Fidelity fund aims to invest only in assets that are collateralised

Boston

FIDELITY Investments plans to convert its largest money fund into one that almost only buys securities issued or backed by the US government after regulators imposed restrictions last year. It wants the US$111.5 billion Fidelity Cash Reserves fund to invest at least 99.5 per cent of total assets in cash, government securities or repurchase agreements that are fully collateralised, according to a regulatory filing.

The move by the Boston-based money manager comes after the US Securities and Exchange Commission last year made changes to how non-government and institutional money market funds should operate, including abandoning their traditional US$1 share price in exchange for a floating net asset value. The rules also give money funds the ability use liquidity fees and redemption gates to prevent runs.