​

A press release entitled, "UBS Asset Management Announces Changes to Its Money Market Fund Platform" tell us, "UBS Asset Management (​Americas) Inc. ("​UBS AM") and its affiliates/​predecessors have managed money market funds for more than 35 years and offer client-​focused solutions throughout the world. In an effort to best address its clients' needs in an era of evolving regulatory reform and industry changes, UBS AM today announced changes to its money market fund platform, including the launch of new products." We review the changes from the 17th largest MMF manager, and we also discuss ICI'​s latest "Money Market Fund Assets" and monthly "Trends in Mutual Fund Investing" reports below.

The release explains, "Highlights of the changes to UBS AM'​s money market fund platform include: The UBS Select Prime Funds, with a largely institutional ... shareholder base, will adopt floating net asset value (​FNAV) pricing by an October 2016 regulatory compliance deadline. The UBS Prime Funds, a recently launched retail money market family of funds, will accept investments from retail investors ('​natural persons') and seek to maintain a constant net asset value (​CNAV) per share of $​1.​00. The UBS Select Tax-​Free Funds intend to qualify as 'retail money market funds' and will also undergo a name change later in 2016. The UBS Select Treasury Funds affirmed their intention, announced in June 2015, to qualify as '​government money market funds'.... The UBS Select Government Funds, a new suite of government money market funds will be launched in 2016 to complement the existing UBS Select Treasury Funds.... The UBS Investor Series will reduce the initial minimum investment requirement from $​100,​000 to $​10,​000.... UBS AM'​s sweep money market funds, available via UBS Financial Services' automatic cash '​sweep platform,' will undergo changes later in 2016."

"The changes we announced today and the expansion of our money market fund platform are designed to ensure that all our clients continue to have access to UBS Asset Management'​s deep capabilities in liquidity management," said Joe Abed, Head of Global Liquidity for UBS Asset Management. "Evolving our global liquidity product offering in the US is a critical component of UBS Asset Management'​s growth strategy in the Americas," said Blake Moore, Head of the Americas for UBS Asset Management. "​With over $​40 billion in US money market assets and almost $​99 billion in liquidity products globally as of September 30, 2015, we continue to offer our clients a broad range of investment products to meet their liquidity needs."

In other news, money fund assets increased $​13.​8 billion in the past week to $​2.​757 trillion, their third straight weeks of gains. For the month-​to-​date in January (​through 1/​27), money market fund assets are still down $​2 billion. The "​Trends" report for December confirms that assets increased by $​35.​3 billion and ended the year up $​30 billion, or 1.​1%, the fourth straight year of gains. We also discuss ICI'​s "Month-​End Portfolio Holdings of Taxable Money Funds," which confirms that holdings of Fed Repo skyrocketed in December (​and Agencies gained), while Time Deposits, CDs, CP, and Treasuries all dropped. (​See our Jan. 13 News, "Jan. Portfolio Holdings: Fed Repo Jumps to Record; TDs, Europe Plunge.")

The latest weekly MMF Assets update says, "Total money market fund assets increased by $​13.​79 billion to $​2.​76 trillion for the week ended Wednesday, January 27, the Investment Company Institute reported today. Among taxable money market funds, government funds increased by $​6.​28 billion and prime funds increased by $​14.​28 billion. Tax-​exempt money market funds decreased by $​6.​77 billion. Assets of retail money market funds increased by $​2.​93 billion to $​1.​02 trillion. Among retail funds, government money market fund assets increased by $​6.​94 billion to $​367.​26 billion, prime money market fund assets increased by $​500 million to $​469.​57 billion, and tax-​exempt fund assets decreased by $​4.​51 billion to $​182.​13 billion.... Assets of institutional money market funds increased by $​10.​86 billion to $​1.​74 trillion. Among institutional funds, government money market fund assets decreased by $​670 million to $​873.​78 billion, prime money market fund assets increased by $​13.​78 billion to $​797.​79 billion, and tax-​exempt fund assets decreased by $​2.​25 billion to $​66.​37 billion."

A Footnote adds, "In anticipation of the Securities and Exchange Commission'​s (​SEC) new money market fund regulations, many advisers are changing their prime money market funds into government money market funds. As a result, there have been, and will continue to be, large shifts in assets from prime funds to government funds before the October 2016 deadline." (There were no reclassification shifts in the latest week, but ICI moved over $​70 billion, including Fidelity Inst MM Portfolio, from Prime Inst to Prime Retail in the first week of 2016.)

ICI'​s "Trends in Mutual Fund Investing: December 2015" confirms a big increase in MMF assets in December, up $​35.​3 billion, or 1.​3%, to $​2.​755.​3 trillion. Assets increased in 7 of the last 8 months of 2015. MMFs increased $​4.​8 billion in November and $​45.​2 billion in October, dropped $​5.​1 billion in September, gained $​8.​1 billion in August, rose $​45.​9 billion in July. For calendar year 2015, money fund assets were up $​30.​0 billion, or 1.​1%, according to ICI'​s monthly series. It was the fourth straight year that MMF assets climbed.

The release says, "​The combined assets of the nation'​s mutual funds decreased by $​292.​35 billion, or 1.​8 percent, to $​15.​65 trillion in December, according to the Investment Company Institute'​s official survey of the mutual fund industry.... Bond funds had an outflow of $​27.​22 billion in December, compared with an outflow of $​5.​05 billion in November.... Money market funds had an inflow of $​35.​36 billion in December, compared with an inflow of $​2.​84 billion in November. In December funds offered primarily to institutions had an inflow of $​15.​17 billion and funds offered primarily to individuals had an inflow of $​20.​19 billion." Money funds now represent 17.​6% of all mutual fund assets, while bond funds represent 21.​8%. The total number of money market funds dropped to 482 in December, from 496 the previous month.

ICI'​s latest "​Portfolio Holdings" summary shows that Repo skyrocketed and Agencies gained, while CDs plummeted, and CP and Treasuries fell. Repurchase agreement displaced CDs to become the largest portfolio segment, increasing $​151.​9 billion, or 27.​7%, in December to $​699.​6 billion. Repo represents 28.​0% of taxable MMF holdings. Treasury Bills & Securities moved into second place among composition segments, falling $​21.​7 billion, 4.​3%, in December to $​481.​4 billion (​19.​3% of assets). U.​S. Government Agency Securities continued their steady climb, moving into third after increasing $​34.​5 billion, or 7.​9%, to $​469.​2 billion (​18.​8% of assets).

