ICI'​s latest monthly "​Trends in Mutual Fund Investing" for December 2011 says, "The combined assets of the nation'​s mutual funds increased by $​12.​3 billion, or 0.​1 percent, to $​11.​620 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.... Money market funds had an inflow of $​38.​52 billion in December, compared with an inflow of $​43.​13 billion in November. Funds offered primarily to institutions had an inflow of $​29.​10 billion. Funds offered primarily to individuals had an inflow of $​9.​42 billion." ICI'​s totals show money fund assets declining by $​112.​3 billion, or 4.​0%, in 2011 from $​2.​804 trillion to $​2.​692 trillion. Bond fund assets rose by $​253.​4 billion, or 9.​6%, from $​2.​633 trillion to $​2.​887 trillion. The number of money funds covered by the ICI report fell from 652 to 632 in 2011. Liquid assets of stock funds remain near a record low of 3.​5%.

MarketWatch writes "​Fed to savers: Cash is trash". The Chuck Jaffe piece says, "The Federal Reserve has telegraphed the future of interest rates and inflation, and here'​s the takeaway: "​Money-​market funds are the Stupid Investment of the Week." Stupid Investment of the Week showcases conditions and characteristics that make a security less than ideal for the average consumer, in the hope that spotlighting trouble in one case makes it easier to avoid trouble elsewhere. The column is not an automatic sell signal, which is particularly true for people who use money funds to park cash that they can plow into an investment strategy on a moment'​s notice. But most people don'​t use money funds that way, and that'​s part of the problem." Jaffe quotes Pete Crane, "There'​s no argument that cash is dumb in this environment. The question is, '​Is what you want to go to instead of cash even dumber?' If what'​s important is having your cash ready and at hand, then no return is the cost you pay for convenience." In other news, see also Bloomberg'​s "​Federated Threatens to Sue SEC Over Planned Money-​Fund Rules," which says, "Federated Investors Inc., the third- largest manager of U.​S. money-​market mutual funds, is planning legal action to block rule changes being contemplated by the Securities and Exchange Commission that the company said could destroy the $​2.​7 trillion cash-​management industry."

ICI'​s latest "​Money Market Mutual Fund Assets" report says, "Total money market mutual fund assets decreased by $​14.​68 billion to $​2.​679 trillion for the week ended Wednesday, January 25, the Investment Company Institute reported today. Taxable government funds decreased by $​9.​85 billion, taxable non-​government funds decreased by $​2.​17 billion, and tax-​exempt funds decreased by $​2.​66 billion.... Assets of retail money market funds decreased by $​5.​73 billion to $​929.​14 billion. Taxable government money market fund assets in the retail category decreased by $​1.​82 billion to $​193.​55 billion, taxable non-​government money market fund assets decreased by $​2.​07 billion to $​539.​92 billion, and tax-​exempt fund assets decreased by $​1.​84 billion to $​195.​67 billion. Assets of institutional money market funds decreased by $​8.​95 billion to $​1.​750 trillion. Among institutional funds, taxable government money market fund assets decreased by $​8.​03 billion to $​745.​50 billion, taxable non-​government money market fund assets decreased by $​100 million to $​907.​92 billion, and tax-​exempt fund assets decreased by $​820 million to $​96.​20 billion. ICI reports money market fund assets to the Federal Reserve each week. Revisions are due to data adjustments, reclassifications, and changes in the number of funds reporting. Historical weekly money market data back to January 2008 are available on the ICI website."

A statement sent out yesterday says, "The Center for Capital Markets Competitiveness (​CCMC) is hosting weekly conference calls to discuss regulatory and legislative issues impacting corporate treasury functions. Karrie McMillan, General Counsel of ICI will be joining this week'​s call to provide an overview of current money market reform proposals being considered by the regulators. The "Weekly Corporate Treasury Call is Thursday, January 26, 2012 at approximately 2:​00 p.​m. EST. The Call in number is: 888-​461-​2011 and Call ID is: 7524346. The Center also says of its 2/​8 Money Market Funds Event: Register today. Join us to hear about the the consequences for the various proposals to regulate the money market fund industry. Following the event a group of corporate treasurers will be meeting with the regulators to express concerns with various reform proposals. If you would like to participate in the meetings, please contact Kristin Angus (kangus@​uschamber.​com or 202-​463-​5502)." Also tomorrow, Deutsche Bank'​s DB Advisors will host a call "​What to expect in 2012" with Joe Benevento and Nagesh Gopal at 1pm EST, and Federated Investors' Deborah Cunningham will host a "Quarterly Money Market Update Thursday, January 26, 2012 at 4:​00pm EST. The Dial-​in number is: 877-​539-​1936 and the ID is: 42143538. (Federated will also release its earnings after the market closes Thursday and will host a conference call Friday at 9 a.​m.)

