MM Money

Money Market Funds Reinflate Fees

Excerpt: Back in the bad ol' days when the sluggish economy led to money market fund yields that were flirting with zero, some funds waived part or all of their expense fee to ensure that investors would garner at least some return. Now that the economy is flourishing enough for yields to rise, expense ratios are going up too.

Back in the bad ol' days when the sluggish economy led to money market fund yields that were flirting with zero, some funds waived part or all of their expense fee to ensure that investors would garner at least some return. Now that the economy is flourishing enough for yields to rise, expense ratios are going up too.

"Many of the waivers that were implemented were the result of a potentially negative yield -- which isn't possible, but the fees would have chewed up the effective return down to nothing, so they reimbursed at least back to the zero level, if not above," says Jeff Keil, vice president of Global Fiduciary Review at Lipper, a mutual fund research company.

"It was a temporary phenomenon by some funds to keep from going underwater. I would guess a sizeable portion will reinstate their fees to a point. Some may not reinstate the entire fee; they may see this as an opportunity to gain a shade more yield than their competitors."

David Bachert, a spokesman for AIM Investments, says they started reinstating fees as soon as the Fed began hiking short-term rates.

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