CDs (​including Eurodollar CDs) plunged to fourth place from first the month before, decreasing $​113.​8B, or 20.​1%, in December to $​453.​8 billion (​18.​1% of assets). (​ICI'​s CD totals likely include Time Deposits, which Crane Data and the SEC categorize as "​Other" -- we reported a large decrease in Other/​TDs in December.) Commercial Paper was still fifth, declining $​21.​0B, or 6.​6%, to $​298.​8 billion (​12.​0% of assets). Notes (​including Corporate and Bank) dropped by $​11.​4 billion, or 15.​1%, to $​64.​4 billion (​2.​6% of assets), and Other holdings (​including Cash Reserves) gained $​8.​9 billion to $​33.​2 billion.

The Number of Accounts Outstanding in ICI'​s series for taxable money funds decreased by 181.​1 thousand to 23.​394 million, while the Number of Funds fell by 8 to 337. Over the past 12 months, the number of accounts fell by 80.​1 thousand and the number of funds declined by 28. The Average Maturity of Portfolios remained unchanged at 35 days in December. Over the past 12 months, WAMs of Taxable money funds have declined by 9 days. At 35, WAM'​s remain at the lowest level since June 2010, according to our analysis of ICI'​s data. Note: Crane Data will update its January MFI XLS today to reflect 12/​31/​15 Portfolio Composition and Maturity Breakout data for our entire fund universe. (​Visit our Content Center and the latest Money Fund Portfolio Holdings download page to access our January Money Fund Portfolio Holdings and the latest files.)

Finally, "T Rowe Price released its Q4 Earnings yesterday. Their press release says, "For the three-​month period ended Dec. 31, 2015, the mutual funds' net cash flows after client transfers include net outflows of $​1.​4 billion from the stock and blended asset funds that `​were offset in part by net inflows of $.​9 billion into the fixed income funds and $.​2 billion into the money market funds." It continues, "Money market advisory fees and other fund expenses voluntarily waived by the firm to maintain positive yields for investors in the fourth quarter of 2015 were $​9.​8 million, compared with $​14.​5 million in the 2014 quarter. In 2015, the firm has waived $​47.​6 million in such fees compared with $​58.​4 million in the 2014 period. The firm expects that it will continue to waive such fees into 2016." (Federated Investors also reported earnings and hosts a conference call this morning; watch for News coverage Monday.)

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State Street Global Advisors hosted a webinar last week entitled, "Cash Solutions for the New Reality," where a panel of experts discussed a range of money fund related issues, including fund flows, the path of the interest rates, repo, ratings, and yield spreads. The session was moderated by Yeng Butler, Head of US Cash Business at SSGA, and featured commentary from Pia McCusker, Global Head Cash Investments, and William Goldthwait, Sales Strategist. We review the webinar below, and we also discuss this week'​s FOMC Meeting, the Federal Reserve'​s first since their December 2015 meeting, when they raised rates for the first time in almost a decade.

SSGA'​s Goldthwait discussed the migration of Prime to Government assets that has been taking place in preparation for the new SEC rules to take effect on October 14, 2016. He said, "​Since the beginning of 2015, we'​ve heard from many asset managers announcing they will not be supporting certain prime funds within their own shops in the new regulatory environment and thus will either close those funds, sell those funds, or convert them into government strategies ... the preferred option for many asset managers.... This makes sense given the cost and operational challenges that are involved in prime strategies. So far, we'​ve seen more than $​200 billion moved out of the prime strategies and converted to government money fund strategies. The key here is that this has been driven by asset manager conversion and not client driven moves."

He continued, "The wild card is how much of the remaining $​1.​25 trillion in Prime strategies will move? At SSGA, we'​ve seen solid growth in our prime strategies throughout 2015; in fact, we'​re at an all-​time high in asset under management in those prime strategies. You can be sure that in 2016, our portfolio management team will be very vigilant to ensure any shift in AUM is managed with relative ease."

Goldthwait also shared his perspectives on potential yield spreads between Prime and Government funds. He commented, "I tend to be less bullish about wider spreads than I once was due to all of the excess liquidity that Prime money market funds must own. As we know, the 7-​day liquidity buffer in a Prime fund will be 30% of asset under management when the new rules go into effect in October. A drop below 30% will trigger a board notification and the potential for a gate or fee. I think it'​s safe to say that portfolio managers will run their liquidity buffer well above that 30% mark to avoid making that call. Does that mean 35%, 40%, 45% of the liquidity buffer?"

He explained, "​I think it'​s too early to say. But when we looked at 10 of the largest Prime money market funds on various different dates last year, they were all running above 35% and some had as much as 50% of 7-​day liquidity. So, the reason I'​m less bullish on wider spreads is because in order to attain 40%, 45% of 7-​day liquidity, you have to own a lot of short term repo, Treasury bills, or discount notes that will qualify in that liquidity bucket. Those are the same securities that some of the government funds will own as well."

Goldthwait added, "We know that Prime funds will continue to be a core product in the money market fund complex. How investors view and implement their Prime strategy in 2016 will be driven by three things. One is the Fund Deadline -- some prime funds are going to have to close a little bit earlier in order to process that variable NAV. The second thing is the Variable NAV, and lastly are Liquidity Fees and Redemption Gates. We'​ve spoken to clients that feel comfortable with all three of those attributes and have expressed that they will remain in prime funds. We'​ve also spoken to others that are not comfortable with one or all of those and will move to a Government or Treasury fund. Some clients have also expressed interest in the yield spread and will base their investments on that spread. We have some clients that are looking for just slight incremental yield over a Government product to remain in Prime, and then we have others that are looking for a very large yield spread between a Government fund and a Prime fund."

McCusker talked about the new SEC rules that remove references to credit ratings in money funds. She said, "​This might alarm some investors that are conditioned to looking at ratings only. But rest assured, here at SSGA we have no plans to change our process or conservative nature with regard to credit. We'​ve always had an independent credit research function that has successfully served our clients well, and we will remain true to what'​s served us well the last 30 years -- solid fundamentals with a focus on principal preservation and access to liquidity."

