Northern Trust Asset Management Announces Changes to Money Market Mutual Fund Suite

Rhea-AI Summary

Northern Trust Asset Management announced significant changes to its money market mutual funds as of January 11, 2021. The Northern Funds-Municipal Money Market Fund (NOMXX) and Northern Institutional Funds-Municipal Portfolio (NMUXX) will close to new investors, with liquidation set for February 12, 2021. Additionally, a merger is proposed between the Northern Funds Money Market Fund (NORXX) and the Northern Funds-U.S. Government Money Market Fund (NOGXX), pending shareholder approval. This marks a strategic exit from the prime and municipal money market segment, driven by low U.S. interest rates and shifting investor preferences.

Positive

• Strategic exit from prime and municipal money markets aligns with changing investor demands.
• Focus on government money market funds caters to rising demand for principal stability.
• Long-term outlook suggests a shift to customized cash strategies, which may enhance client relationships.

Negative

• Closure of funds may limit options for investors seeking municipal and prime exposures.
• Potential loss of investor confidence due to significant fund lineup changes.
• Merger proposal could lead to reallocation of assets, impacting current fund performance.

Northern Trust Asset Management, which oversees $339 billion in liquidity and short-duration strategies globally as of Sept. 30, 2020, announced the following changes to its suite of money market mutual funds:

• The Northern Funds- Municipal Money Market Fund (NOMXX) and the Northern Institutional Funds- Municipal Portfolio (NMUXX) will both close to new investors on or about January 11, 2021. Final liquidating distribution of the funds’ assets will occur on or about February 12, 2021.
  
• A proposed merger of the Northern Funds Money Market Fund (NORXX) into the Northern Funds- U.S. Government Money Market Fund (NOGXX), subject to shareholder approval.

These fund lineup changes highlight a thoughtful progression by Northern Trust Asset Management to exit the prime and municipal money market mutual fund space, a process that began back in May 2020 with the closure of the institutional prime money market mutual fund, the Northern Institutional Funds - Prime Obligations Portfolio.

“Given our strongly held, long-term views on interest rates, coupled with shifting investor preferences and the potential for continued regulatory changes, appropriate action was needed with our money market mutual fund offering,” said Jen Hoffenkamp, who oversees Northern Trust Asset Management’s liquidity products. “Our investment strategies are rooted in the foundational belief that investors should be compensated for the risks they take, and we are committed to delivering investment products and solutions that fit our investor-centric approach.”

Northern Trust Asset Management anticipates that U.S. interest rates will remain anchored near zero for the foreseeable future. In a continued low interest rate environment, investors in municipal and prime money market mutual funds earn yields comparable to government money market funds. “In our opinion, the risk/reward profile for these investors has become misaligned,” said Peter Yi, Northern Trust Asset Management’s director of short-duration fixed income and head of taxable credit research. “Our view is that the constraints limiting municipal and prime money market mutual funds today will not improve significantly over time. The money market mutual fund landscape has fundamentally changed.”

Generally, prime and municipal money market mutual funds have declined in assets, while government money market mutual funds have grown as they seek to preserve the principal stability and liquidity that investors value. “Investor preferences have changed, but their liquidity needs remain the same,” Hoffenkamp said.

For the foreseeable future, Northern Trust Asset Management views government money market mutual funds as the optimal solution for investors’ operational cash needs. For intermediate (six-to-12-month) liquidity needs, the firm encourages clients to consider a cash segmentation strategy to take advantage of the value ultra-short fixed income products can provide.

While these changes affect prime and municipal money market mutual funds, Northern Trust Asset Management will continue to deliver these cash strategies to clients through customized solutions and other fund product types. Northern Trust Asset Management has helped liquidity investors navigate the ever-evolving liquidity landscape for more than 40 years. As one of the largest global cash managers, with a full liquidity suite serving individual and institutional investors, the firm offers a range of strategies, from municipal, prime and government cash management to ultra-short fixed income strategies.

