The March issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Wednesday morning, features the articles: "Friend or Foe to Cash? Money Markets Focus on Repatriation," which discusses the new hot topic in the money markets; "Guardians of Liquidity: SEI's Simko & Lac," which interviews SEI's Sean Simko and Daisy Lac; and, "Deposits Peak at $9 Trillion; MMFs Up, Drive Cash to $12T," which reviews the recent peak and slight decline in bank deposits. We've also updated our Money Fund Wisdom database with Feb. 28, 2018, statistics, and sent out our MFI XLS spreadsheet Wednesday a.m. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our March Money Fund Portfolio Holdings are scheduled to ship on Friday, March 9, and our March Bond Fund Intelligence is scheduled to go out Wednesday, March 14.
MFI's "Repatriation" article says, "Next to higher rates, repatriation has become the hottest topic of discussion among money marketeers so far in 2018. Strategists, PMs and market watchers are now guessing how much cash might shift from offshore to onshore, or from onshore to elsewhere. Because corporates keep making more, we think the total impact of repatriation will be minimal and overall a net positive for "cash" and money market funds. We review recent comments and the many moving parts below."
Our lead piece continues, "Invesco's Matt Bubriski, Joe Madrid and Robert Corner wrote recently, 'How will repatriation impact money markets?' Bubriski says, 'We estimate that US companies currently hold USD3 trillion in unremitted foreign earnings, but only half is held in liquid cash and investments.... [W]e estimate that money market instruments account for a relatively small portion of total cash, at about 8%."
MFI's latest Profile reads, "This month, MFI interviews SEI Managing Director and Senior Portfolio Manager Sean Simko and Portfolio Manager Daisy Lac. We discuss SEI's use of outside managers as subadvisors, their move to offer only Government MMFs, and their focus on separately managed accounts. Our latest Q&A follows."
MFI says, "Tell us about your history." Simko answers, "SEI debuted its money market offering back in 1981. The first funds were launched in our subadvisor program as our money funds are today. In this offering, we hire outside money managers and delegate security selection to take advantage of economies of scale. The program has continued to evolve over the years, with the most recent significant change taking place as a result of the Security & Exchange Commission's decision to require institutional prime money market funds to maintain a floating net asset value and the imposition of an option to impose liquidity fees and redemption gates under certain circumstances."
He continues, "As a result, we liquidated three prime obligation and two municipal money market funds and transitioned assets to other offerings in our subadvisory program. The program includes two sets of funds. The first is the SEI Daily Income Trust (SDIT) Government Money Market Fund. The complex includes four funds that act as the cash sweep component of accounts for institutional and high-net-worth clients and do not charge redemption gates or liquidity fees. The SDIT Funds have assets of just under $10 billion."
Simko adds, "The second is a pair of funds (one taxable and one tax free) in the SEI Institutional Managed Trust (SIMT) complex. These are meant to provide low-risk, highly liquid exposure in client portfolios. While the funds target short weighted-average maturities, they are not money market funds, and their NAVs will fluctuate.... These funds are able to purchase short-term securities at attractive valuations and offer yields above money market strategies. For those investors who do not need daily access to liquid strategies, these could be an attractive investment. The SIMT Fund has assets of $400 million."
Our "Deposits" article says, "The Federal Reserve's latest statistics show that bank deposits are finally starting to peak out and decline, while money market funds have begun to rise after years of being flat. Overall cash, including bank deposits (in banks and thrifts), money fund assets and small time deposits, broke above the $12 trillion level recently for the first time in history."
It continues, "Our chart on page 1 shows the growth of money market deposit accounts (MMDAs) in banks and thrifts vs. assets in money market funds. Below, we show the last 4 months of asset changes for MMMFs, MMDAs and Small TDs (time deposits), and we show changes over the past 1-, 5- and 10-years. We subtotal the three, calling this 'cash'. Our totals using Fed data show that cash, the combination of MMMFs, MMDAs, and Small TDs, broke over $12 trillion recently, in October 2017."
The recap adds, "Bank deposits (MMDAs) have more than doubled since September 2008, rising by over $5.0 trillion to $9.1 trillion as of January 2018. Money fund assets fell from $3.3 trillion to $2.6 trillion (according to the Fed's data) during this time, a drop of 20.9%. Small Time Deposits (or CDs) have withered from $1.3 trillion to $409 billion since Sept. 2008."
Our March MFI XLS, with Feb. 28, 2018, data, shows total assets increased $37.2 billion in February to $3.027 trillion, after decreasing $54.3 billion in January, but increasing $57.9 billion in December and $46.4 billion in November. Our broad Crane Money Fund Average 7-Day Yield was up 7 basis points to 1.05% during the month, while our Crane 100 Money Fund Index (the 100 largest taxable funds) was up 7 bps to 1.24%.
On a Gross Yield Basis (7-Day) (before expenses were taken out), the Crane MFA rose 7 bps to 1.50% and the Crane 100 rose 7 bps to 1.52%. Charged Expenses averaged 0.45% and 0.28% (unchanged), respectively for the Crane MFA and Crane 100. The average WAM (weighted average maturity) for the Crane MFA was 29 days (the same as last month) and for the Crane 100 was 29 days (up one bps from last month). (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
