Malvern, Pa.-based Vanguard Group closed its $39.5 billion Treasury Money Market Fund to new investors Thursday, the company said in a news release.
The move was made “to protect existing fund shareholders from high levels of cash flow that could potentially accelerate reductions to the fund’s yield,” the news release said.
Existing shareholders of the fund can continue to make purchases with no limits, however, the $5.3 trillion money manager said.
According to the company, “An increase in demand for high-quality government money market funds, combined with extremely low yields on U.S. Treasury securities, may have the effect of reducing the fund’s yield, as new cash flow is invested in lower-yielding securities,” the release said.
The fund, which launched in December 1992, was previously closed to new investors in 2009 “when we were in a similar low interest rate period,” a Vanguard spokesman said Thursday. The fund reopened to investors in January 2016, the spokesman added.
Vanguard decided to close the fund on Thursday, in part, due to the Federal Reserve slashing interest rates to zero last month, the spokesman said.
The Fed’s move on March 15 served as an attempt to cushion the economy from the impact of the coronavirus.
By closing the fund to new investors, Vanguard “can temper new cash flow and limit how much of those low-yielding securities we have to purchase,” the spokesman added.