Goldthwait also commented on the importance of the Fed'​s Reverse Repo Program. He explained, "​The reverse repo program is very important in the market because it allows money funds and other approved counterparties to loan money to the Fed and receive U.​S. Treasury securities as collateral. Registered money market funds that are larger than $​5 billion in AUM are eligible to apply to this program. We have 6 money market funds that participate daily. We find the program very helpful in establishing a floor on short-​term rates, particularly at month-​end and especially at quarter-​end when broker-​dealer balances are reduced and broker dealers are not offering other short term investments due to quarter-​end balance sheet constraints."

He added, "The Fed ultimately would prefer not to have this program utilized. They don'​t want to be the lender of last resort in times of market stress, so it'​s anticipated that when the Fed does the unwind their quantitative easing balance sheet and starts to reduce the over $​2 trillion in Treasuries they currently hold, short term rates will drift higher.... Ultimately, participating in the Fed reverse repro program will not be the most attractive option in the short term market."

He also explained changes to the repo market, which could impact Government funds. He told the webinar, "Although it does not impact our clients directly, they should be aware of the procedural changes that have taken place in the repo market, specifically, the tri-​party market. Historically, before repo reform was implemented, the tri-​party repo market was actively traded up until and even after 5pm. This allowed government money market funds, specifically, to remain open until 5pm because they could utilize this tri-​party market to meet any shareholder activity. `​But with repo reform, the process has changed. Deadlines have been implemented and there is very little, if any, tri-​party repo trading after 2pm. So what government funds need to do now is leave cash uninvested in order to handle client redemptions. Leaving cash uninvested did not mean much when yields were near zero as there was very little opportunity cost there, but as rates start to rise, we might see potentially yield gaps on Government funds that close earlier vs. those that continue to close at 5pm. So now our clients should be asking themselves: How important is it to have a fund that is open to 5 pm?"

Finally, McCusker discussed the projected and expected path of interest rates in 2016. She said, "​Our official house view is 4 interest rate hikes this year, and that'​s in line with the Fed'​s dot plot.... But right now, the Fed funds futures market is pricing in a probability of 24% for a March rate hike; this was about 50% post the December meeting. So, clearly the market is pricing in a much lower assumption." On whether or not bank deposit rates will increase with Fed rate hikes, she added, "I would expect banks to lag deposit rate increases by at least a couple of Fed rate hikes until some form of rate normalization is in place."

In other news, the Federal Reserve'​s FOMC met yesterday and, as expected, held the line on rates. The Fed'​s Statement says, "Given the economic outlook, the Committee decided to maintain the target range for the federal funds rate at 1/​4 to 1/​2 percent. The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.... In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data."

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At last week'​s 6th annual Crane'​s Money Fund University in Boston, the state of money market supply was a theme woven through several of the sessions. While the industry has been dealing with a supply-​demand imbalance in recent years, the outlook for supply in 2016 is optimistic, according to the experts. Barclays' Director of Fixed Income Strategy Joseph Abate and J.​P. Morgan Securities' Executive Director `​Teresa Ho shared their perspectives on why in two separate sessions. We also heard from portfolio managers, including SSgA'​s Todd Bean, who talked about the fundamental objectives of cash management. For a broad overview of MFU, see our Jan. 25 News, "American Beacon Goes Govt; Crane'​s Money Fund University Sets Record," and visit our "Content Center" and our "Crane'​s Money Fund University 2016 Downloads" page to access the MFU Binder and Powerpoints (​available to attendees and Crane subscribers only).

In the session, "The Federal Reserve and Money Markets," Barclays' Abate examined the supply demand imbalance and offered his optimistic outlook for 2016. He says, "​If you look back before the financial market crisis you could make the argument that there was a shortage of government safe assets. Historically, government safe assets as a share of total assets has been about one in three. Beginning in the mid-​90s and certainly accelerating around 2000, the share of government safe assets began to fall. `​So, banks decided that there was a market here to create money-​like substitutes for T-​bills, including ABCP ... and all sorts of other maturity transformation tools that effectively mimicked government safe assets."

He adds, "​They were highly liquid, they had supposedly deep markets, and could be changed into cash quickly. But the financial market crisis in 2008 demonstrated that without government backing, what looks like a government safe asset is in fact not a government safe asset. That partly explains why markets like repo and in particular CP have detracted sharply. The asset backed commercial CP market was at one point over $​1 trillion, now it is considerably smaller than that -- somewhere around $​300 billion."

Abate continues, "The Bill universe has shrunk considerably since 2009, and there are essentially two reasons for this. The first is the budget deficit has continued to come in smaller than expected.... The other thing that'​s happened is the Treasury, to reduce rollover risk, has lengthened the average maturity for debt outstanding. So, as a share of total debt outstanding, Bills have contracted from around 20% to around 11%. And before the debt ceiling was resolved, the universe contracted to about 9.​9%. If you go back to 1952, we'​ve never seen the Bill universe as small as it is today. Now, obviously, in absolute terms, at $​1.​5 trillion, it'​s still quite large, but absolute vs. relative are two very different stories."

Looking ahead to 2016, Abate says, "My sense is that the supply pressure for you guys in terms of looking for the safe assets is going to abate in the coming years. I think Bill issuance could increase by $​125 billion this year, but it could be significantly larger than that." Abate says it could be as much as $​250 billion, or higher. He adds, "Secondly, the Fed'​s Reverse Repo Program, at $​2 trillion, for all intents and purposes, is unlimited." He continues, "​If the supply of Treasury bills increases significantly, you may in fact see further spread widening and further reduction or lower use of the RRP. So, 2016 in terms of supply is going to depend on what happens with respect to T bill issuance."

He continues, "The Treasury has a unique opportunity to capitalize on this demand and supply imbalance on the front end. The further advantage is, of course, the Fed does not want to see daily use of the reverse repo facility in excessive amounts. If there is a competing product out there that could crowd out demand for the RRP, i.​e. Bills, then the Fed would be happy to take the cap down on the RRP and steadily, over time, eliminate the program."

On demand, Abate highlights the major sources of new demand. The most notable is money fund reform driven flows. He asks, "How much money is going to leave Prime Institutional funds because the investors don'​t like the idea of fees gates and floating NAV? That'​s anybody'​s guess. My sense is to be conservative and assume a couple hundred billion dollars, because if the fund generates a high enough yield, it may overcome the institutional investors' displeasure with an emergency fee and gate structure, especially since fee and gates don'​t apply unless there is a major catastrophe."

