 27, 2020 3:55 pm

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by frankie7447 »

I was informed today by Vanguard Investment Services that Prime shares transferred to your Vanguard Brokerage a/c are SIPC insured up to $500,000. Also surprised that FDIC does NOT insure VMMXX shares held in older mutual fund accounts. Got that transferred lickety split to Federal MM a/c along with check writing.
rem2809
Posts: 2
Joined: Thu Sep 15, 2016 11:21 am

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by rem2809 »

How would we replicate the existing Prime Money fund asset allocation using the renamed Vanguard Cash Reserves Federal Money Market Fund?
Is there another Vanguard fund which has the removed elements?
palanzo
Posts: 1362
Joined: Thu Oct 10, 2019 4:28 pm

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by palanzo »

frankie7447 wrote: Thu Aug 27, 2020 4:41 pm I was informed today by Vanguard Investment Services that Prime shares transferred to your Vanguard Brokerage a/c are SIPC insured up to $500,000. Also surprised that FDIC does NOT insure VMMXX shares held in older mutual fund accounts. Got that transferred lickety split to Federal MM a/c along with check writing.
That's because Brokerage accounts "need" SIPC insurance. There are several threads on this topic.
User avatar
Kevin M
Posts: 11698
Joined: Mon Jun 29, 2009 3:24 pm
Contact:

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by Kevin M »

rem2809 wrote: Thu Aug 27, 2020 4:43 pm How would we replicate the existing Prime Money fund asset allocation using the renamed Vanguard Cash Reserves Federal Money Market Fund?
Is there another Vanguard fund which has the removed elements?
Per a reply on page 1, quoted below, it seems that Vanguard will not be offering "prime funds" after this transition is complete. So it does not appear that there will be any way to get access to commercial paper via a money market fund at Vanguard.
palanzo wrote: Thu Aug 27, 2020 3:24 pm Looks like Vanguard is concerned with the risks of commercial paper.
“Vanguard investors prioritize capital preservation for their money market investments, and we believe that the rewards of even the most conservatively managed prime funds are no longer worth the risk,” said Greg Davis, Vanguard chief investment officer, in a statement.
https://www.cnbc.com/2020/08/27/vanguar ... ments.html
Kevin
Wiki ||.......|| Suggested format for Asking Portfolio Questions (edit original post)
Northern Flicker
Posts: 6484
Joined: Fri Apr 10, 2015 12:29 am

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by Northern Flicker »

It appears the distinction between Federal and Cash Reserves will be percentage of treasury obligations in the portfolio-- 65% for Federal, perhaps 50% for Cash Reserves. And Cash Reserves will have an ER that is 1bp/yr lower than Federal.
Risk is not a guarantor of return.
User avatar
Monster99
Posts: 353
Joined: Tue Aug 29, 2017 10:28 am

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by Monster99 »

What will be interesting is what they do to my Roth - there was 7 cents in interest in Prime MM (the old sweep) from a past transaction. When they went with the Federal MM they just added the Prime as a new fund in my IRA with $0.07 in it. I wonder if they will just move it to the current sweep or convert to the new fund....
Wind_Reaver
Posts: 120
Joined: Mon Jan 05, 2009 3:15 pm

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by Wind_Reaver »

Northern Flicker wrote: Thu Aug 27, 2020 5:21 pm It appears the distinction between Federal and Cash Reserves will be percentage of treasury obligations in the portfolio-- 65% for Federal, perhaps 50% for Cash Reserves. And Cash Reserves will have an ER that is 1bp/yr lower than Federal.
Expecting a more prominent repo allocation to differentiate from Federal and Treasury MM. Competitors have similar established funds (at subsidized & higher cost). For example, Fidelity Government Cash Reserves (FDRXX), or Schwab Government Money Fund (SNVXX).
User avatar
Kevin M
Posts: 11698
Joined: Mon Jun 29, 2009 3:24 pm
Contact:

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by Kevin M »

Wind_Reaver wrote: Thu Aug 27, 2020 6:29 pm
Northern Flicker wrote: Thu Aug 27, 2020 5:21 pm It appears the distinction between Federal and Cash Reserves will be percentage of treasury obligations in the portfolio-- 65% for Federal, perhaps 50% for Cash Reserves. And Cash Reserves will have an ER that is 1bp/yr lower than Federal.
Expecting a more prominent repo allocation to differentiate from Federal and Treasury MM. Competitors have similar established funds (at subsidized & higher cost). For example, Fidelity Government Cash Reserves (FDRXX), or Schwab Government Money Fund (SNVXX).
And this could result in no state income tax exemption for CA, CT and NY residents, as was the case for FDRXX for 2019 (although it did qualify for 2018), even though 50.47% of income was from USGO: https://www.fidelity.com/bin-public/060 ... -funds.pdf.