IMPORTANT INFORMATION

You could lose money by investing in the Funds. Although each of the Northern Funds (NF)- Money Market Fund, Municipal Money Market Fund and U.S. Government Money Market Fund seek to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. Because the share price of the Northern Institutional Funds (NIF) - Municipal Portfolio will fluctuate, when you sell your shares they may be worth more or less than what you originally paid for them. The NF- Money Market Fund and Municipal Money Market Fund and NIF- Municipal Portfolio may impose a fee upon sale of your shares or may temporarily suspend your ability to sell shares if such Fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in a Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation (“FDIC”), any other government agency, or The Northern Trust Company, its affiliates, subsidiaries or any other bank. The Funds’ sponsor has no legal obligation to provide financial support to the Funds, and you should not expect that the sponsor will provide financial support to the Funds at any time.

Please carefully read the summary prospectus or prospectus and consider the investment objectives, risks, charges and expenses of the Northern Funds and Northern Institutional Funds before investing. Call 800-595-9111 or 800-637-1380, respectively, to obtain a summary prospectus or prospectus. The summary prospectus and prospectus contain this and other information about the Funds.

Northern Funds and Northern Institutional Funds are distributed by Northern Funds Distributors, LLC, not affiliated with Northern Trust.

About Northern Trust Asset Management

Northern Trust Asset Management is a global investment manager that helps investors navigate changing market environments, so they can confidently realize their long-term objectives. Entrusted with US$1.0 trillion of investor asset as of September 30, 2020, we understand that investing ultimately serves a greater purpose and believe investors should be compensated for the risks they take — in all market environments and any investment strategy. That’s why we combine robust capital markets research, expert portfolio construction and comprehensive risk management to craft innovative and efficient solutions that deliver targeted investment outcomes. As engaged contributors to our communities, we consider it a great privilege to serve our investors and our communities with integrity, respect, and transparency.

Northern Trust Asset Management is composed of Northern Trust Investments, Inc., Northern Trust Global Investments Limited, Northern Trust Fund Managers (Ireland) Limited, Belvedere Advisors LLC, Northern Trust Global Investments Japan, K.K., NT Global Advisors, Inc., 50 South Capital Advisors, LLC, and investment personnel of The Northern Trust Company of Hong Kong Limited and The Northern Trust Company.

About Northern Trust

Northern Trust Corporation (Nasdaq: NTRS) is a leading provider of wealth management, asset servicing, asset management and banking to corporations, institutions, affluent families and individuals. Founded in Chicago in 1889, Northern Trust has a global presence with offices in 22 U.S. states and Washington, D.C., and across 22 locations in Canada, Europe, the Middle East and the Asia-Pacific region. As of June 30, 2020, Northern Trust had assets under custody/administration of US $12.1 trillion, and assets under management of US $1.3 trillion. For more than 130 years, Northern Trust has earned distinction as an industry leader for exceptional service, financial expertise, integrity and innovation. Please visit our website or follow us on Twitter.

Northern Trust Corporation, Head Office: 50 South La Salle Street, Chicago, Illinois 60603 U.S.A., incorporated with limited liability in the U.S. Please read our global and regulatory information.

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FAQ

What changes did Northern Trust Asset Management announce for its money market mutual funds?

Northern Trust announced closures of NOMXX and NMUXX to new investors, effective January 11, 2021, and plans to merge NORXX into NOGXX, pending shareholder approval.

When will the Northern Funds-Municipal Money Market Fund close?

The Northern Funds-Municipal Money Market Fund (NOMXX) will close to new investors on or about January 11, 2021.

What is the reason behind Northern Trust's exit from the prime and municipal money market funds?

Northern Trust cites low U.S. interest rates and changing investor preferences as key reasons for exiting the prime and municipal money market space.

What will happen to the assets of the funds being closed by Northern Trust?

Assets of the Northern Funds-Municipal Money Market Fund and Northern Institutional Funds-Municipal Portfolio will be liquidated on or about February 12, 2021.

How does Northern Trust Asset Management advise investors for liquidity needs after these changes?

Northern Trust recommends government money market funds for operational cash needs and suggests a cash segmentation strategy for intermediate liquidity requirements.