Gyroscopic Investing

Details here: https://investornews.vanguard/changes-t ... nd-lineup/

The gist: Prime money market fund will be called Cash Reserves and will become slightly more conservative in its holdings.
The minimum for Admiral has gone down from $5 million to 3 thousand.

dualstow wrote: ↑Thu Aug 27, 2020 9:57 am Details here: https://investornews.vanguard/changes-t ... nd-lineup/

The gist: Prime money market fund will be called Cash Reserves and will become slightly more conservative in its holdings.
The minimum for Admiral has gone down from $5 million to 3 thousand.

$5 million??!!

Vinny

Prime MM will be MUCH more conservative - 100% U.S. government paper, and they also reopened their pure Treasury MM fund to new investors after closing it in April. 3K minimum for Admiral shares of the new Prime vs. 50K minimum for Treasury fund (and no checkwriting option for either of them).

Interesting moves.

So now there will be a Vanguard Federal Money Market Fund and a Vanguard Cash Reserves Federal Money Market Fund?

Kind of a confusing naming scheme, but okay...

Kevin K. wrote: ↑Thu Aug 27, 2020 10:46 am Prime MM will be MUCH more conservative - 100% U.S. government paper
...

It says “almost exclusively.” I look forward to viewing the exact holdings when they print them.

Tortoise wrote: ↑Thu Aug 27, 2020 11:19 am So now there will be a Vanguard Federal Money Market Fund and a Vanguard Cash Reserves Federal Money Market Fund?
Kind of a confusing naming scheme, but okay...

I’m going to miss the name Prime.

FYI even their Treasury MM fund isn't exactly pure Treasuries. From Vanguard's policy statement about the fund:

"The fund invests solely in high-quality, short-term money market securities whose interest and principal payments are backed by the full faith and credit of the U.S. government. Under normal circumstances, at least 80% of the fund’s assets will be invested in U.S. Treasury securities; the remainder of the assets may be invested in securities issued by U.S. governmental agencies.

Under the new money market reforms, government money market funds are required to invest at least 99.5% of their total assets in cash, government securities, and/or repurchase agreements that are collateralized solely by government securities or cash (collectively, government securities). The fund generally invests 100% of its assets in government securities and therefore will satisfy the 99.5% requirement for designation as a government money market fund."

It will indeed be interesting to see if the new version of Prime is just a "distinction without a difference" from the existing Treasury fund when they release the fine print.

Of course given today's Fed announcement I guess in either case you have a guaranteed zero nominal/negative real return from either backed by the full faith and credit of the guvmint.

As I see it, the effect of this decision by Vanguard is to reduce its expense ratio on its Treasury money market from 0.16% to 0.10%.

As a mostly Fidelity fund investor, this is welcome news because it places pressure on Fidelity to reduce the expense ratio on its Treasury money market funds, SPAXX and FDLXX, currently at 0.42%. Given the current interest rate environment, I am hoping Fidelity feels the heat.

Actually Vanguard's Treasury MM fund (VUSXX) had an ER of .09% - but it also has a $50,000 minimum investment.

The confusion here is that their Prime MM fund is changing its name to Vanguard Cash Reserves Federal Money Market Fund and it does indeed have a .10 ER for Admiral shares. But it's not a pure Treasury fund. To add to the potential confusion they also will still have their Federal MM fund which is in between the other two in terms of the percentage of Treasuries.

That said, I don't know about Fidelity but I have most of my investments at Schwab and nothing Vanguard has done has had any effect on their high ER's for their Treasury MM fund. Schwab makes most of its money by offering lousy returns on cash and I'd be surprised if that isn't true to some degree with Fido as well.

jhogue wrote: ↑Fri Aug 28, 2020 12:13 pm As I see it, the effect of this decision by Vanguard is to reduce its expense ratio on its Treasury money market from 0.16% to 0.10%.

As a mostly Fidelity fund investor, this is welcome news because it places pressure on Fidelity to reduce the expense ratio on its Treasury money market funds, SPAXX and FDLXX, currently at 0.42%. Given the current interest rate environment, I am hoping Fidelity feels the heat.

Spaxx and fdlxx are not at .42 ..the 7 day yield is .01

I was referring to the expense ratios of the funds. Not the yield.

at this stage fidelity is paying the expenses or the fund would be negative at minus .22%

7-Day Yield Without Reductions

-0.22%

Kevin K. wrote: ↑Fri Aug 28, 2020 12:35 pm Actually Vanguard's Treasury MM fund (VUSXX) had an ER of .09% - but it also has a $50,000 minimum investment.

For those who have the 50K, I think you can put it in for a short while and then take a bunch of it out.
I keep a lot of cash in there because I like the fund and I’m lazy about chasing yield. I occasionally jump on treasury notes with a good yield, but I don't think I'll need to look for a long time.

At the moment, I am about 50-50 in FDLXX and I-bonds for Cash. FDLXX yields close to zero; I am holding it for safety and liquidity, not yield. I-bonds are presently yielding 1.06%- better than the 10-year bellwether Treasury note. My present mix has become my "barbell within a barbell."

Normally, I would have some 1 year T-bills too, but we are not in normal times, thanks to the Fed's ZIRP. Fortunately, I have yet to have to redeem an I-bond in order to rebalance into Cash.