The Association for Financial Professionals wrote yesterday, "Money Market Fund Reforms Appear Imminent." It says, "Since the fall of 2008, a great deal of attention has been given to the safety and soundness of money market mutual funds (​MMFs). The focus on this issue was triggered in September 2008 by the Reserve Primary Fund "​breaking the buck," or lowering its share price below the $​1 fixed net asset value (​NAV) that is currently associated with most money funds.... The MMFs most commonly used by retail and institutional investors are regulated by the Securities and Exchange Commission (​SEC) under Rule 2a-​7 of the Investment Company Act of 1940.... On several occasions since the release of this information nearly two years ago, AFP has expressed concerns regarding the option to eliminate the stable net asset value (​NAV) in favor of a floating NAV and has been clear on our opposition of such a proposal. We believe it would greatly reduce investors' interest in utilizing MMFs as a cash management and investment tool, whether applied to all investors or just institutional investors. For purchasers of MMFs, the return of principal is a much greater driver of the investment decision than return on principal.... Fast forward to January 2012 and it is clear that these issues are still at the forefront of the regulator'​s mind. It is expected that SEC will release additional rules and guidance on this issue in early 2012. In anticipation of this action, AFP is preemptively reiterating our position to the SEC and collecting the names of companies who share our views. AFP will send a joint letter highlighting our concerns and we invite you to sign on to this letter and add your company name to the effort. If you would like to receive a copy of the draft letter or have questions, please contact me at jarnett@​AFPonline.​org or visit AFP'​s Money Market Fund Resource Center."

Following the successful conclusion of our 2nd annual Crane'​s Money Fund University last week in Boston, we'​re preparing to focus on Crane Data'​s big annual show, Crane'​s Money Fund Symposium 2012. Our 4th annual Money Fund Symposium will be held June 20-​22, 2012, at The Westin Convention Center in Pittsburgh. Crane Data'​s big event in Philadelphia last year attracted over 380 speakers, sponsors, and attendees, and we expect our Pittsburgh conference to be even bigger and better. Crane'​s Money Fund Symposium offers money market portfolio managers, investors, issuers, and service providers a concentrated and affordable educational experience, as well as an excellent and informal networking venue. Registration for Crane'​s Money Fund Symposium 2012 will (​again) be $​750; exhibit space is $​3,​000; and sponsorship opportunities are $​4.​5K, $​6K, $​7.​5K, and $​10K. Our mission is to deliver a better and less expensive conference alternative to money market fund professionals and investors, and we hope to see you in Pittsburgh this summer! Crane Data is also assisting German conference company IQPC with a new European Money Fund Summit, which is tentatively scheduled for November 14-​16, 2012, in Frankfurt, Germany. Finally, mark your calendars for next year'​s Money Fund University, which is tentatively scheduled for Jan. 23-​24 in New York City.

The Financial Times writes "​US funds return to European bank paper". The article says, "US money market funds have begun moving back into European bank paper, a sign that central bank efforts to backstop key institutions are improving risk appetite. This past week, the funds were buyers in increased issuance of French and Spanish banks' commercial paper, according to bankers. Notes issued by US banks with foreign parents rose $​6bn to $​152bn and foreign domiciled bank notes outstanding rose nearly $​3bn to $​133bn, according to figures from the Federal Reserve. Last year, money market funds were sellers of many European banks' short-​term commercial paper as worries grew about the repercussions of a possible European sovereign default." The FT quotes Chris Conetta, head of global commercial paper trading at Barclays Capital, "Money market funds in particular have shown an improved risk tolerance as we start the new year. We have seen a broadening of the foreign banks that they have been willing to buy."

ICI'​s weekly "​Money Market Mutual Fund Assets" says, "Total money market mutual fund assets decreased by $​12.​58 billion to $​2.​692 trillion for the week ended Wednesday, January 18, the Investment Company Institute reported today. Taxable government funds decreased by $​9.​18 billion, taxable non-​government funds decreased by $​2.​58 billion, and tax-​exempt funds decreased by $​820 million. Assets of retail money market funds decreased by $​3.​72 billion to $​935.​17 billion. Taxable government money market fund assets in the retail category decreased by $​1.​48 billion to $​195.​00 billion, taxable non-​government money market fund assets decreased by $​2.​00 billion to $​542.​54 billion, and tax-​exempt fund assets decreased by $​240 million to $​197.​64 billion. Assets of institutional money market funds decreased by $​8.​87 billion to $​1.​756 trillion. Among institutional funds, taxable government money market fund assets decreased by $​7.​70 billion to $​753.​52 billion, taxable non-​government money market fund assets decreased by $​590 million to $​905.​94 billion, and tax-​exempt fund assets decreased by $​580 million to $​97.​02 billion."

