Earlier this month, we published, "Top 10 Stories of 2019: Assets Jump; Yields Fall Back; ESG MFs and More," which reviewed the biggest stories of the past year. Today, we look back not just at 2019, but at the past decade. Most of the '10's were dominated by ultra-low yields and the discussion surrounding Money Market Fund Reforms, but the last third of the decade brought money fund yield and asset recovery. We've selected the most important, and most representative, news stories of the past 10 years below. (Note: Crane Data's Daily News Archives and Link of the Day Archives now go back over 13 years, to the middle of 2006.)
Crane Data's Top 10 Stories of the 2010's include (in chronological order): "Light at the End of Tunnel? Fee Waivers Retreating, Outflows Halting" (7/26/10); "More MFs Liquidate: Calvert, Hartford Exit; Bad Timing for Bond Funds" (6/27/13); "SEC Passes Final MMF Reform Rule 3-2; Final Reforms Just Like Proposed" (7/23/14); "Managers Rolling with Reform Changes; Recap of Announcements So Far" (7/22/15); "BlackRock Taking Over BofA MMFs in One of Biggest Acquisitions Ever" (11/3/15); "SEC's Money Fund Reforms Go Live; NAVs Float, Emergency Gates, Fees" (10/14/16); "WSJ Calls Chinese Money Fund Yu'e Bao World's Largest MMF; Still Going" (9/14/17); "Schwab Money Market Fund Liquidates, Shift to Bank Deposits Continues" (5/29/18); "WSJ Says Cash Is a Star in Rocky Year; Weekly Holdings; ICI Annual" (12/6/19), and, finally, "SEC Stats: MMF Assets Poised to Break $4.0 Tril, Up 17th Month in a Row" (12/26/19).
Fee waivers and near-zero yields were big news throughout the first half of the decade. Our "Light at the End of Tunnel? Fee Waivers Retreating" story explained, "Federated Investors hosted its latest quarterly earnings call Friday. Today we excerpt some highlights, which include evidence that fee waivers are decreasing and that money fund outflows are nearing an end. CEO Chris Donahue said, 'Money market asset changes are best understood within the context of the unprecedented cycle we're experiencing.... While market conditions continue to be challenging, our clients have remained strong, stable and growing. Our clients have appreciated the strength, the stability and the availability of our products. We remain confident that our cash management business is well positioned, and we expect this business to grow over time with higher highs and higher lows during particular cycles.' (For more on fee waivers, see also our 11/15/11 News, "MMFs Prepare to Recapture Fee Waivers; Warn of Recoupment Risk.")
We also wrote a lot about money fund liquidations and consolidation over the decade. Our 2013 piece, "More MFs Liquidate: Calvert, Hartford Exit," comments, "Liquidations continue in the money market mutual fund space, though there have been surprisingly few so far in 2013. Recent filings and statements from Calvert and from Hartford funds announced that both are giving up on the sector. Money funds hadn't seen an exit announcement since April, when Union Bank's HighMark funds announced its sale to Reich & Tang. (Prior to that, the last exit was documented in our Jan. 3, 2013, News, "More Fund Liquidations: HSBC, Dreyfus T-E; More FSOC MMF Comments.") The exits could be poor timing though, as substitute ultra-short bond funds begin to show losses and outflows, and as pressures on money fund due to ultra-low rates and potentially drastic regulatory changes may finally be easing."
A July 2014 article, "SEC Passes Final MMF Reform Rules 3-2," hit on perhaps the decade's biggest news, regulatory change. We wrote, "The U.S. Securities & Exchange Commission (SEC), which discussed and passed its Final Money Market Fund Reforms Wednesday morning (July 23 10am) with a 3-2 vote, released the following press release and 'Fact Sheet' outlining the new rules. (The SEC's full 869-page Final MMF Reform Rules are now available here. Visitors may also view the archived Webcast of the Sunshine Meeting here.)
The SEC's 'Fact Sheet' on Money Market Fund Reform says, "The Commission will consider whether to adopt final rules that reform the way money market funds are structured and operate in order to better equip them to address run risks, while preserving the benefits of money market funds. The money market fund reforms would: Floating NAV - Require certain money market funds to maintain a floating net asset value (NAV) for sales and redemptions based on the current market value of the securities in their portfolios rounded to the fourth decimal place (e.g., $1.0000). The requirement, which would apply to institutional prime money market funds (including institutional municipal money market funds), would result in the daily share prices of the money market funds fluctuating along with changes in the market-based value of the funds' investments. Fees and Gates - Provide new tools to money market fund boards of directors to directly address a run on a fund. The new tools -- fees and gates -- would give fund boards the ability to impose liquidity fees or to suspend redemptions temporarily, also known as 'gate,' if a fund's level of weekly liquid assets falls below a certain threshold.'"
We covered the changes made by major money market fund managers due to reforms in our July 2015 article, "Managers Rolling with Reform Changes; Recap." We wrote, "With the October 2016 implementation of the pending money fund reform rules a little over a year away, money market fund managers have been busy this year making plans to adapt to the new environment. We have reported extensively on the announcements that have come to our attention over the past six months, including the most recent, this week's announcement by Deutsche and filings from State Street. Of the 20 largest money market fund complexes, almost all have issued updates, including the 5 largest -- Fidelity, JP Morgan, BlackRock, Federated, and Vanguard. Only 4 of the top 20 companies have not made their plans known publicly, including Northern, BofA, Franklin, and American."