Kevin
Wiki ||.......|| Suggested format for Asking Portfolio Questions (edit original post)
retiringwhen
Posts: 1820
Joined: Sat Jul 08, 2017 10:09 am
Location: New Jersey, USA

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by retiringwhen »

Kevin M wrote: Thu Aug 27, 2020 7:13 pm
Wind_Reaver wrote: Thu Aug 27, 2020 6:29 pm
Northern Flicker wrote: Thu Aug 27, 2020 5:21 pm It appears the distinction between Federal and Cash Reserves will be percentage of treasury obligations in the portfolio-- 65% for Federal, perhaps 50% for Cash Reserves. And Cash Reserves will have an ER that is 1bp/yr lower than Federal.
Expecting a more prominent repo allocation to differentiate from Federal and Treasury MM. Competitors have similar established funds (at subsidized & higher cost). For example, Fidelity Government Cash Reserves (FDRXX), or Schwab Government Money Fund (SNVXX).
And this could result in no state income tax exemption for CA, CT and NY residents, as was the case for FDRXX for 2019 (although it did qualify for 2018), even though 50.47% of income was from USGO: https://www.fidelity.com/bin-public/060 ... -funds.pdf.

Kevin
As you point out, repos hurt state tax exemptions, but do they provide any goose to the actual returns? I am not sure why an investor would prefer them. Do they help with liquidity?
000
Posts: 2680
Joined: Thu Jul 23, 2020 12:04 am

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by 000 »

Translation: Vanguard thinks a liquidity crisis is coming soon and wants to protect investors.
User avatar
nisiprius
Advisory Board
Posts: 41944
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by nisiprius »

...the fund will invest almost exclusively in cash, U.S. government securities, and/or repurchase agreements that are collateralized solely by U.S. government securities or cash...
As I look at the VMMXX portfolio tab today, I only see 1.3% in "commercial paper." So either they've been quietly getting rid of it for a while, or they never had much to begin with.

On the other hand, I see over 20% in "Yankee/Foreign." I read their statement, and I interpret the new name ("Vanguard Federal Money Market Fund") to mean US investments only. (Their existing "Vanguard Federal Money Market Fund," VMFXX, has 0% Yankee/Foreign).

So it seems to me that the big change is not expunging commercial paper. The big change is in going US-only. Having a smidge of home bias, I'm happy enough with that, but I'd be curious to know their reason.

Image
Last edited by nisiprius on Thu Aug 27, 2020 8:05 pm, edited 4 times in total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
Actin
Posts: 115
Joined: Wed May 16, 2018 8:40 pm

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by Actin »

Amazing. Now I get a choice of three different 0% accounts to put my money in. I love having choices
User avatar
Kevin M
Posts: 11698
Joined: Mon Jun 29, 2009 3:24 pm
Contact:

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by Kevin M »

nisiprius wrote: Thu Aug 27, 2020 7:40 pm
...the fund will invest almost exclusively in cash, U.S. government securities, and/or repurchase agreements that are collateralized solely by U.S. government securities or cash...
As I look at the VMMXX portfolio tab today, I only see 1.3% in "commercial paper." So either they've been getting rid of it for a while, or they just haven't had much.

On the other hand, I see over 20% in "Yankee/Foreign." I read their statement as saying US-only. Also, the new name is "Vanguard Cash Reserves Federal Money Market Fund," and their existing "Vanguard Federal Money Market Fund," VMFXX, has 0% Yankee/Foreign.

So it seems to me that the big change is not expunging commercial paper. The big change is in going US-only.

I'd love to know why they're doing that.

Image
Interesting. Look how much in Yankee/Foreign shortly before the March madness:

Image

According to Wikipedia:
A Yankee Bond is a bond issued by a foreign entity, such as a bank or company, but is issued and traded in the United States and denominated in U.S. dollars.[
So they look closer to commercial paper than to USGO backed by the US government; i.e., higher risk.