The second potential source of flows is from bank deposits. He explained that there are two types of deposits -- retail deposits and non-​operating corporate balances. The Barclays strategist expects banks to hold on to the former but shed the latter. He adds, "The institutional money will leave banks and head for the closest substitute for bank deposits, Government-​only money funds." He summarizes, "Basically we'​re talking about a substantial increase in demand for safe assets -- somewhere on the order of maybe $​500B this year."

JPM Securities Teresa Ho provided an overview of supply in the session, "Instruments of the Money Markets Intro." She comments, "At its peak in early 2008, total money market supply was about $​11.​5 trillion. Excluding Treasuries, credit supply peaked in 2008 at around $​9.​5 trillion. Fast forward to today, total money market supply has come down to roughly $​8.​5 trillion in terms of total MM supply, and $​5.​5 trillion in credit supply. So, there has been a dramatic $​4 trillion drop in credit supply over the past few years."

She says it is driven largely by two factors, banks deleveraging their balance sheets and regulations. This is impacting the money markets, particularly CP. Ho says, "​At its peak in 2006, the CP market was about $​2 trillion with over 50% of that in ABCP. But in 2007 there was a collapse in the SIV and since then this market has fallen by the wayside.... Another example is repo. At its peak, this market was almost $​6 trillion, now it is roughly half of that. It suffered through severe liquidity pressure during the financial crisis and even more so now in this post regulatory world."

Ho contrasted the downward trend in supply with the stability of demand. She comments, "​Over the past 4-​5 years, their [​money fund] assets have been relatively stable across all different classes. Even if we take it back to September 2008, the cumulative change in their balances from that time period to today is only $​500 billion." If the same calculation is applied to the supply side of the equation, the cumulative change from September 2008 to today is about $​2.​7 trillion. Ho adds, "This imbalance is in part one of the reasons why money market rates have been trading so low over the past few years. But that is about to change."

She elaborates, "We estimate that somewhere between $​600-​650 billion will flow out of Prime funds into something else, most likely into Government funds. Why does that matter? When you look at Prime money funds and what they invest in, about 60-​70% of their assets are currently being lent to banks either in form of CP, CDs, ABCP, or Repo. `​In dollar terms they lent out $​1.​1 trillion to banks on any given day." When that is pulled back, rates are going to respond accordingly, she said. "Banks are going to have to aggressively compete for Prime money funds, so they are going to offer a higher interest rate to do so. Naturally, we would expect that to move higher as money fund reform unfolds and cash starts to move out of prime funds."

Ho continues, "As the Fed moves its corridor higher and higher with interest rate movement, will short-​term rates respond correspondingly? If they move up by 25, will bill also move up by 25, will CP rates rates also move up by 25? More importantly, with the new tool they have implemented, the ON RRP facility, will that serve as the floor for money market rates?" She concludes, "​Ultimately, despite the fact there are a lot of cross currents in the space, I would still say that money markets are here to stay. Regulations may change the structure of the entire market, but as we'​ve seen, the market will continue to adapt and evolve."

Finally, in the session, "Credit Analysis and Portfolio Management," SSgA Senior Portfolio Manager Todd Bean discusses the process and objectives of managing money funds. He says, "The two primary objectives that guide cash management are preservation of principal and liquidity to accommodate your clients' cash flow needs. If the strategy you'​re in doesn'​t meet these objectives, then either something has gone drastically wrong in the market, the investment manager has made a horrible mistake, or the strategy has been mislabeled to begin with. Meeting these objectives is what allows our clients and us as portfolio managers to sleep well at night knowing that that cash has been invested safely and prudently."

Bean explains, "Typically, to help insure we'​ve met the preservation of principal objective, portfolio managers use a combination of high credit quality assets and short duration assets when constructing a portfolio. Many investment managers have in house credit research staff that control credit exposure in the funds through their use of an approved list of issuers. At that point, the PMs execute the trades off that approved list. They'​ll also typically establish maturity restrictions and asset limits for each of the credits as well."

Bean says, "PMs also use a variety of strategies to meet the liquidity objectives, like laddering maturities and diversifying the funds' purchases across a variety of liquid products." He adds, "Liquidity in the marketplace isn'​t what it used to be. Tighter regulations have clearly changed the balance sheets for banks and broker-​dealers -- this makes meeting the liquidity objective more challenging than ever. Finally, we strive to provide a strong relative rate of return once we'​ve insured that we'​ve met the two primary objectives."

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The SEC released its latest "Money Market Fund Statistics" report, which confirmed our earlier reports that yields jumped in December and assets rose slightly, showing a big shift from Prime to Government MMFs. The $​6.​0 billion increase in December results in assets being up a total $​4.​7 billion in 2015. It also shows that net and gross yields jumped in December while expense ratios only inched higher. The report, produced by the SEC'​s Division of Investment Management, summarizes monthly Form N-​MFP data and includes totals on assets, yields, liquidity, WAM, WAL, holdings, and other money market fund trends. We also review the Investment Company Institute'​s latest "Money Market Fund Holdings" summary (​with data as of Dec. 31, 2015) below.

The SEC'​s report shows total money market fund assets stood at $​3.​085 trillion overall at the end of December, up $​6.​0 billion, after dropping $​6.​6 billion in November, rising $​62.​3 billion in October, and dropping $​2.​6 billion in September, according to the SEC'​s broad total. (​This series includes many private and internal funds not reported to ICI, Crane Data or other reporting agencies.) Of the $​3.​085 trillion in assets, $​1.​572 trillion was in Prime funds, down a whopping $​154.​0 billion in December. Prime funds now represent 51.​0% of total assets, down from 58.​0% in November. Government funds made up the difference, jumping $​152.​1 billion to $​1.​250 trillion, or 40.​5% of assets (​up from 33.​7% in November). Tax Exempt Funds were up $​7.​9 billion to $​263.​9 billion, or 8.​6% of all assets.