The Financial Times writes "​US custodian banks hit by shift into cash". It says, "Global custodian banks have adopted a defensive position as fund managers and large institutions shift into cash and ultra-​safe assets, putting pressure on the banks' ability to generate income. Bank of New York Mellon earnings in the fourth quarter dropped from $​679m last year to $​505m. The quarter'​s results included a $​107m restructuring charge, primarily a result of lay-​offs. Low interest rates have put tremendous pressure on custodian banks that manage funds for large institutions and retail brokerages, with the Federal Reserve'​s commitment to near-​zero rates through 2013 make it difficult to invest customer funds in safe investments that generate return. Coming at the same time that fees generated by trading and investment activity are falling sharply, such groups have been forced to rely on cost-​cutting and lay-​offs to generate consistent earnings growth."

A press release entitled, "Stradley Ronon Attorney to Speak at Crane Data'​s "​Money Fund University"," says, "Stradley Ronon attorney Joan Ohlbaum Swirsky will present, "​Money Fund Regulations: 2a-​7 Basics and History," and "​Regulations II: Interpretations & Recent Changes," at Crane Data'​s Money Fund University in Boston on Jan. 19-​20, 2012. The conference focuses on matters relating to money market funds, including their history, interest rates, Rule 2a-​7, ratings, rankings, money market instruments such as commercial paper and repo, and portfolio construction and credit analysis. Swirsky has counseled clients for more than 25 years, including more than 15 years advising investment companies on regulatory compliance and general corporate matters under the Investment Company Act of 1940, with a focus on money market funds and Rule 2a-​7. She is the author of The Guide to Rule 2a-​7: A Map Through the Maze for the Money Market Professional." (​Note that Money Fund University attendees will receive a copy of Swirsky'​s book. Visit www.​moneyfunduniversity.​com for more details and for the full conference agenda.)

Bloomberg writes "​U.​S. Money Funds Slashed Loans to French Banks by 97% in 2011". The article says, "U.​S. money-​market funds reduced their lending to French banks by 97 percent in 2011, according to an analysis of reports from the eight largest U.​S. funds published in today'​s Bloomberg Risk newsletter. The funds owned $​2.​3 billion of French bank certificates of deposit, time deposits, commercial paper and repurchase agreements in December, a drop of 58 percent from the previous month and down from $​82 billion at the end of 2010. The funds shifted investments to Japanese, American and Swiss banks, with increases of between 10 percent and 15 percent." Bloomberg quotes JPMorgan Securities' Alex Roever, "For now I don'​t think we'​re likely to see money market investors in the U.​S. moving money back into the euro zone. However, the data we’​re seeing is suggesting that maybe the market’​s willing to take a pause here." The piece explains, "The funds surveyed were Fidelity Cash Reserves, JPMorgan Prime Money Market Fund, Vanguard Prime Money Market Fund, Fidelity Institutional Prime Money Market Portfolio, BlackRock TempFund, Wells Fargo Advantage Heritage Money Markets Fund and Federated Prime Obligations Fund. They manage about $​594 billion in total."

ICI'​s latest "Money Market Mutual Fund Assets" report says, "Total money market mutual fund assets increased by $​10.​75 billion to $​2.​704 trillion for the week ended Wednesday, January 11, the Investment Company Institute reported today. Taxable government funds decreased by $​2.​92 billion, taxable non-​government funds increased by $​14.​83 billion, and tax-​exempt funds decreased by $​1.​16 billion. Assets of retail money market funds decreased by $​6.​34 billion to $​938.​93 billion. Taxable government money market fund assets in the retail category decreased by $​2.​00 billion to $​196.​49 billion, taxable non-​government money market fund assets decreased by $​3.​87 billion to $​544.​54 billion, and tax-​exempt fund assets decreased by $​470 million to $​197.​90 billion. Assets of institutional money market funds increased by $​17.​09 billion to $​1.​765 trillion. Among institutional funds, taxable government money market fund assets decreased by $​910 million to $​761.​22 billion, taxable non-​government money market fund assets increased by $​18.​70 billion to $​906.​52 billion, and tax-​exempt fund assets decreased by $​690 million to $​97.​60 billion." Money fund assets have increased in 9 out of the past 10 weeks, rising by $​82 billion, or 3.​1%. Institutional money funds have accounted for $​79 billion or the gain, rising 4.​7% since Nov. 2, 2011.

