Stronghold Money Fund is a relatively new money market fund with about $400 million in total financial assets and shares outstanding (each maintained at a value of $1.00 per share). Most of the fund’s accounts represent the savings of high-income, interest-sensitive investors. Stronghold’s current distribution of financial assets is as follows:
U.S. Treasury securities .... $170 million
Federal agency securities .... 115 million
Prime bank CDs ........ 85 million
Prime commercial paper issues ...... 30 million
Interest rates are expected to rise substantially in the money market over the next several weeks or months and Stronghold’s management is concerned that its relatively low current yield (a seven-day average of 4.05 percent, one of the lowest yields among existing funds) may result in the loss of many of its more interest-sensitive share accounts. The fund’s average maturity is currently 34 days, which is also substantially less than the industry’s current average maturity of about 45 days. What steps would you recommend to help Stronghold Money Fund prepare for an apparent impending change in money market conditions?