What is the 90-day Equity Wash Rule? (2024)

The 90-Day Equity Wash Rule states that anyone transferring assets out of an investment contract fund must transfer the assets into a stock fund, balanced fund, or bond fund with an average maturity of three years or more. The assets must remain in that equity fund for a period of 90 days before becoming eligible for transfer into a competing stable value fund.

This restriction is imposed by the issuers of the investment contracts in which the fund invests. The intent is to prevent investors from moving out of an investment contract fund and into a competing fund to obtain a higher rate of interest. An investment contract fund's yield reflects the blended or average yield of all of the contracts held. The yield changes gradually over time, following general market interest rates. With an average contract maturity of 2-3 years, an investment contract fund will see its yield change at a slower pace than the yield of a money market fund, which has an average maturity of only 60-90 days. At times, the trust's yield may be significantly above or below current market interest rates.

What is the 90-day Equity Wash Rule? (2024)
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