To provide municipal investors with investment options beyond plain- vanilla Treasuries, Fidelity Investments has converted one money market fund into a new fund that also includes dollar-denominated foreign securities, the company announced Friday.
Standard & Poor's Corp. and Moody's Investors Service said last week that they had assigned triple-A ratings to the Fidelity Rated Money Market Fund.
That portfolio was created from the Fidelity Money Market Trust: Domestic, said Michael Mathison, a vice president for Fidelity's institutional cash products.
Besides dollar-denominated foreign securities, the new fund can invest in "highly rated bank and corporate obligations, foreign and domestic," Mathison said.
"There was a gap in what we were offering institutional investors," Mathison said. "We took one fund - the domestic fund - and repackaged it to meet the needs of government clients."
The new portfolio is Fidelity's second institutional money market fund, Mathison said. The other fund invests only in Treasuries, he said.
The new fund's load will be 22 basis points less than the domestic fund's 42 basis points, Mathison said.
"We lowered the fees to make it a competitive, institutionally priced product," Mathison noted.
Fidelity offers six triple-A rated money market funds, but only two - this fund and the Treasury-only fund - are "institutionally priced," Mathison said.
At the same time, Standard & Poor's has withdrawn its rating on the domestic fund at Fidelity's request, said Peter Rizzo, an associate at Standard & Poor's.
The triple-Am rating signifies the fund's capacity to maintain a $1- per-share net asset value, Rizzo noted. The agency will review the fund on a weekly basis, he said.
"This new fund is targeted mainly to municipalities," Mathison said. "Thousands of cities are required to invest their bond proceeds in triple-A rated vehicles. This fund not only satisfies those requirements, but also offers broader investment parameters and therefore a better yield than the Treasury fund."
There is $324 million invested in the new fund, Mathison said. In comparison, the Treasury fund has $6.3 billion, he added.