For the year, total assets were up $​4.​7 billion (​0.​2%) through December 31. Prime assets ended the year down $​200.​4 billion, or 11.​3%, to $​1.​572 trillion, which should come as no surprise. Some $​172 billion in Prime money funds converted to Government in funds in 2015 in response to MMF reforms. Consequently, Government/​Treasury fund assets were up $​211.​4 billion, or 20.​4%, to $​1.​250 trillion in 2015. Tax exempt assets were down $​6.​3 billion (​2.​3%) for the year to $​263.​9 billion The number of money funds was 502, down 44 for the year, reflecting industry consolidation due to MMF reforms.

The Federal Reserve'​s decision to raise interest rates off the zero bound to the 0.​25% to 0.​50% range had an immediate impact on MMF yields in December. The Weighted Average Gross 7-​Day Yield for Prime Funds on Dec. 31 was 0.​41% (​up 0.​14% from 0.​27% the previous month), 0.​28% for Government/​Treasury funds (​nearly double the 0.​15% from last month), and 0.​07% for Tax-​Exempt funds (​up 1 basis point). The Weighted Average Net Prime Yield was 0.​22% (​doubling from 0.​11% the month before). The Weighted Average Prime Expense Ratio was 0.​19% (​up 3 basis points from the previous month). Gross yields for Prime MMFs were up 21 basis points in 2015; expense ratios for Prime MMFs were up 4 basis points for the year (​to 0.​19%); and net yields for Prime MMFs were up 17 basis points for 2015 (​to 0.​22%).

The average Weighted Average Life, or WAL, was 57.​6 days (​down 9.​1 days from last month) for Prime funds, 85.​2 days (​up 0.​6 days) for Government/​Treasury funds, and 29.​4 days (​down 2.​3 days) for Tax Exempt funds. The Weighted Average Maturity, or WAM, was 30.​6 days (​down 2.​2 days from the previous month) for Prime funds, 40.​3 days (​up 2.​0 days) for Govt/​Treasury funds, and 27.​4 days (​down 1.​8 days) for Tax-​Exempt funds. Total Daily Liquidity for Prime funds was 32.​3% in December (​up 2.​2% from last month). Total Weekly Liquidity was 45.​7% (​up 2.​2%).

In the SEC'​s "Prime MMF Holdings of Bank Related Securities by Country" table, the United States topped the list with $​187.​7 billion, followed by Canada with $​183.​2 billion, and Japan at $​162.​3 billion. France was fourth with $​104.​5 billion, followed by Australia/​New Zealand ($​87.​4B), the UK ($​57.​7B), Sweden ($​52.​3B), and The Netherlands ($​43.​5B). Germany ($​32.​7B) and Switzerland ($​31.​8B) round out the top 10.

The only gainers for the month were Singapore (​up $​2.​7B) and China (​up $​1.​4B). The biggest drops came from France (​down $​75.​4B), Sweden (​down $​56.​2B), Norway (​down $​27.​2B), Canada (​down $​17.​2B), UK (​down $​15.​9B), Switzerland (​down $​13.​3B), Japan (​down $​9.​8B), Belgium (​down $​8.​7B), The Netherlands (​down $​7.​5B), and Germany (​down 6.​0B). For Prime MMF Holdings of Bank-​Related Securities by Major Region, Europe had $​339.​2 billion (​down from $​550.​2B from last month), while its subset, the Eurozone, had $​186.​6 billion (​down from $​284.​5B). The Americas had $​373.​2 billion (​down from $​391.​8B), while Asia and Pacific had $​279.​3 billion (​down from $​285.​6B).

Of the $​1.​556 trillion in Prime MMF Portfolios as of Dec. 31, $​448.​0B (​28.​8%) was in CDs (​down from $​509.​0B), $​511.​3B (​32.​9%) was in Government (​including direct and repo) (​up from $​477.​5B), $​284.​5B (​18.​3%) was held in Non-​Financial CP and Other Short term Securities (​down from $​409.​0B), $​212.​0B (​13.​6%) was in Financial Company CP (​down from $​232.​8B), and $​100.​0B (​6.​4%) was in ABCP (​up from $​98.​1B).

Also, the Proportion of Non-​Government Securities in All Taxable Funds was 37.​4% at month-​end, down from 44.​3% the previous month. All MMF Repo with Federal Reserve was $​398.​0 billion on Dec. 31, up from $​133.​9B. Finally, the "Trend in Longer Maturity Securities in Prime MMFs" tables shows 35.​4% were in maturities of 60 days and over (​down from 40.​9%), while 5.​2% were in maturities of 180 days and over (​down from 7.​5%).

In other news, ICI released its latest "Money Market Fund Holdings" summary (​with data as of Dec. 31, 2015) last week, which reviews the aggregate daily and weekly liquid assets, regional exposure, and maturities (​WAM and WAL) for Prime and Government money market funds. See our Jan. 13 News, "Jan. Portfolio Holdings: Fed Repo Jumps to Record; TDs, Europe Plunge" for more on holdings.

ICI'​s "Prime and Government Money Market Funds' Daily and Weekly Liquid Assets" table shows Prime Money Market Funds' Daily liquid assets at 33.​1% as of Dec. 31, up from 30.​1% on Nov. 30. Daily liquid assets were made up of: "All securities maturing within 1 day," which totaled 28.​4% (​vs. 24.​8% last month) and "Other treasury securities," which added 4.​7% (​up from 5.​3% last month). Prime funds' Weekly liquid assets totaled 44.​6% (​vs. 42.​3% last month), which was made up of "​All securities maturing within 5 days" (​37.​4% vs. 34.​0% in November), Other treasury securities (​4.​7% vs. 5.​2% in November), and Other agency securities (​2.​7% vs. 3.​0% a month ago).

The report says, Government Money Market Funds' Daily liquid assets totaled 61.​3% as of Dec. 31 vs. 64.​3% the previous month. All securities maturing within 1 day totaled 27.​5% vs. 25.​1% last month. Other treasury securities added 33.​8% (​vs. 39.​2% in November). Weekly liquid assets totaled 77.​4% (​vs. 80.​7%), which was comprised of All securities maturing within 5 days (​36.​7% vs. 35.​4%), Other treasury securities (​31.​1% vs. 37.​2%), and Other agency securities (​9.​6% vs. 8.​1%).

