Yes, although as the mid-October deadline for significant regulatory-driven changes to US money market mutual funds draws near, investors that wait may find themselves with fewer options for funds that will continue to offer stable net asset values. Most US-domiciled investors that require reliable daily liquidity from their cash holdings should act now to ensure that this cash is held by government-only money market mutual funds, because after October 14, other types of institutional money market funds will undergo major structural changes, dramatically decreasing their appeal for most investors.

In 2008, the Reserve Primary money market fund “broke the buck” amid the Lehman Brothers bankruptcy, triggering a run on prime money market funds that caused significant financial distress for major corporations that relied on commercial paper for financing. Regulators, eager to constrain this systemic risk and prevent a repeat, have adopted impactful reforms to the money market fund industry.*

Gone are the days when investors could choose any money market fund and be virtually certain that they would always have daily access to their cash, with asset values permanently pegged at $1.00 per share. Starting in October, institutional “prime” funds and tax-exempt money market funds will adopt market-based pricing that can vary from the $1.00 peg. While the move to floating prices is mainly a hassle for corporate treasurers and others (share prices are unlikely to move much, even in wild markets), most investors will find that less bothersome than another element of the regulation: the potential for these funds to impose liquidity fees and gates.

For most investors, the marching orders are pretty simple. Cash that might be called on in the near term should generally be held in a government-only money market fund, not in a “prime” fund (which can own commercial paper and non-insured bank CDs, among other assets), and not in a tax-exempt fund that includes municipal debt. These government-only funds invest exclusively in US government obligations, often including Treasury bills and floating rate notes, as well as repurchase agreements (“repos”) that are backed by government obligations.

The slightly higher yields available from prime funds (and higher after-tax yields from tax-exempt funds) may be tempting, but for near-term cash needs, most institutions can’t risk having a frozen money market fund that causes them to default on a capital call, delay vendor repayments, or even miss payroll.

For cash not needed in the near term, prime or tax-exempt “40 Act” money market mutual funds (that is, those regulated according to the conservative standards of the Investment Company Act of 1940) remain a reasonable choice, although government-only funds are also defensible.

Assets are now marching steadily out of “prime” and tax-exempt funds and into government funds (and fund sponsors are changing the mandate of some of the former types into government-only funds). Assets of government-only funds have increased by $650 billion from the end of 2014, with a corresponding decrease of similar magnitude in prime and tax-exempt funds. If the pace of inflows quickens, some government funds could possibly restrict new investment. Thus, investors that have not already done so should ensure that near-term cash holdings are held in a fund not subject to the new liquidity restrictions. After October 14, non-government money market mutual funds will not be what they used to be.

* For more details on the regulatory changes, please read the August 2015 edition of our Quarterly Regulatory Update.

Sean McLaughlin is a Managing Director on Cambridge Associates’ Global Investment Research team.