By Keith Delahunty
Senior Product Manager
October 13th 2023
Money market funds are back in favour, and we’ve been enhancing the functionality in our transfer agency solution to make money market fund support that bit easier.
Investors have ploughed $1 trillion into global money market funds so far this year, drawn by a surge in yields to more than 5%, continued economic uncertainty, and concerns about the safety of bank deposits in the wake of the Silicon Valley Bank, Signature Bank and Credit Suisse collapses. Predictions suggest fund inflows could rise to a record $1.5 trillion by year-end.
Money market fund yields are at their highest in over 15 years, having not gone above 2.25% in the last decade until recently. Getting 5%-plus risk free – compared to the S&P’s 11% year-to-date return and -18% decline in 2022 – is bound to be attractive. And with relatively high short-term interest rates set to remain in place for longer, strong investor inflows into money market funds are expected to continue.
Easing money market fund processing
Deep Pool’s transfer agency solution already features advanced money market fund support that enables users to administer funds with unique characteristics. The software can handle Constant NAV (CNAV), Variable NAV (VNAV) and Low Volatility NAV (LVNAV) funds, with fully automated processes that require little to no user interaction. It includes a full suite of bespoke money market fund reports, plus the ability to run a full application suite of reports for money market fund types.
But we have further boosted those capabilities in our Q3 product release.
Administrators need to calculate investors’ daily dividend upon redemption and populate that in order, without impacting the final monthly dividend payment to an investor’s remaining balance. A new update adds the ability upon saving -1 Order/Trans to have the option to retrieve and calculate included money market accrual. Investors’ dividend accrual is calculated upon -1 activity (redemption & transfer/switch out) and populated in Order/Trans as negative, increasing the net amount for Order/Trans. Period-end dividend processing is then reduced by the investor accrual amounts paid mid-period.
For VNAV and LVNAV money market funds, system users in the past had to manually update the application’s automatically created NAV. The default mapping for the UI Money Market Screen’s Next NAV Date displayed value was previously hard coded to 1.00. We have now adjusted the logic to update to the latest navs.nav record for selected funds.