ICI'​s "​Prime and Government Money Market Funds' Holdings, by Region of Issuer" table shows Prime Money Market Funds with 55.​5% in the Americas (​vs. 46.​2% last month), 20.​1% in Asia Pacific (​vs. 18.​4%), 24.​1% in Europe (​vs. 35.​2%), and 0.​3% in Other and Supranational (​vs. 0.​2% last month). Government Money Market Funds held 93.​9% in the Americas (​vs. 86.​6% last month), 0.​8% in Asia Pacific (​vs. 0.​8%), 5.​3% in Europe (​vs. 12.​6%), and 0.​0% in Supranational (​vs. 0.​0%). The table, "​Prime and Government Money Market Funds' WAMs and WALs" shows Prime MMFs WAMs at 31 days as of Dec. 31, down from 33 days last month. WALs were at 56 days, down from 65 days last month. Government MMFs' WAMs was at 40 days, down from 38 days last month, while Government fund WALs was at 86 days, down from 85 days.

The release explains, "​Each month, ICI reports numbers based on the Securities and Exchange Commission'​s Form N-​MFP data, which many fund sponsors provide directly to the Institute. ICI'​s data report for June covers funds holding 94 percent of taxable money market fund assets." (Note: ICI publishes aggregates but doesn'​t publish individual fund holdings.)

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American Beacon, the 55th largest money fund manager (​out of 65 tracked by Crane Data), is "​going government," liquidating its $​165 million "​prime" American Beacon Money Market Select Fund while continuing to offer its $​242 million American Beacon U. S. Government Money Market Select Fund. The Jan. 20 Prospectus Supplement for American Beacon Money Market Select Fund says, "​On January 11, 2016, the Board of Trustees (​the "​Board") of American Beacon Select Funds approved a plan to liquidate and terminate the American Beacon Money Market Select Fund (​the "​Fund"), upon the recommendation of American Beacon Advisors, Inc. ("​Manager"), the Fund'​s investment manager." We also review last week'​s Money Fund University, Crane Data'​s "​basic training" event, which set a record for attendance last week in Boston, below. (Note: The Conference Binder and Powerpoints are now available to Attendees and Crane Data Subscribers via our "​Content Center".)

American Beacon is the 53rd fund and 24th fund family to "​go government" with some or all of its money market funds. A total of $​172.​4 billion has already converted to date, and $​91.​6 billion more is scheduled to switch from "​Prime" to "​Government" (​the total declared to date is $​264.​0 billion). American Beacon'​s Select MM'​s filing explains, "In anticipation of the liquidation, effective immediately, the Fund is closed to new shareholders. The Fund will distribute cash pro rata to all remaining shareholders who have not previously redeemed or exchanged all of their shares on or about March 31, 2016 (​the "​Liquidation Date"). These distributions may be taxable events. Once the distribution is complete, the Fund will terminate."

It adds, "Please note that you may be eligible to exchange your shares of the Fund at net asset value at any time prior to the Liquidation Date for shares of the American Beacon U. S. Government Money Market Select Fund. You also may redeem your shares of the Fund at any time prior to the Liquidation Date. No sales charges, redemption or termination fees will be imposed in connection with such exchanges and redemptions. In general, exchanges and redemptions are taxable events for shareholders."

In other news, Crane'​s 6th annual Money Fund University conference convened last week in Boston with a record 125 people in attendance. The basic training event, targeted at those new to the money market fund industry, featured primers on interest rates, rule 2a-​7, various money market securities, the Federal Reserve, ratings, portfolio management, and money market fund reforms. Conference host Peter Crane, President of Crane Data, kicked things off with a session called, "History and Current State of Money Funds." Crane said money market fund assets have been remarkably stable, gaining slightly each of the past four years. "After six years of 0% yield and radical regulatory change, if you are still in a money market fund, you'​re not going anywhere."

Crane continued, saying the migration out of Prime funds ultimately won'​t be as dramatic as many expect it to be due to the yield advantage they will have over Government funds in a rising rate environment. That sentiment was echoed by other as well. He also expects inflows from the banking sector. "I believe you are going to hear a giant sucking sound out of the banking sector once money fund yields get to 100 basis points," he commented. Until then, much change is anticipated in the MMF space as reforms go into effect on October 14, 2016. Fund managers, not quite sure which way the money will flow, are ready for everything. Crane added, "A lot of people are getting buckets out because they don'​t know where its going to rain."

In a session on the "Federal Reserve and Money Markets," Bank of America Merrill Lynch Strategist Mark Cabana talked about the path of interest rates. While the Fed is estimating 4 rate hikes in 2016, the market is pricing in only one rate hike this year and just 3.​5 over the next three years, given economic uncertainty. "The market is telling them it will be a lot more gradual than Fed projections," said Cabana.

Barclays Joe Abate discussed the supply and demand outlook for 2016. Supply pressures should abate in 2016. Treasury bill issuance is expected to increase by $​125 billion or more, and the essentially unlimited Overnight Reverse Repo Program, capped at $​2 trillion, will ease the pressure from increased demand in the Government sector.

In the afternoon session, "Instruments of the Money Markets Intro," JP Morgan Securities' Teresa Ho said they expect to see $​400 billion flow out of Prime funds into Government funds, this in addition to the over $​260 billion in Prime funds already scheduled to convert to Government funds. Federated Senior Portfolio Manager Sue Hill said in the session on "Treasury and Government Securities," that she believes the government sector, with $​6 trillion in available securities, plus the Fed ON RRP, will have enough supply to handle the migration. Day 1 closed with a session on "Credit Analysis and Portfolio Management," featuring SSgA Senior PM Todd Bean and Peter Hajjar, Global Head of Credit Research. The two walked the audience through the process of security selection and portfolio management.

Day 2 (​Friday) focused almost entirely on regulatory issues. Attorney John Hunt, Partner, Nutter, McClennen & Fish, discussed "Money Fund Regulations: 2a-​7 Basics and History," while Jack Murphy, Partner, Dechert, and Stephen Keen, Senior Counsel, Perkins Coie, discussed "Outstanding Issues with MMF Reforms." Murphy and Keen led attendees through the various regulatory changes coming up in April and October of 2016. Keen said that while initially the thinking was that the Floating NAV provision would be the most worrisome for clients, it'​s now clear that clients are more concerned about fees and gates. On the fees and gates provision Keen said, "The amount of redemptions you'​d have to see to get down to 10% liquidity would be stupendous." The day ended with a session from Peter Crane and Jonathan Carlson, BofA Global Capital Management on "Offshore MMFs, SMAs, and Ultra-​Short Bonds."