Kevin
Wiki ||.......|| Suggested format for Asking Portfolio Questions (edit original post)
ruud
Posts: 320
Joined: Sat Mar 03, 2007 1:28 pm
Location: san francisco bay area

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by ruud »

Based on the comments in this thread, it seems like I'm the only one who doesn't care about checkwriting for a money market fund.
.
Chuck
Posts: 2143
Joined: Thu May 21, 2009 12:19 pm

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by Chuck »

Actin wrote: Thu Aug 27, 2020 7:45 pm Amazing. Now I get a choice of three different 0% accounts to put my money in. I love having choices
This is my key takeaway. There is a whole lot of doesn't matter here. I keep as little as possible in these useless funds.
VaR
Posts: 722
Joined: Sat Dec 05, 2015 11:27 pm

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by VaR »

Kevin M wrote: Thu Aug 27, 2020 8:06 pm
nisiprius wrote: Thu Aug 27, 2020 7:40 pm
...the fund will invest almost exclusively in cash, U.S. government securities, and/or repurchase agreements that are collateralized solely by U.S. government securities or cash...
As I look at the VMMXX portfolio tab today, I only see 1.3% in "commercial paper." So either they've been getting rid of it for a while, or they just haven't had much.

On the other hand, I see over 20% in "Yankee/Foreign." I read their statement as saying US-only. Also, the new name is "Vanguard Cash Reserves Federal Money Market Fund," and their existing "Vanguard Federal Money Market Fund," VMFXX, has 0% Yankee/Foreign.

So it seems to me that the big change is not expunging commercial paper. The big change is in going US-only.

I'd love to know why they're doing that.

Image
Interesting. Look how much in Yankee/Foreign shortly before the March madness:

Image

According to Wikipedia:
A Yankee Bond is a bond issued by a foreign entity, such as a bank or company, but is issued and traded in the United States and denominated in U.S. dollars.[
So they look closer to commercial paper than to USGO backed by the US government; i.e., higher risk.

Kevin
I looked into this last year and again in Feb while I was trying to figure out what the small additional risk I was taking on for Vanguard Prime Money Market's small yield premium. What I found and what you can see in their 2019 Annual Report here is that about 25% was USD commercial paper issued by foreign banks, 5% was USD commercial paper issued by foreign quasi-governmental entities (like the Canadian Pension Plan Investment Board i.e. CPPIB) and 28% Yankee (USD) Certificates of Deposit issued by the U.S. branches of foreign banks. I moved myself and everyone in my family from Prime to Federal.

If forced to speculate that this was indeed due to a risk of foreign bank liquidity that Vanguard does not think is worthwhile any more. It's also possible that there may not be enough float in these securities anymore due to the Fed buying them.
Last edited by VaR on Thu Aug 27, 2020 11:50 pm, edited 1 time in total.
Wind_Reaver
Posts: 120
Joined: Mon Jan 05, 2009 3:15 pm

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by Wind_Reaver »

000 wrote: Thu Aug 27, 2020 7:18 pm Translation: Vanguard thinks a liquidity crisis is coming soon and wants to protect investors.
The 'Prime' MM fund isn't very 'Prime' for lack of opportunity as nisiprius illustrated above, and Vanguard hinted in the anouncement. In current circumstances, it seems reasonable the general concept of the retail Prime MM fund (post Money Market Reform) is defunct, taking almost four years to realize. The changes appear more an operational move addressing the constraints of MMR and Zero Interest Rate Policy 2 than a reactive de-risking event.
000
Posts: 2680
Joined: Thu Jul 23, 2020 12:04 am

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by 000 »

Wind_Reaver wrote: Thu Aug 27, 2020 11:30 pm
000 wrote: Thu Aug 27, 2020 7:18 pm Translation: Vanguard thinks a liquidity crisis is coming soon and wants to protect investors.
The 'Prime' MM fund isn't very 'Prime' for lack of opportunity as nisiprius illustrated above, and Vanguard hinted in the anouncement. In current circumstances, it seems reasonable the general concept of the retail Prime MM fund (post Money Market Reform) is defunct, taking almost four years to realize. The changes appear more an operational move addressing the constraints of MMR and Zero Interest Rate Policy 2 than a reactive de-risking event.
If true, why didn't Vanguard roll it into the existing Federal fund? It seems there will still be three separate funds. Or did I misread?
User avatar
abuss368
Posts: 21507
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by abuss368 »

So what fund will Vanguard PAS use going forward?
John C. Bogle: “Simplicity is the master key to financial success."
Wind_Reaver
Posts: 120
Joined: Mon Jan 05, 2009 3:15 pm

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by Wind_Reaver »

