New Rules May Make Money Market Funds Safer
But the trade-off -- low interest rates -- won’t make them popular with investors.
New rules going into effect later this year are likely to work as designed -- shoring up money market funds. The regulations from the Securities and Exchange Commission require funds to have greater liquidity, higher asset quality and better disclosures. “The changes create a situation where there is a lower probability that there will be a run on money market funds,” says Jeffrey Elswick, a managing director at Frost Investment Advisors. “They clearly address some of the big risks in the business.”
But there’s a downside to greater safety. The same measures that make funds more reliable will hold interest rates down, making them less attractive to investors and leaving less money for business loans. Many companies and financial institutions rely on money market funds for short-term, low cost financing. “They are the oil that lubricates the economy,” says Peter Crane, head of Crane Data, about the importance of the funds in helping companies and banks access money. As more investors pull out of the funds, looking for better returns, more companies will have to turn to alternatives such as bonds to raise capital, and that will mean paying higher interest.
The new restrictions mean funds will have trouble reaching precrisis levels. In the past 12 months alone, as interest rates held steady at zero or close to it, total fund deposits fell 18 percent from a peak of $3.9 trillion to $3.2 trillion, according to an Investment Company Institute report.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.

Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Expect assets to fall 10 percent more in the next 12 months. “It may be quite awhile before we get back to that peak level,” says Brian Reid, chief economist at ICI, a trade group. “Now that the restrictions have increased and money funds have become less competitive, their asset levels are more dependent on interest rates.”
For weekly updates on topics to improve your business decisionmaking, click here.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
-
S&P 500 Hits New High on Jobs Friday Eve: Stock Market Today
The S&P 500 hit a new all-time closing high and most of the stocks in the Dow Jones Industrial Average were up the day before a critical jobs report.
-
New $6,000 'Senior Bonus' Deduction: What It Means for Taxpayers Over Age 65
Tax Changes If you’re an older adult, a new bonus tax deduction could provide a valuable tax benefit. Here's how it works.
-
AI Start-ups Are Rolling in Cash
The Kiplinger Letter Investors are plowing record sums of money into artificial intelligence start-ups. Even as sales grow swiftly, losses are piling up for AI firms.
-
What is AI Worth to the Economy?
The Letter Spending on AI is already boosting GDP, but will the massive outlays being poured into the technology deliver faster economic growth in the long run?
-
Kiplinger Special Report: Business Costs for 2026
Economic Forecasts Fresh forecasts for 2026, to help you plan ahead and prepare a budget on a range of business costs, from Kiplinger's Letters team.
-
Trump-Era Regulations Will Broaden Access to Crypto
The Kiplinger Letter The president wants to make the U.S. the leader in digital assets.
-
Breaking China's Stranglehold on Rare Earth Elements
The Letter China is using its near-monopoly on critical minerals to win trade concessions. Can the U.S. find alternate supplies?
-
America's Surprising Strengths in Manufacturing and Exports
The Kiplinger Letter Despite common perceptions that the U.S. doesn't build things anymore, American factories are still hard at work. A special report from The Kiplinger Letter.
-
The Economic Impact of the US-China Trade War
The Letter The US-China trade war will impact US consumers and business. The decoupling process could be messy.
-
What DOGE is Doing Now
The Kiplinger Letter As Musk's DOGE pursues its ambitious agenda, uncertainty and legal challenges are mounting — causing frustration for Trump.