The Conference Binder and Powerpoints for MFU is available to Crane Data subscribers via our "Content Center. (​Page down to the bottom for "​Conference Materials".) Note that next year'​s Money Fund University is tentatively scheduled for Jan. 19-​20, 2017, in Jersey City, NJ. Also, Crane Data'​s next conference event is our "​big show," Money Fund Symposium, which will be held June 22-​24, 2016, at the Philadelphia Marriott (​registration is now live for this), and our next European Money Fund Symposium will be held Sept. 20-​21, 2016, at the London Tower Bridge Hilton.

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The January issue of our flagship Money Fund Intelligence newsletter features a profile of the liquidity management team at RBC Global Asset Management in the U.​S., including Brandon Swensen, Senior Portfolio Manager and Co-​Head of U.​S. Fixed Income; John Donohue, Head of Liquidity Management; and, Matthew Appelstein, Head of U.​S. Sales and Distribution. They discuss RBC'​s decision to no longer offer the RBC Prime Money Market Fund, the firm'​s growth in the U.​S., and the opportunities that exist in the new liquidity management landscape. Below, we reprint the Q&​A from our January issue. (Note: Thanks too for all those attending our Money Fund University in Boston, which concludes at noon on Friday. We hope you had a great show, and safe travels home!)

MFI: How long have you been running money funds? Swensen: In 1991, RBC GAM in the U.​S. launched money market funds as sweep vehicles for the brokerage and wealth management business. Since that time money funds have been a significant part of our asset management offerings. We consider this a core capability and a focus of our U.​S. asset management lineup, one we expect to grow going forward. We feel like we have differentiated ourselves in this business in a few ways, the most notable being that during the financial crisis our funds did not need any capital. We are one of the few fund families that can say we never invested in a SIV and we have never experienced a default in our money market portfolios. It'​s a track record we'​re very proud of.

MFI: What is your biggest priority? Appelstein: A strategic priority for the bank is to grow the U.​S. asset management business. The good news is in the last four years, RBC'​s U.​S. business, revenue-​wise, has more than doubled. We just added 8,​000 square feet of space in Boston and have plans to add more square footage in Minneapolis. We are investing in the U.​S. business with people, resources, and products right now to grow this business. Obviously, a big component of that is the liquidity business, where we'​ve also been adding resources. We have a 31-​member Sales and Distribution team to which we continue to add resources. Swensen: To Matthew'​s point, the growth of our liquidity business is a natural extension of RBC'​s growth in the U.​S. overall. The money market fund and liquidity business has always been about two things: Rule number one: preserve principal, and rule number two: never forget rule number one.

MFI: Tell us about your recent changes. Why are you getting out of prime? Donohue: The decision was driven by conversations with our clients -- they just don'​t feel the need to be involved in a variable rate NAV product. What we'​ve seen is that the majority of our clients are considering a move to our government money market fund, while also evaluating our ultrashort products. In addition, clients continue to explore customized separate account strategies for their core cash positions. We have approximately $​30 billion of short duration assets, which enables us to be large enough in the market, but remain flexible. We believe clients will scrutinize their cash investing practices more than ever before.

Swensen: While we'​re not predicting the demise of prime funds, we are in the camp that believes they have been fundamentally changed and are less desirable in terms of delivering the liquidity solution our clients are looking for. Prime funds now exhibit liquidity characteristics that aren'​t quite the same as what a liquidity investment should look like. We think government funds are still a pure play liquidity product, but prime funds have this baggage associated with it. Fundamentally, we feel that clients that are looking for yield should be in something other than a prime fund, and that'​s where our separately managed accounts will come in to fill that void. The government funds are there to provide that pure play liquidity with no strings attached.

MFI: What is your biggest challenge? Swensen: Yield is obviously a challenge. It'​s been very painful for our clients. The challenge is not just about us trying to manage a portfolio that delivers a yield that is '​X', it'​s about meeting our client'​s goals, and unfortunately the market just hasn'​t been there. So, we were over-​the-​moon thrilled about the Fed deciding to hike rates. It'​s been so long overdue in our view. For them to breathe a little bit of oxygen into the front end of the yield curve has just been fantastic for our clients.

Our fees in this business are very low and they'​re not expected to rise anytime soon. So our clients really experience this first rate increase in their portfolio. It has been coming through for two months as the market started to price in a very high probability of the rate increase occurring. Then, there'​s the challenge of the regulatory environment. We think the [​recent] round of reforms has fundamentally altered the liquidity landscape. That'​s unfortunate on the one hand, but on the other hand, it'​s a once in a lifetime opportunity for investors and for asset managers to position themselves for the new reality in liquidity.

MFI: Have you seen yields rise already? Swensen: Yes. The historical relationship has held up very well when you look at the Prime to '​Govie' spread. Historically, the spread is plus or minus 10 basis points and that'​s right where we sit today. About a month ago our institutional government fund finally broke through the expense ratio and started providing more than a basis point of yield. And we'​re not raising fees or raising expenses to recapture past waivers in our money market funds, so clients are experiencing the full benefit of that increase. It remains to be seen how things progress in 2016 as market dynamics change. We are hoping for more Fed increases, albeit at probably a slower pace than we'​ve experienced in past recoveries. That'​s going to be of great benefit for money market funds and liquidity investors.

MFI: What are you buying? Swensen: Probably the biggest thing for money market funds from the Fed release in December was the essentially unlimited cap on the reverse repo program (​RRP) -- and when I say essentially unlimited, it'​s actually limited at $​2 trillion. When you look at the size of the overall money market space, they'​ve got it covered -- the whole thing can get put to the Fed if need be.... We think this will be a benefit to the market in the short term. The longer term question is: How long does the Fed want to be such a big factor in money markets? Also, how does the Fed then pull away from the repo market if they become such a large share of it for money market funds? It will be interesting to follow.

