The Investment Company Institute released its latest "Money Market Fund Holdings" report (with data as of April 30, 2015), which tracks the aggregate daily and weekly liquid assets, regional exposure, and maturities (WAM and WAL) for Prime and Government money market funds. ICI's "Prime and Government Money Market Funds' Daily and Weekly Liquid Assets" table shows Prime Money Market Funds' Daily liquid assets at 23.3% as of April 30, down from 24.9% on March 31. Daily liquid assets were made up of: "All securities maturing within 1 day," which totaled 18.2% (vs. 19.2% last month) and "Other treasury securities," which added 5.2% (down from 5.8% last month). Prime funds' Weekly liquid assets totaled 37.6% (vs. 37.9% last month), which was made up of "All securities maturing within 5 days" (31.1% vs. 30.8% in March), Other treasury securities (5.0% vs. 5.8% in March), and Other agency securities (1.5% vs. 1.3% a month ago). (See also Crane Data's May 12 "News", "May MF Portfolio Holdings Show Plunge in Fed Repo, Jump in TDs, CP.") We also examine the latest MMF holdings report from JP Morgan Securities below.
The ICI holdings report says Government Money Market Funds' Daily liquid assets totaled 61.6% as of April 30 vs. 56.0% in March. All securities maturing within 1 day totaled 26.3% vs. 18.4% last month. Other treasury securities added 35.3% (vs. 37.6% in March). Weekly liquid assets totaled 80.2% (vs. 82.6%), which was comprised of All securities maturing within 5 days (39.5% vs. 38.2%), Other treasury securities (33.1% vs. 35.6%), and Other agency securities (7.7% vs. 8.8%).
ICI's "Prime and Government Money Market Funds' Holdings, by Region of Issuer" table shows Prime Money Market Funds with 41.6% in the Americas (vs. 50.4% last month), 19.6% in Asia Pacific (vs. 19.4%), 38.5% in Europe (vs. 29.4%), and 0.4% in Other and Supranational (vs. 0.3% last month). Government Money Market Funds held 84.4% in the Americas (vs. 91.9% last month), 0.5% in Asia Pacific (vs. 0.2%), 15.2% in Europe (vs. 7.9%), and 0.1% in Supranational (vs. 0.1%).
The table, "Prime and Government Money Market Funds' WAMs and WALs" shows Prime MMFs WAMs at 40 days as of April 30, down from 42 days last month. WALs were at 78 days, down from 79 days last month. Government MMFs' WAMs was at 43 days, down from 44 days last month, while WALs was at 82 days, up from 81 days. ICI's release explains, "Each month, ICI reports numbers based on the Securities and Exchange Commission's Form N-MFP data, which many fund sponsors provide directly to the Institute. ICI's data report for April covers funds holding 94 percent of taxable money market fund assets." Note: ICI publishes aggregates but doesn't publish individual fund holdings.
In their latest "Prime Money Market Fund Holdings Update," JP Morgan Securities', Alex Roever, Teresa Ho, and John Iborg explain why recent outflows are not necessarily due to reforms. They write, "Prime retail funds lost $11bn or -2.3% of AuM, while prime institutional fund AuM decreased by $40bn or -4.1%. In total, prime MMFs shed $51bn or -3.5% of AuM during the month. Furthermore, government funds experienced $17bn or -1.8% in outflows. Funds built liquidity in order to meet outflows, and shortened maturities throughout the month. Indeed, at the end of April, prime fund WAMs stood at an average of 39 days, close to a multi-year low. Additionally, average WAMs of government funds decreased by 1day over the course of the month to 41 days, also close to a multi-year low."
They add, "Outflows have been a typical occurrence during the first half of the year. Since 2012, tax season and the dissipation of cash balances built up around the end of the year has resulted in average outflows of $47bn for prime MMFs, and $63bn for government MMFs through the end of April. For perspective, YTD, outflows from prime and government MMF have registered $51bn and $17bn respectively. We do not believe that MMF reform has been the driving factor behind the prime outflows experienced to date. As we pointed out above, prime fund outflows are normal for this time of the year, and 2015 has been mostly on par. Although the timing is uncertain, we do not expect sizable reform–related flows to occur until later this year. However, the degree to which prime funds are changing their maturity compositions suggests that these funds are already preparing for further outflows to occur."
They continue, "Bank exposures rebounded during April. Prime funds increased their holdings of banks by $76bn month-over-month, as quarter-end balance sheet management subsided. Not surprisingly, time deposits were the primary asset class behind the rebound, increasing by $97bn principally across European banks. For the most part, other asset classes remained unchanged, with the exception of CDs. Holdings of CDs decreased by $20bn, concentrated across Canadian, Japanese, Swedish and Dutch banks."
Further, JPM explains, "Prime fund usage of the Fed RRP decreased by $148bn month-over-month. For prime MMFs, the Fed RRP facility has served as a viable source of backstop supply, particularly on quarter-end dates when large dealers temporarily scale back on short-term funding. With quarter-end supply pressures alleviated, prime funds used $24bn of RRP versus $172bn at the end of March.... Prime MMFs increased their holdings of US agency securities by $19bn month-over-month while paring back holdings of Treasuries by $14bn. We suspect that with quarter-end out of the way, prime funds preferred agencies for their relative yield pickup to short-term Treasuries, as 1m and 3m bills traded at zero to negative levels at some points prior to the end of the month. However, looking forward, we expect allocations to Treasuries to continue their up-trend as funds further bolster liquidity as a result of MMF reform."
Finally, JPM's latest weekly adds, "Large money fund complexes continue to come forward with their strategies for dealing with MMF reform. BlackRock, Legg Mason, Invesco, and Schwab each made respective announcements throughout April and early May. Blackrock announced that it will restructure a portion of its institutional prime and muni MMFs into 7 day max-maturity funds, will restructure certain prime MMFs into government MMFs, and will not implement gates and fees for its government MMFs. Legg Mason announced that it intends to offer two non-money market short duration bond funds, and that it will not implement gates and fees on its government MMFs. Most recently, Schwab announced that it will not implement gates and fees on its government MMFs. We expect more fund families to come forward, and more specific details be released, as the year progresses and as we get closer to the final rules taking effect in 2016.