000 wrote: Thu Aug 27, 2020 11:38 pm
Wind_Reaver wrote: Thu Aug 27, 2020 11:30 pm
000 wrote: Thu Aug 27, 2020 7:18 pm Translation: Vanguard thinks a liquidity crisis is coming soon and wants to protect investors.
The 'Prime' MM fund isn't very 'Prime' for lack of opportunity as nisiprius illustrated above, and Vanguard hinted in the anouncement. In current circumstances, it seems reasonable the general concept of the retail Prime MM fund (post Money Market Reform) is defunct, taking almost four years to realize. The changes appear more an operational move addressing the constraints of MMR and Zero Interest Rate Policy 2 than a reactive de-risking event.
If true, why didn't Vanguard roll it into the existing Federal fund? It seems there will still be three separate funds. Or did I misread?
Unless I'm misinterpreting, the announcement outlines the Prime MM fund converting from Prime (Prime category) to Federal (Government category) later this year. Vanguard won't have a Prime MM fund after the change, it will have two Federal MM funds with differing mandates and one Treasury MM fund.
User avatar
jeffyscott
Posts: 9140
Joined: Tue Feb 27, 2007 9:12 am
Location: Wisconsin

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by jeffyscott »

Chuck wrote: Thu Aug 27, 2020 10:38 pm
Actin wrote: Thu Aug 27, 2020 7:45 pm Amazing. Now I get a choice of three different 0% accounts to put my money in. I love having choices
This is my key takeaway. There is a whole lot of doesn't matter here. I keep as little as possible in these useless funds.
Yep, I can get near 0% from an actual checking account and near 1% from a savings account. It has not made sense to have anything in any money market account for a while.

Someday if it does again, I'm not sure that this new federal money market is going to be worth bothering with over the existing one. I don't want or need check writing, I barely even need that on our checking account, so maybe if the ER difference grows to something more significant than 1 BP?
The two greatest enemies of the equity fund investor are expenses and emotions. ― John C. Bogle
Dennisl
Posts: 121
Joined: Sun Jun 09, 2019 1:46 pm

VG prime MM getting nixed

Post by Dennisl »

[Thread merged into here, see below. --admin LadyGeek]

From VG

Vanguard Prime Money Market Fund (Investor Shares: VMMXX; Admiral™ Shares: VMRXX) will change its investment strategy and be renamed Vanguard Cash Reserves Federal Money Market Fund. When this change goes into effect in late September 2020, the fund will invest almost exclusively in cash, U.S. government securities, and/or repurchase agreements that are collateralized solely by U.S. government securities or cash. The fund has historically been managed more conservatively than its peer group. For example, Vanguard Prime Money Market Fund maintained a 33% allocation to government securities—in contrast to the industry average of less than 3%*—leading into the sharp volatility of March 2020. The change in investment strategy further lowers its risk.

Our decades of experience, deep investment expertise, and low costs have enabled Vanguard's taxable money market funds to deliver highly competitive yields without taking undue risks. This approach has allowed Vanguard Prime Money Market Fund Admiral Shares to outperform 97% of the competition over the past 2 decades.** However, Vanguard Prime Money Market Fund Investor Shares has only slightly outperformed Vanguard Federal Money Market Fund Investor Shares over the same time period (note that Admiral Shares aren't available for Vanguard Federal Money Market Fund).*** We've observed and navigated 2 market crises in 12 years. With that as a backdrop, we believe it's better to provide clients with a highly competitive yield by expanding access to lower expenses on a secure government portfolio rather than incurring risk in the prime market.

Vanguard's government money market funds have outperformed their peer-group averages and are ranked within the top decile of peers over the 1-, 3-, 5-, and 10-year periods ended June 30, 2020. Vanguard's government money market funds have also delivered strong returns relative to prime money market funds, and at lower levels of risk.† We seek to continue to deliver competitive yields through low costs, deep expertise in managing portfolios of government securities, and decades of experience across different market cycles.
User avatar
JoMoney
Posts: 9763
Joined: Tue Jul 23, 2013 5:31 am

Re: VG prime MM getting nixed

Post by JoMoney »

Probably for the best, even under Vanguard's prudent management, taking any risk doesn't seem worth it under the current near zero interest rate environment. FDIC insured high yield savings (and reward checking accounts for those willing to jump through the hoops) seems to be the place to keep cash. I've also been using Series I U.S. Savings bonds, but series EE seems a bargain if you're certain to hold them 20 years to the doubling.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
BeachPerson
Posts: 937
Joined: Sun Feb 25, 2007 6:39 pm
Location: Northern VA

Vanguard shifting prime money market fund to safer U.S.-backed investments

Post by BeachPerson »

[Thread merged into here, see below. --admin LadyGeek]
Next month, Vanguard will transition its $125.3 billion Prime Money Market Fund into a government money market fund and rename it the Vanguard Cash Reserves Federal Money Market Fund.
Money Market
From Jack Brennan's "Straight Talk on Investing", page 23 "Living below your means is the ultimate financial strategy"
standard7
Posts: 131
Joined: Thu Jul 30, 2015 9:39 am

Re: Vanguard shifting prime money market fund to safer U.S.-backed investments

Post by standard7 »

Unrelated to whether the change in fund holdings is good or bad, I have to say that changing the name to -

"Vanguard Cash Reserves Federal Money Market Fund"

when the settlement fund is already named - "Vanguard Federal Money Market fund"

Is a mistake, especially when they had the option of creating a new name. I wouldn't be surprised if the name of the settlement fund changes in the future.