Federated Investors has published two new brochures on its "Money Market Matters" website. Written by Arnold Porter'​s John Hawke, the first is "Leave Money Funds Alone!," while the second is "Money Market Funds and Folklore: A Response to Chairman Volcker." The first paper says, "There is an unseemly -- and entirely unwarranted -- amount of bashing of money market mutual funds (​MMFs) going on in Washington and Academia these days. Unseemly because much of it is uninformed and wrongheaded, and unwarranted because MMFs do not present a threat to our economic health that the bashing would imply. The "​remedies" that the bashers would propose would not only threaten the continued viability and availability of MMFs, but could themselves have unintended consequences that would be harmful, such as the constriction of short-​term credit to businesses and state and local governments." The second explains, "For more than 40 years, since the time he served as Chairman of the Board of Governors of the Federal Reserve System, Paul A. Volcker has made clear his strong antipathy to money market mutual funds (​MMFs). His most recent attack came in his William Taylor Memorial Lecture to a conference of the Group of 30, a private body made up of public and private representatives and academics."

Federated Investors' latest Month in Cash commented last week, "​The cash-​yield curve steepened during December as a sharp drop in the supply of overnight paper pushed rates lower at the short end while mounting jitters over the continuing euro-​zone debt crisis nudged yields higher at the longer end. Normal year-​end window dressing and other seasonal factors accounted for the dearth in repo supply, which effectively pushed some overnight rates down into the single digits.... The increase in Libor could have been larger had not the Federal Reserve in early December lowered the rate it charges foreign institutions to "​swap" euros for dollars. The Fed intervention, which was designed to provide dollar liquidity to the euro-​zone financial system, curtailed interbank lending, thus limiting the scope of upward pressure on Libor. It was a challenging month from a cash management perspective. Supply was severely constrained as banks and broker-​dealers closed their books for the year, even as seasonal inflows necessitated putting new funds to work. It remained our objective to keep maturities relatively short to take advantage of the more generous cash yields that we believe will be available if, as we expect, the U.​S. economic recovery gains traction in 2012.... As the New Year unfolds, investors will be casting a watchful eye on Europe. During the first few months of 2012, Italy will need to rollover massive amounts of government debt, and while recent action by the European Central Bank to extend longer-​term loans to the region’​s struggling banks will significantly reduce the possibility of a liquidity crisis, major sovereign solvency issues remain unresolved. We are carefully monitoring financial conditions in the euro zone and are maintaining sufficient cash to invest if the yield curve continues to steepen in coming months."

Wells Fargo Advantage Funds' latest "​Overview, Strategy & Outlook" discusses Europea and "​governments. Dave Sylvester explains, "In the U.​S., we have our own practice of homogenizing different types of sovereign debt into one monolithic market we call "​governments." This market includes not only securities issued by the U.​S. Treasury, but a component commonly referred to as the "​agency" market, which includes a number of true U.​S. government agencies, government-​sponsored enterprises, and other federally sponsored or chartered entities. Agency securities play a prominent role in many money market fund portfolios. Money funds are permitted to include certain government securities in the assets used to meet their daily and weekly liquid asset targets under Securities and Exchange Commission (​SEC) Rule 2a-​7.... And though it'​s not always been the case and may not be in the future, right now all of the agencies trade at the same yield. This includes the two big housing agencies, the Federal National Mortgage Association, nicknamed Fannie Mae, and the Federal Home Loan Mortgage Corporation, or Freddie Mac, which are kept solvent only through financial support from the U.​S. Treasury. However, because there is no differentiation between the various agencies under the Rule, it is especially important for money funds to note that unlimited support of Fannie Mae and Freddie Mac will end after 2012."

Barron'​s writes Money Funds are "​Broken Forever". The piece says, "​What'​s the difference between a piggy bank and a money-​market fund? Not much. Neither is insured, and the returns are basically the same: nothing. The average money fund these days pays just two basis points, or 0.​02%. A third of them pay nothing at all. Yet in November and December 2011, investors put more cash into money funds -- $​91.​7 billion -- than they had since December 2008 and January 2009, when $​195 billion poured into the funds. Retail assets account for about a third of the $​2.​7 trillion held in domestic money-​market funds. The reason for that is safety. And that'​s where the trouble begins -- both for the companies that run money-​market funds and the individuals who stash their money there. There are three big reasons for this, starting with the Federal Reserve. The Fed has made clear that it plans to keep overnight rates at their historic lows, which means that the securities money funds buy are also yielding exceedingly low rates. And low rates make it exceptionally hard -- virtually impossible, in fact -- for the funds, and therefore investors, to make any money." It quotes Peter Crane, "We will undoubtedly see more consolidation, but less than people expect. Most of the consolidations or liquidations we'​ve seen are from funds run by [​funds like] AARP and PayPal. They were never really in the business in the first place." Barron'​s adds, "​The notion of paying for safety, however, isn'​t far-​fetched, Crane says. "​Negative interest rates are nothing new. They used to be called checking accounts," he says. "​For centuries, people have paid banks to hold money, not the other way around. There'​s always been a price for safety, and people are always willing to pay.""

