Fidelity Closes 3 Money Market Funds To Protect Shareholders From Plunging Yields

David Dierking

Fidelity made it clear recently that enough is enough when it comes to investor demand for Treasuries and Treasury-related funds. Overwhelmed with cash from investors, Fidelity decided to close the doors to new investors for three of its money market funds.

  • Fidelity Treasury Only Money Market Fund
  • FIMM Treasury Only Portfolio
  • FIMM Treasury Portfolio

This is a decision that's rarely made by fund companies because it involves turning away money, but it's usually one that benefits shareholders (although in ways that aren't always tangible).

Fidelity noted "restricting inflows will help reduce the number of new Treasury securities that the funds will need to purchase." Fidelity also says that since the move will help limit the number of new Treasuries that the funds would have to purchase, it helps maintain a higher yield overall.

This is certainly a nice sentiment, but shareholders probably won't get any significant boost from this. Money markets generally hold securities that mature within 30 days and even the longest-term notes rarely exceed 90 days. Money market funds will essentially be forced to buy low-yielding Treasuries within about a month anyway.

Existing shareholders and participants in plans that offer one of these funds as an investment option will continue to be able to make new purchases.

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