When I first read the release I thought they may have figured out a way to circumvent the settlement rules and were able to combine both money market accounts. Instead it seems that they may have complicated the situation.
rkhusky
Posts: 10171
Joined: Thu Aug 18, 2011 8:09 pm

Re: Vanguard shifting prime money market fund to safer U.S.-backed investments

Post by rkhusky »

standard7 wrote: Fri Aug 28, 2020 8:58 am Unrelated to whether the change in fund holdings is good or bad, I have to say that changing the name to -

"Vanguard Cash Reserves Federal Money Market Fund"

when the settlement fund is already named - "Vanguard Federal Money Market fund"

Is a mistake, especially when they had the option of creating a new name. I wouldn't be surprised if the name of the settlement fund changes in the future.
+1

Why not Cash Reserves Fund or Federal Money Market II or just roll it into Federal Money Market?
Robot Monster
Posts: 1522
Joined: Sun May 05, 2019 11:23 am
Location: New York

Re: Vanguard shifting prime money market fund to safer U.S.-backed investments

Post by Robot Monster »

rkhusky wrote: Fri Aug 28, 2020 9:11 am
standard7 wrote: Fri Aug 28, 2020 8:58 am Unrelated to whether the change in fund holdings is good or bad, I have to say that changing the name to -

"Vanguard Cash Reserves Federal Money Market Fund"

when the settlement fund is already named - "Vanguard Federal Money Market fund"

Is a mistake, especially when they had the option of creating a new name. I wouldn't be surprised if the name of the settlement fund changes in the future.
+1

Why not Cash Reserves Fund or Federal Money Market II or just roll it into Federal Money Market?
None of these would make a particularly good title for a Britney Spears song.
"Happiness comes from being connected in the right ways to: other people, your work, something larger than yourself."
standard7
Posts: 131
Joined: Thu Jul 30, 2015 9:39 am

Re: Vanguard shifting prime money market fund to safer U.S.-backed investments

Post by standard7 »

just roll it into Federal Money Market?
You probably already know this, I'm just posting this because I didn't know the specifics the 2016 rules for settlement funds before this morning, just that something occurred to change up the MM funds - after a quick search this is what I found:

https://investor.vanguard.com/mutual-fu ... et-reform/
Our Federal Money Market Fund**—which also seeks to maintain a stable $1 NAV—is now the only fund that can be used to settle brokerage trades. The fund isn't subject to the liquidity fee or redemption gate requirements.
Liquidity fees and gates are tools to help money market fund managers keep the funds stable during times of extreme market duress. Under the rules:

A fund may impose a fee of up to 2% on redemptions if a fund's weekly liquid assets fall below 30% of its total assets.

A fund must impose a 1% fee on redemptions (with the option of imposing a fee of up to 2%) if a fund's weekly liquid assets fall below 10% of its total assets—unless the fund's board determines a fee would not be in the fund's best interest.

A fund may impose a gate—that is, suspend redemptions—for up to 10 business days in a 90-day period.
standard7
Posts: 131
Joined: Thu Jul 30, 2015 9:39 am

Re: Vanguard shifting prime money market fund to safer U.S.-backed investments

Post by standard7 »

Does anyone know if "Liquidity fees and gates" have been used with Money Market funds in the past by VG or other brokers?
S_Track
Posts: 369
Joined: Sat Feb 18, 2017 12:33 pm

Re: Vanguard shifting prime money market fund to safer U.S.-backed investments

Post by S_Track »

standard7 wrote: Fri Aug 28, 2020 9:47 am Does anyone know if "Liquidity fees and gates" have been used with Money Market funds in the past by VG or other brokers?
Good question I would like to know as well. Also do the Liquidity fees and gates make the fund safer by giving VG tools during a crisis? So comparing the settlement fund to the new cash reserve fund that would be a difference that you pointed out above.
User avatar
LadyGeek
Site Admin
Posts: 66281
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by LadyGeek »

I merged Dennisl's and BeachPerson's threads into the on-going discussion.