After an 8-​week winning streak which saw money fund assets rise by $​72 billion, assets declined slightly in the latest week. ICI'​s "​Money Market Mutual Funds" report says, "Total money market mutual fund assets decreased by $​1.​89 billion to $​2.​693 trillion for the week ended Wednesday, January 4, the Investment Company Institute reported today. Taxable government funds decreased by $​6.​88 billion, taxable non-​government funds decreased by $​700 million, and tax-​exempt funds increased by $​5.​69 billion." In other news, the U.​S. Chamber of Commerce has drafter a letter to the "Financial Stability Oversight Council urging regulators to avoid making additional regulatory changes that would fundamentally alter the nature of money market funds, undermining their usefulness to businesses." Please contact Kristin Angus (​202-​463-​5502) to have your company included on the letter. The Chamber adds, "On February 8, we are hosting a fly-​in to discuss the impact of reforms to money market funds with the SEC, the Federal Reserve, other regulators, and congressional staff. The morning will kick-​off with an event at the Chamber bringing together corporate treasurers and other members of the business community to discuss current reform proposals. To RSVP, contact Leigh Stapleton (​202-​463-​5374)."

Letter corrects FT, "​Only one money market fund '​broke the buck'". Professor George Pennacchi, from the University of Illinois, Champaign, writes the FT, "Sir, The front page article '​Sceptical investors race to safety of US money market funds' (​December 30) contains the misleading statement, "​The funds are attractive because they rarely lose money, although a number '​broke the buck' and incurred losses during the financial crisis". The number of money market funds that broke the buck during the financial crisis is exactly one, namely, the Reserve Primary Fund during the week the Lehman Brothers declared bankruptcy. The Reserve Primary Fund held $​785m in Lehman commercial paper. Investors in this fund ultimately recovered slightly more than 99 per cent of what was the fund'​s reported assets prior to its writedown. In October 2008 the US Treasury offered insurance to money market funds for an insurance premium of 1 to 1.​5 basis points under the Temporary Guarantee Program for Money Market Funds. The programme ended after one year with no claims being paid. No US money market fund has since broken the buck."

The U.​K.-​based website FundWeb writes, "​IMA populates new money market sectors". It explains, "The [​U.​K.] Investment Management Association (​IMA) has revealed how its two new money market sectors will be constructed. The trade association announced that it will create two sectors -- the IMA Short Term Money Market sector and the IMA Money Market sector -- back in November. Coming into effect on January 1, the sectors are intended to fall into line with definitions of money market funds introduced into the FSA handbook in July last year." FundWeb adds, "The IMA Short Term Money Market sector holds 14 funds at launch, while the IMA Money Market sector comprises 12 products." The IMA Short Term Money Market sector includes: Architas Liquidity, Baillie Gifford Cash, BlackRock Cash, Fidelity Cash, Fidelity MoneyBuilder Cash ISA, GLG Cash, JP Morgan Sterling Liquidity, Jupiter Cash, Royal London Cash, Scottish Widows Cash, St James'​s Place Cash Unit Trust, Standard Life Cash, Thesis Optima Cash, and Wesleyan Cash. The IMA Money Market sector includes: Aberdeen Cash, Aviva Investors Cash, F&​C Money Markets, F&​C Sterling Enhanced Cash, Henderson Cash, Henderson Money Market Unit Trust, Invesco Perpetual Money, Legal & General Cash Trust, LV Money Market, Marlborough Cash Trust, Premier UK Money Market, and Santander Money Market.

Wall Street Journal'​s "​CFO Journal" blogs "​SEC Commissioners in Money Market Showdown". It says, "Securities and Exchange Commission chairman Mary Schapiro plans to introduce a new regulatory overhaul of the money-​market mutual fund industry in the first quarter of 2012, but faces opposition from within the Commission itself, as well as from trade groups representing corporate finance professionals. The market has already been reformed recently, but the financial crisis in Europe has increased fears of a run on the funds, which are an important source of short-​term financing for companies. This has increased pressure on the SEC to ensure that the funds are on stable footing." (​Note that WSJ subscribers can'​t access; a separate subscription to CFO Journal is needed.)

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