Texas Capital Unveils 'First-of-Its Kind' Money Market ETF

Texas Capital Bank Private Wealth Advisors has introduced a “first-of-its-kind” ETF to follow money market fund rules, aiming to gain ground in the $6.5 trillion money market industry, the company announced today. 

The Texas Capital Government Money Market ETF (MMKT) intends to provide high current interest income while maintaining liquidity and stability of principal while following Rule 2a-7, Texas Capital said in a press release. 

"As the first ETF committed to following Rule 2a-7, the provision of the Investment Company Act of 1940 that governs money market funds, Texas Capital believes the combination of the tradability of an ETF and the structure of a money market fund will prove an important investment alternative for investors," Daniel Hoverman, head of corporate and investment banking at Texas Capital, said in the release. 

The fund will invest at least 99.5% of its assets in cash, government securities, and fully collateralized repurchase agreements, according to the fund’s prospectus filed with the Securities and Exchange Commission.

Unlike traditional money market funds, MMKT will not maintain a stable $1 net asset value (NAV), the fund’s prospectus states. Instead, it will calculate its NAV based on the market value of its investments.

Texas Capital Enters Competitive Space

This launch coincides with a period of growth in money market funds. Research from Managing Partners Group (MPG) indicates U.S. money market funds currently hold $6.5 trillion in assets.

“There is a record amount of money set to return to the bond market over the next few years,” said MPG CEO Jeremy Leach, commenting in the survey on the current market dynamic. “As we appear to be entering a period of falling inflation and lower interest rates, our research shows a strong appetite for fixed income, as it offers stability, diversification and a regular income stream.”

MPG’s survey found that 96% of institutional investors and wealth managers agree that investment strategies are looking again to fixed income for stability, diversification and income in portfolios.

The survey also revealed potential for fund movement. Over half the surveyed investors predict between $2 trillion and $2.5 trillion will leave U.S. money markets and return to the bond market in the coming years.

MMKT carries an expense ratio of 0.2%, according to the prospectus. The fund’s holdings can range from overnight repurchase agreements to securities with maturities up to 13 months.

This debut marks Texas Capital’s fourth ETF offering, following the debt of the Texas-focused $26.2 million Texas Capital Texas Equity Index ETF (TXS) last year.