I also removed an off-topic post regarding money as an asset. As a reminder, see: Non-actionable (Trolling) Topics
If readers can't do anything with the content of a topic other than argue about it, it does not belong here. Examples include:
  • US or world economic, political, tax, health care and climate policies
  • conspiracy theories of any type
  • discussions of the crimes, shortcomings or stupidity of other people, whether they be political figures, celebrities, CEOs, Fed chairmen, subprime mortgage borrowers, lottery winners, federal "bailout" recipients, poor people, rich people, etc. Of course, you are welcome to talk about the stupid financial things you have done.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
Dad
Posts: 39
Joined: Fri Feb 05, 2010 10:42 am

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by Dad »

So what will be the difference investment mandate wise between the new Cash Reserve Federal Money Market and the old Federal Money Market fund? When rates do perk back up one day, is the new Cash Reserve Federal Money Market considered the fund that will produce the higher yield over the existing Federal Money Market fund. That is why I selected Prime in first place - two extremely conservative funds for holding cash, yet with Prime giving historically higher yield. That seems to be going away?
capran
Posts: 123
Joined: Thu Feb 18, 2016 10:45 am

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by capran »

After reading through the entire thread I did not see anyone with my question. We don't use check writing in our prime account but we do have the ability to transfer money to our credit union via electronic process. When we are required to be switched from Prime to the new Admiral Share, will we lose that feature? Yes, I could call Vanguard to ask, but one post indicated that when someone called recently, they had not even heard of the change.
User avatar
Kevin M
Posts: 11698
Joined: Mon Jun 29, 2009 3:24 pm
Contact:

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by Kevin M »

capran wrote: Fri Aug 28, 2020 11:06 am <snip> we do have the ability to transfer money to our credit union via electronic process. When we are required to be switched from Prime to the new Admiral Share, will we lose that feature? <snip>
No, you will not lose your EFT/ACH capability. External banks (or credit unions) are linked to one or more accounts. You can transfer to or from any fund in the account from or to the linked bank or CU. Both investor shares and admiral shares versions of Prime MM are just another fund in the account. You can do the same transfers from stock or bond funds in the account as well.

Kevin
Wiki ||.......|| Suggested format for Asking Portfolio Questions (edit original post)
capran
Posts: 123
Joined: Thu Feb 18, 2016 10:45 am

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by capran »

Kevin M wrote: Fri Aug 28, 2020 11:25 am
capran wrote: Fri Aug 28, 2020 11:06 am <snip> we do have the ability to transfer money to our credit union via electronic process. When we are required to be switched from Prime to the new Admiral Share, will we lose that feature? <snip>
No, you will not lose your EFT/ACH capability. External banks (or credit unions) are linked to one or more accounts. You can transfer to or from any fund in the account from or to the linked bank or CU. Both investor shares and admiral shares versions of Prime MM are just another fund in the account. You can do the same transfers from stock or bond funds in the account as well.

Kevin
Thank you for your quick reply. Now we'll call the CU and see if there are any requirements for waiting periods on withdrawals from their MMKT funds. they are still paying .35% compared to Vanguards .01% in their new Prime Admiral shares. Years ago we moved our Roths from Vanguard to the CU, but then moved them back to Vang when the CU interest became substantially less than Vang. but now we have a fair amount of change in the Vanguard Prime and are quickly tiring of making nothing on it. I can see why the stock market is booming. Fed is putting savers like us in the position that we can't make any money in our money market funds and lose money to inflation, literally trying to force people into the stock market.
palanzo
Posts: 1362
Joined: Thu Oct 10, 2019 4:28 pm

Re: VG prime MM getting nixed

Post by palanzo »

Dennisl wrote: Fri Aug 28, 2020 8:25 am [Thread merged into here, see below. --admin LadyGeek]

From VG

Vanguard Prime Money Market Fund (Investor Shares: VMMXX; Admiral™ Shares: VMRXX) will change its investment strategy and be renamed Vanguard Cash Reserves Federal Money Market Fund. When this change goes into effect in late September 2020, the fund will invest almost exclusively in cash, U.S. government securities, and/or repurchase agreements that are collateralized solely by U.S. government securities or cash. The fund has historically been managed more conservatively than its peer group. For example, Vanguard Prime Money Market Fund maintained a 33% allocation to government securities—in contrast to the industry average of less than 3%*—leading into the sharp volatility of March 2020. The change in investment strategy further lowers its risk.

Our decades of experience, deep investment expertise, and low costs have enabled Vanguard's taxable money market funds to deliver highly competitive yields without taking undue risks. This approach has allowed Vanguard Prime Money Market Fund Admiral Shares to outperform 97% of the competition over the past 2 decades.** However, Vanguard Prime Money Market Fund Investor Shares has only slightly outperformed Vanguard Federal Money Market Fund Investor Shares over the same time period (note that Admiral Shares aren't available for Vanguard Federal Money Market Fund).*** We've observed and navigated 2 market crises in 12 years. With that as a backdrop, we believe it's better to provide clients with a highly competitive yield by expanding access to lower expenses on a secure government portfolio rather than incurring risk in the prime market.

