Money fund assets declined slightly for the second week in a row and the first full week of 2018, though Prime MMFs continued to see inflows, according to the Investment Company Institute's latest "Money Market Fund Assets" report. ICI writes, "Total money market fund assets1 decreased by $1.85 billion to $2.84 trillion for the week ended Wednesday, January 10, the Investment Company Institute reported today. Among taxable money market funds, government funds decreased by $6.42 billion and prime funds increased by $2.83 billion. Tax-exempt money market funds increased by $1.74 billion." Total Government MMF assets, which include Treasury funds too, stand at $2.238 trillion (78.9% of all money funds), while Total Prime MMFs stand at $462.3 billion (16.3%). Tax Exempt MMFs total $135.7 billion, or 4.8%. We review the latest asset totals, as well as another WSJ update on H.R.2319, below.
ICI explains, "Assets of retail money market funds decreased by $7.46 billion to $1.01 trillion. Among retail funds, government money market fund assets decreased by $5.24 billion to $610.69 billion, prime money market fund assets decreased by $3.51 billion to $266.16 billion, and tax-exempt fund assets increased by $1.30 billion to $129.37 billion." Retail assets account for over a third of total assets, or 35.5%, and Government Retail assets make up 60.7% of all Retail MMFs.
Their release adds, "Assets of institutional money market funds increased by $5.60 billion to $1.83 trillion. Among institutional funds, government money market fund assets decreased by $1.18 billion to $1.63 trillion, prime money market fund assets increased by $6.34 billion to $196.19 billion, and tax-exempt fund assets increased by $440 million to $6.38 billion." Institutional assets account for 64.5% of all MMF assets, with Government Inst assets making up 88.9% of all Institutional MMFs.
In other news, an article on The Wall Street Journal's WSJ Pro service, entitled, "Effort to Unwind Money-Fund Rule Hits Hurdle," says that the ICI is opposed to the effort to overturn parts of the SEC's 2014 Money Fund Reforms. Written by Andrew Ackerman, it comments, "Bipartisan House legislation aimed at undoing sweeping changes to certain money-market mutual funds suffered a major blow this week: The fund industry's top trade group came out in opposition to the bill, a move that could make it much tougher to advance through the chamber. The Investment Company Institute now opposes the legislation in question after months of being neutral."
The piece explains, "The decision by ICI is a victory for some of its biggest members, including BlackRock Inc. and Fidelity Investments, which have privately argued the industry has already spent millions of dollars to comply with the SEC's requirement -- a view now adopted publicly by ICI.... Most of the industry has learned to live with the SEC rule. But Federated Investors Inc., with nearly 70% of its assets in money funds, and state and local treasurers teamed up to undo the rule, which they say has increased borrowing costs and limited investment options. Some 60 lawmakers signed on to the bill, introduced by Rep. Keith Rothfus (R., Pa.)."
It adds, "Supporters of the bill played down the significance of ICI's opposition." Ackerman quotes Rothfus, "State and local governments, universities, hospitals, and businesses continue to bear the unfair and highly disproportionate costs of the SEC's questionable rule. That is why this bill continues to have strong bipartisan support."
The piece adds, "The bill was scheduled to be debated by the House Financial Services Committee last month, but didn't come to a vote amid behind-the-scenes pushback from firms opposed to the legislation. Even with ICI now opposing the bill, it may come up again for a committee vote, though it's unlikely to advance in its current form, according to people familiar with the process."
ICI's statement, partially quoted by the article, says, "Money market funds were subject to intense scrutiny after the financial crisis, resulting in prolonged, intense debate and two rounds of sweeping reforms, in 2010 and 2014. While ICI and its members did not support many of the measures adopted in 2014, we were pleased that the reforms preserved money market funds as a key cash management product for fund investors and a source of financing for businesses and governments. ICI's members spent thousands of hours and millions of dollars implementing these changes, and the cash management market has adjusted to the new regulatory regime. The consensus of our member leadership is that ICI should oppose this legislative effort to reopen those reforms."
Wells Fargo Money Market Funds' latest Commentary, which is our "Link of the Day" today, also commented on H.R. 2319. They write, "With the threat of the debt-ceiling binding on the horizon, it's not much of a stretch to predict that politics will affect the money markets again this year. But one bill of particular interest that market participants may want to keep an eye on is HR2319: the Consumer Financial Choice and Capital Markets Protection Act of 2017. As we briefly noted in our June commentary, this bill aims to reverse much of the money market reform that was implemented in October 2016. At that time, we had pointed out that while it hadn't really gotten much traction up to that point, we felt it had a better chance than previous versions of getting to a vote due to the large number of bipartisan sponsors. Since then, the bill has garnered even more sponsors -- currently standing at 37 Republicans and 24 Democrats -- but more important was the subject of a November 3 hearing by the House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises prior to referral to the committee. So it has made some progress, unlike its predecessors."
They add, "Not everyone, though, is on board with the idea of repealing this latest round of money market fund reform. A major difference from the environment prior to the SEC's 2014 publication of its new money market regulations is that the industry itself is fractured in its support and is not virtually unanimously behind reversing the terms of the regulatory reform. Citing the expense and fatigue from the 2-year implementation process, the Investment Company Institute and some fund complexes are siding against the effort, in direct conflict with other fund complexes, consumer professional organizations, and securities-related and associated constituents that have declared their support. It should be interesting to follow this bill to see what happens."
For more on the topic, see the Journal's previous article, "Bringing Back the Money-Fund Buck. See also our Dec. 15 News, "WSJ on NAV Bill," our Dec. 12 Link of the Day, "BofA's Cabana on Bill H.R.2319" and our Nov. 17 News, "AFP Comments on Stable NAV Bill."
