A flight to safety in the current coronavirus pandemic by investors looking to sit it out has caused Vanguard to close its $39.5 billion Treasury Money Market Fund (VUSXX) to new shareholder accounts.
The company said it is seeking to protect existing fund shareholders from high levels of cash flow that could potentially lead to lower yields. Existing shareholders in the fund, however, can continue to make purchases with no limits.
“Vanguard believes that money market funds provide significant value to investors as a stable and convenient cash equivalent instrument,” the Valley Forge, Penn.-based Vanguard wrote in a statement. “However, an increase in demand for high-quality government money market funds, combined with extremely low yields on U.S. Treasury securities, may have the effect of reducing the Fund’s yield, as new cash flow is invested in lower-yielding securities.”
Prudent step
Calling it a prudent step to temper cash flows, Vanguard will continue to monitor the fund and employ additional measures if needed. Vanguard has taken similar pre-emptive measures during prolonged low-interest-rate environments.
“Prospective investors will continue to have access to other portfolios in Vanguard’s $414 billion low-cost lineup of money market funds, including Vanguard Prime Money Market Fund, Vanguard Federal Money Market Fund, and Vanguard’s national and state-specific tax-exempt money market funds. Vanguard continues to manage its money market funds very conservatively, focusing only on the highest-quality short-term money market instruments.”
Vanguard is one of the world’s largest investment management companies. As of March 31, 2020, Vanguard managed $5.3 trillion in global assets.
The firm, headquartered in Valley Forge, offers 425 funds to 30 million investors worldwide.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
