(Reuters) - Goldman Sachs Group Inc (GS.N) said it will disclose the values of its money-market mutual funds on a daily basis rather than monthly, a move that could boost investor confidence and head off new regulations.
The change is a major shift in the $2.6 trillion industry which for years has battled regulators over plans to tighten rules governing price disclosures, reserves against potential losses and conditions for returning money to investors in the event of a crisis.
David Fishman, co-head of Goldman’s money fund business, said in an interview the additional disclosures are meant to show the quality of the funds and their net asset values, or NAVs.
“There’s a lot of talk about ‘shadow banking’ and ‘shadow NAV,’ the implication being that things are more hidden,” Fishman said in a telephone interview. “We would say that by bringing this out into the open, we can say these are high-quality products.”
Goldman Sachs’ money fund assets total about $200 billion, including more than $130 billion in U.S.-based funds.
Currently, money funds report their actual net asset value per share only monthly, with a 60-day lag. Fluctuations of the share prices are typically seen in tenths of a cent or less. Investors buy and sell shares at a fixed price of $1.
During the financial crisis, however, one major money fund suffered losses on Lehman Brothers debt it owned and could not maintain the $1 per share price. When the Reserve Primary Fund “broke the buck,” investors stampeded out of all funds that potentially could have also owned Lehman debt, threatening to freeze much of the U.S. borrowing system.
By giving investors more regular updates, Goldman could assuage the fears that led to the panic. Clients have been asking for more details lately, Fishman said.
Regulators have been considering whether the funds should go farther and use the actual daily net asset value when investors buy and sell shares.
But few other fund families are likely to follow Goldman’s move, according to Pete Crane, a long-time money fund analyst and co-founder of Crane Data, which tracks the industry.
Investors have shown little interest in the current monthly disclosures, Crane said. Almost all the time, the data shows little difference between actual mark-to-market prices and the fixed $1 per share price, he added.
Goldman said it will disclose the previous day’s NAV of its three U.S. commercial paper funds daily, starting on Wednesday. It will begin disclosing daily NAVs of its six U.S. government and tax-exempt funds next week. The daily price of its six offshore funds will be available by the end of the year.
Reporting by Avik Das and Tanya Agrawal in Bangalore and Ross Kerber and Aaron Pressman in Boston; editing by Matt Driskill, Supriya Kurane and Matthew Lewis