Vanguard's government money market funds have outperformed their peer-group averages and are ranked within the top decile of peers over the 1-, 3-, 5-, and 10-year periods ended June 30, 2020. Vanguard's government money market funds have also delivered strong returns relative to prime money market funds, and at lower levels of risk.† We seek to continue to deliver competitive yields through low costs, deep expertise in managing portfolios of government securities, and decades of experience across different market cycles.
Why did the 33% allocation to government securities lead to the sharp volatility of March 2020?
Makefile
Posts: 224
Joined: Fri Apr 22, 2016 11:03 pm

Re: VG prime MM getting nixed

Post by Makefile »

palanzo wrote: Fri Aug 28, 2020 12:15 pm Why did the 33% allocation to government securities lead to the sharp volatility of March 2020?
I think that what they meant was that "leading into March 2020," i.e., at the time the volatility started, the fund held 33% government securities which was a more conservative (higher) allocation than their competitor prime funds.

Is it possible that, behind the scenes, the CDs, Yankee/Foreign, and other non-government components of Prime MM were more problematic than it seemed back in March? i.e., something came too close for comfort in the opinion of the fund managers?

Where do the companies that were borrowing from Prime MM go now, when Prime MM basically says we won't buy your bonds/CDs anymore? Is this just not a big problem because Prime MM is still a very small % of the total market for those things? Anyone have insight?
User avatar
heartwood
Posts: 1627
Joined: Sat Nov 23, 2013 1:40 pm

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by heartwood »

I confess I don't relate to the differences in the three MM account based upon types of holdings. For large amounts of cash in our tax deferred accounts it seems a no brainer to go switch to the Prime MM Admiral VMRXX since we do not write checks from those accounts. Any downsides besides check writing?

Since Treasury MM VUSXX is reopened is there any/enough reason to at least put a placeholder amount in that fund? At today's Vanguard posted SEC yields (0.08 for VUSXX v. 0.10 for VMRXX) the dividend amounts are trivial on an annual basis. Is there enough difference in holdings makeup to hold both? Safety? Other?
User avatar
Electron
Posts: 2115
Joined: Sat Mar 10, 2007 8:46 pm

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by Electron »

I processed the Admiral Conversion yesterday and the online confirmation indicated that checkwriting was carried over to the new fund. That was apparently incorrect.

Today the account options for the new Admiral fund account show N/A for checkwriting. I plan to safely dispose of the checkbook for the Investor class fund.

In recent weeks Prime Money Market has been yielding less than the Federal and Treasury Money Market funds. That is generally not the case.

The higher yields may be the result of the two year Treasury Floating Rate Notes (FRNs) held in the Federal and Treasury Money Market funds. Treasury Floating Rate Notes pay a rate determined by the most recent 13 week T-Bill discount rate plus a fixed spread determined at the time of the FRN auction.

The Treasury fund recently held six FRNs with spreads of 0.300%, 0.220%, 0.154%, 0.139%, 0.115%, and 0.114%. Those spreads are quite attractive at present with 13 week T-Bills at 0.101%.

The two year FRNs should add incremental yield as long as they remain in the fund.
Electron
bgyt
Posts: 99
Joined: Sat Jun 16, 2018 8:20 am

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by bgyt »

Can someone confirm that the lazy/amateur move here for anyone with more than $3K in VMMXX is a straight transfer to VMRXX? Or am I missing something?
sport
Posts: 9527
Joined: Tue Feb 27, 2007 3:26 pm
Location: Cleveland, OH

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by sport »

heartwood wrote: Fri Aug 28, 2020 12:54 pm
Since Treasury MM VUSXX is reopened is there any/enough reason to at least put a placeholder amount in that fund?
The minimum initial investment is $50K.
palanzo
Posts: 1362
Joined: Thu Oct 10, 2019 4:28 pm

Re: VG prime MM getting nixed

Post by palanzo »

Makefile wrote: Fri Aug 28, 2020 12:47 pm
palanzo wrote: Fri Aug 28, 2020 12:15 pm Why did the 33% allocation to government securities lead to the sharp volatility of March 2020?
I think that what they meant was that "leading into March 2020," i.e., at the time the volatility started, the fund held 33% government securities which was a more conservative (higher) allocation than their competitor prime funds.

Is it possible that, behind the scenes, the CDs, Yankee/Foreign, and other non-government components of Prime MM were more problematic than it seemed back in March? i.e., something came too close for comfort in the opinion of the fund managers?