In November 2015, we discussed BlackRock's huge BofA fund acquisition. The article, entitled, "BlackRock Taking Over BofA MMFs in One of Biggest Acquisitions," says, "In one of the largest acquisitions ever in the money market fund space, BlackRock announced that it was taking over management of BofA Global Capital's cash business. BofA Funds is the 14th largest manager of money market fund assets that we track with $48.3 billion -- and according to BlackRock's press release announcing the move, has $87 billion in total cash assets under management. Prior to this transaction, the largest money fund mergers in the past included both BlackRock's merger with Merrill Lynch Investment Management in 2006 and BlackRock's merger with Barclays Global Investors in 2009. (See our Dec. 2, 2009 News, "Merged BlackRock, BGI Form World's 3rd Largest Money Fund Manager.") When the BofA transaction is complete, BlackRock will become the second largest manager of money fund assets with about $370 billion in AUM, jumping ahead of now No. 2-ranked JP Morgan."
We continued our coverage of the Money Fund Reforms in, "SEC's Money Fund Reforms Go Live; NAVs Float, Emergency Gates." The piece explains, "October 14 marks the implementation date for the final phase of the SEC's 2014 Money Fund Reforms, which most notably include a floating (4-digit) NAV for Prime Institutional funds and emergency gates and fees provisions for all Prime and Municipal money market funds. (See our July 24, 2014 News, "SEC Adopts MMF Reforms; Chair White on Rule's Fundamental Changes.") ICI released a "Statement on SEC Money Market Fund Rules," which is subtitled, 'Reforms from 2010 and 2014 Have Fundamentally Changed Product to Address Any Pre-Crisis Risks.'"
The piece adds, "The ICI writes, 'In 2014 the US Securities and Exchange Commission (SEC) finalized new regulations governing money market funds, which will take effect on October 14, 2016. Investment Company Institute (ICI) President and CEO Paul Schott Stevens issued the following statement on the eve of implementation of the new SEC rules: 'This SEC rulemaking required funds to make a number of significant operational changes on a very aggressive timeframe. Thanks to substantial effort, planning, and execution within the industry, funds are prepared to meet the new requirements on time.'"
In 2017, we wrote, "WSJ Calls Chinese Money Fund Yu'e Bao World's Largest," which discussed the massive growth of Chinese MMFs and Alibaba's Yu'e Bao. The piece said, "The Wall Street Journal featured an article entitled, 'Meet Earth's Largest Money-Market Fund.' Subtitled, 'Alibaba Spinoff Yu'e Bao has accrued 370 million account holders and $211 billion in assets in just four years. As its model is replicated, the government is enforcing new regulations.' It says, 'In just four years, a money-market fund created by an affiliate of China's Alibaba Group Holding Ltd. has become the world's largest, providing millions of the country's savers a high-returning place to park their money. Now, it is facing pressure from regulators to slow down.' We excerpt from the Journal's piece below. (See also our Sept. 6 News, 'FT Says Chinese Issue New Rules on Money Funds.'"
Like we have a lot recently, we featured brokerage sweeps in our piece, "Schwab Money Market Fund Liquidates, Shift to Bank Deposits." Crane Data wrote, "Charles Schwab liquidated its Schwab Money Market Fund late last week as the brokerage continues to shift large amounts of money market fund 'sweep' assets into bank deposits. Schwab MMF (SWMXX) saw its assets decline to zero on Friday, from $15.4 billion two years ago and $7.3 billion on April 30, 2018. Schwab is the 8th largest manager of money market mutual funds with $138.8 billion in assets as of April 30, 2018. The brokerages' money fund assets declined by $4.1 billion in April, by $16.9 billion over 3 months, and by $17.5 billion, or 11.2%, over the past 12 months. Year-to-date, Schwab has shifted at least $32 billion in money fund sweep assets into bank deposits."
Late in 2018, we also penned, "WSJ Says Cash Is a Star in Rocky Year." Our article said, "The Wall Street Journal writes 'Cash Is a Star in Rocky Year for Global Markets.' It says, 'In a year of anemic returns and wild gyrations across most markets, cash is a star. U.S. cash and cash equivalents are on track to be some of the best-performing assets in 2018, enticing money managers struggling with a rare synchronized downturn in stocks, commodities and bond markets. Rising returns on cash make it more appealing for investors to move out of other investments, risking a turning point for markets as the global economy shows signs of slowing and the Federal Reserve slowly normalizes interest rates.'"
Finally, as the decade came to a close, we reported on what could be a record breaking year for MMF assets, with our article "SEC Stats: MMF Assets Poised to Break $4.0 Tril." The piece explained, "The Securities and Exchange Commission released its latest "Money Market Fund Statistics" summary Tuesday, which confirms that total money fund assets increased in November, rising by $45.6 billion to a record $3.984 trillion. It was the 17th straight month of gains for money fund assets overall. Prime MMFs increased $20.2 billion in November to close at $1.122 trillion, their highest level since July 2016, while Govt & Treasury funds rose by $24.2 billion to a record $2.718 trillion. Tax Exempt funds rose by $1.2 billion to $143.8 billion. Yields fell across the board with Prime MMFs, Govt MMFs and Tax-Exempt MMFs all decreasing in November. The SEC's Division of Investment Management summarizes monthly Form N-MFP data and includes asset totals and averages for yields, liquidity levels, WAMs, WALs, holdings, and other money market fund trends. We review their latest numbers below."
For more 2010-2019 (and soon 2020) News (and prior years going back to 2006), see Crane's News Archives. We'll continue to provide daily updates on the money fund marketplace in the coming year, so keep reading our News and Link of the Day commentaries in 2020. Let us know if you need web access (unlimited access is for subscribers only), or if you'd like to see our latest Money Fund Intelligence or Bond Fund Intelligence newsletters, or our MFI Daily publication. Thanks to all of our readers and subscribers for your support in 2019, and we wish you all the best in the coming year. Happy New Year!
