Brokerage Edward Jones announced plans to alter its sweep program, and money market funds will no longer be made available to new investors on or after Feb. 9. In a letter entitled, "Required Notice to All Clients: Cash Management Option Changes," they explain that the restriction also applies to current investors who "have not selected the fund as your sweep option for your brokerage [or retirement] account as of that date." They "will no longer be able to do so." There will be no immediate change for customers who have previously selected the money fund as their sweep option. They will "continue to have uninvested cash automatically transferred to the fund." The advisory also stipulated that "if you make a change to your brokerage account's sweep option on or after Feb. 9, 2019, you will not be able to select the fund as your brokerage sweep option again."
The company noted that the Edward Jones Insured Bank Deposit Program (IBD), an interest-bearing bank account, "will be available as a sweep option for Select Retirement Accounts, making it an option available for all brokerage accounts. IBD provides FDIC protection and allows you to access your funds using check writing and debit cards."
The Notice further observed, "If you do not wish to use the fund or IBD as your sweep option, you can: Hold your uninvested cash in your account and those funds will be eligible to receive interest; use your cash to invest in other securities such as a money market mutual fund or to purchase certificates of deposit, or withdraw your cash balance." It clarified that the changes "apply to new and existing Select Retirement Accounts and brokerage accounts other than 529 Plans, pooled plans and vendor-held retirement plans ('brokerage accounts'). They will not apply to Advisory Solutions or Guided Solutions accounts."
Two share classes of the Edward Jones Money Market Fund combined for assets of $29.2 billion as of Jan. 29, according to our MFI XLS. The Investor class posted a 7-day simple yield of 1.77% at year end vs. deposit rates of 0.40% for less than $250K, 0.60% for $250K-<$1M, and 1.65% for balanced over $1M. The funds are sub-advised by Federated Investors, which owns 49% of Passport, the advisor for the Edward Jones Money Market Fund. (See our March 10, 2016 News, "Federated, Edward Jones Restructure Money Fund Deal; New 10-K Filing.")
Edward Jones is the latest money-fund provider redirecting sweep cash away from its funds and into bank deposit products. Charles Schwab has been active here, plumping up assets of banks it owns, as outlined in this Jan. 25 News, "Schwab, Brokerages Discuss Sweeps, Money Funds on Earnings Calls." See also our, Jan. 22 Link of the Day, "Washington Post Column on Sweeps."
In other news, the Investment Company Institute released its latest monthly "Trends in Mutual Fund Investing" report yesterday, which shows MMF assets breaking over $3.0 trillion in the last month of 2018. Assets increased by $71.8 billion in December to $3.037 trillion. This follows an $80.4 billion increase in November, a $21.4 billion increase in October, and a $3.4 billion decrease in September. In the 12 months through Dec. 31, 2018, money fund assets have increased by $189.8 billion, or 6.7%. (Money Fund Intelligence logged a 12-month asset increase of $188 billion in 2018, with $112.8 billion of this from Prime MMFs.)
The monthly "Trends" report states, "The combined assets of the nation's mutual funds decreased by $996.95 billion, or 5.3 percent, to $17.71 trillion in December, according to the Investment Company Institute's official survey of the mutual fund industry. In the survey, mutual fund companies report actual assets, sales, and redemptions to ICI."
It explains, "Bond funds had an outflow of $65.56 billion in December (1.60 percent of November 2018 assets), compared with an outflow of $26.11 billion in November.... Money market funds had an inflow of $68.92 billion in December (2.32 percent of November 2018 assets), compared with an inflow of $77.23 billion in November. In December funds offered primarily to institutions had an outflow of $4.76 billion and funds offered primarily to individuals had an inflow of $73.68 billion."
The latest "Trends" shows that both Taxable and Tax Exempt MMFs gained assets last month. Taxable MMFs increased by $65.4 billion in December to $2.892 trillion. Tax-Exempt MMFs increased $6.4 billion in December to $145.3 billion. Taxable MMF assets increased year-over-year by $175.6 billion (6.5%) while Tax-Exempt funds rose by $14.2 billion over the past year (10.8%) <b:>`_. Bond fund assets decreased by -$38.2 billion in December (-0.9%) to $4.062 trillion; they've declined by $3.8 billion (-0.1%) over the past year.
Money funds represent 17.2% of all mutual fund assets (up from 15.9% the previous month), while bond funds account for 22.9%, according to ICI. The total number of money market funds was unchanged from 368 in November, and is down from 382 a year ago. Taxable money funds again numbered 287 funds, and tax-exempt money funds remained at 81 funds.
ICI also released its latest "Month-End Portfolio Holdings of Taxable Money Funds," which confirmed yet another jump in Repos and Treasuries in December. Repurchase Agreements remained in first place among composition segments; they increased by $41.6 billion, or 4.3%, to $1.019 trillion, or 35.2% of holdings. Repo holdings have risen by $62.7 billion, or 6.6%, over the past year.
Treasuries rose by $68.7 billion, or 8.5%, to $873.1 billion, or 30.2% of holdings. Treasury securities have increased by $171.0 billion over the past 12 months, or 24.3%. U.S. Government Agency securities were the third largest segment; they gained $24.1 billion, or 3.9%, to $644.3 billion, or 22.3% of holdings. Agency holdings have fallen by $38.2 billion, or -5.6%, over the past 12 months.
Certificates of Deposit (CDs) stood in fourth place; they decreased $13.2 billion, or -6.4%, to $192.1 billion (6.6% of assets). CDs held by money funds added $9.8 billion, or 5.3%, over 12 months. Commercial Paper remained in fifth place, down by 3.4 billion, or -1.8%, to $188.7 billion (6.5% of assets). CP has increased by $40.5 billion, or 27.3%, over one year. Notes (including Corporate and Bank) were down by $76 million, or -1.0%, to $7.3 billion (0.3% of assets), and Other holdings decreased to $10.8 billion.
The Number of Accounts Outstanding in ICI's series for taxable money funds decreased by 412.3 thousand to 33.275 million, while the Number of Funds was unchanged at 287. Over the past 12 months, the number of accounts rose by 6.390 million and the number of funds decreased by 12. The Average Maturity of Portfolios was 31 days, same as in November. Over the past 12 months, WAMs of Taxable money funds have decreased by 1 day.
