Tags: mutual funds | sec

Industry research firm Celent has put together a new report on money market funds concluding that ending the fixed $1 NAV structure will kill the asset class.

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"A floating NAV will negate the entire incentive that investors have to buy and sell these funds and ultimately eliminate the $2.7 trillion industry," says Scott Sullivan, the analyst who put the report together.

Celent is fine with the 2010 MMF rules, which beefed up liquidity in order to minimize the odds of another fund "breaking the buck" and starting a panic among investors who consider these vehicles equivalent to cash.

MMF portfolios now have to contain 10% of their holdings in one-day securities and have an average maturity of ony 60 days, giving them time to ride out any temporary upheaval while still making their day-to-day distributions.

However, SEC Commissioner Mary Schapiro has made deeper MMF reform her top priority, even though matters of top-level concern to advisors -- like who's going to regulate them in the future -- drift from year to year.

Leading fund managers like Fidelity have already balked at the notion of abandoning the fixed $1-a-share NAV structure.

The question is why Schapiro is so stubborn on an issue that nearly every other commentator says has already gone far enough. 

Does she know something ominous about looming instability of the money markets that we don't?

If she does, maybe she can tell us in a way that doesn't panic the markets. And if not, why is this such a big deal?