Where do the companies that were borrowing from Prime MM go now, when Prime MM basically says we won't buy your bonds/CDs anymore? Is this just not a big problem because Prime MM is still a very small % of the total market for those things? Anyone have insight?
Your interpretation is probably correct. It's very poorly written.
Northern Flicker
Posts: 6484
Joined: Fri Apr 10, 2015 12:29 am

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by Northern Flicker »

Wind_Reaver wrote: Thu Aug 27, 2020 6:29 pm
Northern Flicker wrote: Thu Aug 27, 2020 5:21 pm It appears the distinction between Federal and Cash Reserves will be percentage of treasury obligations in the portfolio-- 65% for Federal, perhaps 50% for Cash Reserves. And Cash Reserves will have an ER that is 1bp/yr lower than Federal.
Expecting a more prominent repo allocation to differentiate from Federal and Treasury MM. Competitors have similar established funds (at subsidized & higher cost). For example, Fidelity Government Cash Reserves (FDRXX), or Schwab Government Money Fund (SNVXX).
Repos can be collateralized by treasuries or lower credit quality instruments.
Risk is not a guarantor of return.
S_Track
Posts: 369
Joined: Sat Feb 18, 2017 12:33 pm

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by S_Track »

Looking at the total net assets for the three MM accounts, shows most investors prefer the Federal. This is what's on VG's site as of today. Is there a way to see this over time, I would be curious to the amounts pre-March?

Federal (Settlement account): Fund total net assets $196.4 billion
Prime: Fund total net assets $125.3 billion
Treasury: Fund total net assets $38.9 billion
User avatar
nisiprius
Advisory Board
Posts: 41944
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by nisiprius »

bgyt wrote: Fri Aug 28, 2020 1:11 pm Can someone confirm that the lazy/amateur move here for anyone with more than $3K in VMMXX is a straight transfer to VMRXX? Or am I missing something?
I did that because it seemed to be what the email from Vanguard was more-than-half suggesting. Without even thinking I just said "Admiral, sure. Click click do it."

And then the next day I got a notice saying that I had messed up my automatic RMD service by doing that and that I would need to set it up again.

Given that ERs for VMMXX and VMRXX are 0.16% and 0.10% respectively, and that the SEC yields showing on my screen right now are 0.04% and 0.10% respectively, and that it messed up my RMD service, and messed up somebody's checkwriting... I think there might be something said for leaving well enough alone. Or getting the money the heck out of there and putting it into a bank account where it could be earning a princely 0.65%.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
User avatar
Electron
Posts: 2115
Joined: Sat Mar 10, 2007 8:46 pm

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by Electron »

bgyt wrote: Fri Aug 28, 2020 1:11 pmCan someone confirm that the lazy/amateur move here for anyone with more than $3K in VMMXX is a straight transfer to VMRXX?
It looks like investors will be converted automatically late 2020 through 2021. They don't state whether the Investor class fund will be closed or remain open.

"What you need to do"

"Existing Investor share owners (VMMXX): You have the option to immediately convert to Admiral Shares to begin taking advantage of the lower expense ratio. You can find simple step-by-step instructions here. If you don’t initiate a conversion, you’ll be automatically converted sometime between late 2020 through 2021. Note: Our checkwriting service isn’t available for the fund’s Admiral share class. Checkwriting is available for Vanguard Federal Money Market Fund and other Vanguard money market funds."

https://investornews.vanguard/changes-t ... nd-lineup/
Electron
000
Posts: 2680
Joined: Thu Jul 23, 2020 12:04 am

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by 000 »

Wind_Reaver wrote: Thu Aug 27, 2020 11:56 pm Unless I'm misinterpreting, the announcement outlines the Prime MM fund converting from Prime (Prime category) to Federal (Government category) later this year. Vanguard won't have a Prime MM fund after the change, it will have two Federal MM funds with differing mandates and one Treasury MM fund.
That was my read too. So it seems Vanguard still thinks it's worth the trouble to have another Federal fund that reaches for yield a bit, but doesn't want to expose the risk of commercial and yankee paper.
Northern Flicker
Posts: 6484
Joined: Fri Apr 10, 2015 12:29 am

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]

Post by Northern Flicker »

I spoke with Vanguard about it, and it sounds like the plan is that Cash Reserves will have a longer average maturity than Federal MM, but not significantly different credit quality. Federal MM needs to meet the liquidity requirements of a settlement fund, but Cash Reserves will not need to. Cash Reserves will still be a cash fund managed for a stable share price.

Vanguard offers the Ultrashort bond fund if you want credit exposure, but minimal term exposure.
Risk is not a guarantor of return.
Post Reply