Tags: Fee | Hike | Money | Market | Funds

Money Market Funds Poised to Quietly Hike Fees

By Dan Weil   |   Friday, 26 Mar 2010 09:06 AM

Annoyed by hefty fees from your bank and credit-card companies?

Get ready for more, because your money market fund could soon be charging more fees too.

Many funds have waived their fees since late 2008 to avoid dropping yields to zero or even creating losses for their investors.

But funds are allowed to boost fees to reclaim lost revenue, MarketWatch.com reports. And you can bet that’s exactly what they will do once interest rates start rising again.

The worst part of it is that the funds don’t even have to tell you that they’re doing it.

“Our analysis suggests that virtually all the asset managers (we cover) are poised to recapture most, if not all, of their money fund fee waivers following an increase in short-term rates, even if they suffer some incremental outflows," analyst Rob Lee of Keefe Bruyette & Woods wrote in a research note obtained by MarketWatch.

More than 95 percent of retail money market funds were waiving some or all of their fees as of Dec. 31, according to a study by research firm iMoneyNet.

That represents a steep increase from about 60 percent in 2006.

With money market yields so close to zero, many experts recommend alternative investments.

Miriam Sjoblom, a bond fund analyst for research firm Morningstar, told Moneynews.com that investors would do well to consider T. Rowe Price Short-Term Bond fund and Vanguard Short-Term Bond Index fund.

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