MFI: Tell us about the demand for Government securities. Swensen: Some concerns that have been raised -- even at your conference here in June [​our 2015 Money Fund Symposium was held in Minneapolis], about supply for government funds and how are they going to manage the big inflow -- are alleviated by the Fed'​s RRP. Being a significant but not gigantic player in the money fund space, we can be more selective. We are able to participate in auctions at a different degree as well as be able to access some other parts of the market that the bigger funds avoid. Outside of just discount notes and Treasury bills, we are able to invest in some of those other sectors where there is potentially value. We'​ve always been big buyers of agency floaters and they continue to make a difference in our strategies. Their performance was really driven by our positioning in floaters and some other subsectors of the market that bigger funds aren'​t as active in.

MFI: Are customers more averse to floating NAVs, or gates & fees? Donohue: Over the last four years, I'​ve probably visited about 300 institutions, and almost every one of them, with the exception of five, said they'​re not dealing with a variable rate NAV. The ones that felt comfortable with the variable NAV said their biggest hurdle with the CFO and senior treasury leadership are the gates and fees.

MFI: Tell us about your other offerings. Swensen: We have Ultra Short and Short Duration bond funds that we launched in anticipation of money market reform in December 2013. In our view, they are a strong component of what liquidity investors should be thinking about going forward in terms of buckets of liquidity. Government funds should be used for your pure play liquidity and, beyond that, a short duration solution other than a prime fund should be used to earn some income. We feel that those funds are natural extensions of our prime fund capabilities -- very high quality funds managed in a way that is about preserving principal, but also capturing additional income that is available when you free yourself up from the money fund space. By no means are they money market fund surrogates, because they have variable NAVs. But in our view, the extra income you pick up by moving out just a little bit on the duration curve is a nice value proposition for risk-​averse investors.

MFI: What is your outlook for 2016? Swensen: The rate environment certainly gives reason to be optimistic. Earning something other than a basis point in your cash is a welcome development. The future of money funds is going to be very interesting because nobody knows exactly what it'​s going to look like in October. We see the general trend of fund families converting Prime funds to Government funds, and investors being concerned about variable NAVs and fees and gates. But when do they actually start to move money? That hasn'​t really occurred yet in significant size, other than these fund closures and conversions that have occurred already. We believe 2016 is an unprecedented opportunity for investors to rethink their liquidity strategies. So, as much as we may be disappointed about prime fund reform, we'​re even more optimistic about the opportunity.... It'​s going to be an extremely exciting year and we'​re looking forward to it.

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Charles Schwab, Goldman Sachs, and Northern Trust released 4th quarter earnings this week, and all of the reports show a drop in money market fund fee waivers. (​For more on decreasing fee waivers, see also yesterday'​s "News," "Ignites: MMF Fee Waivers Drop in 2015; Fitch on MMF Reform in China.") Schwab'​s Q4 earnings, released Jan 19, shows $​153 million in money market fund fee waivers in Q4, down from $​193 million in Q4 of 2014. In 2015, Schwab waived $​672 million in MMF fees, down from $​751 million in 2014. Schwab CFO Joe Martinetto also commented, "​This past year, we completed approximately $​6.​5 billion in bulk transfers from money market funds to Schwab Bank, including $​2.​8 billion in the fourth quarter." We look at these earnings releases below, and we also excerpt from J.​P. Morgan Securities' most recent Prime Holdings update. Finally, welcome to those of you attending Crane'​s Money Fund University, our "​basic training" event, which takes place today and tomorrow at the Hyatt Regency Boston. We look forward to 2 days packed full of money fund education and information!

Northern Trust released its Q4 earnings on Jan. 20. The release says, "​Trust, investment and other servicing fees were $​747.​1 million, up $​18.​9 million, or 3%, from $​728.​2 million in the prior-​year quarter. The increase primarily reflects new business and lower money market mutual fund fee waivers, partially offset by the unfavorable impact of movements in foreign exchange rates and equity markets." It adds, "​Investment management fees increased 10%, primarily due to lower money market mutual fund fee waivers. Money market mutual fund fee waivers in C&​IS totaled $​7.​8 million in the current quarter compared to $​16.​8 million in the prior-​year quarter."

Furthermore, Northern says, "​The increase in Wealth Management fees was primarily driven by new business and reduced money market mutual fund fee waivers, offset by unfavorable equity markets. Money market mutual fund fee waivers in Wealth Management totaled $​12.​7 million in the current quarter compared to $​16.​2 million in the prior-​year quarter." Finally, they add, "​Net interest income on an FTE basis totaled $​296.​0 million, up $​21.​0 million, or 8%, from $​275.​0 million in the prior quarter. Earning assets averaged $​105.​6 billion, up $​4.​8 billion, or 5%, from $​100.​8 billion in the prior quarter. The increase was primarily the result of higher levels of money market assets, reflecting increased demand deposits and short-​term borrowings."

Goldman Sachs also put out Q4 earnings yesterday. Their release explains, "​Net revenues in Investment Management were $​1.​55 billion for the fourth quarter of 2015, essentially unchanged compared with the fourth quarter of 2014 and 9% higher than the third quarter of 2015.... During the quarter, total assets under supervision increased $​64 billion to $​1.​25 trillion. Long-​term assets under supervision increased $​16 billion, including net inflows of $​9 billion, spread across all asset classes, and net market appreciation of $​7 billion, reflecting appreciation in equity assets. In addition, liquidity products increased $​48 billion."

It adds, "Net revenues in Investment Management were $​6.​21 billion for 2015, 3% higher than 2014, due to slightly higher management and other fees, primarily reflecting higher average assets under supervision, and higher transaction revenues. During 2015, total assets under supervision increased $​74 billion to $​1.​25 trillion. Long-​term assets under supervision increased $​51 billion, including net inflows of $​71 billion (​which includes $​18 billion related to an acquisition), and net market depreciation of $​20 billion, both primarily in fixed income and equity assets. In addition, liquidity products increased $​23 billion." BlackRock also released its Q4 earnings this week, while Federated, State Street and T. Rowe Price will release their latest earnings next week.

In other news, JPM Securities' most recent "Prime Money Market Holdings Update" looks at various trends, including Fed RRP usage, Prime to Govt fund conversions, and rising yields. Authors Alex Roever, Teresa Ho, and John Iborg write, "Flows within the taxable MMF universe finished flat in 2015, and total AuM registered $​2.​485tn at year-​end. While no reform related investor outflows were evident during the course of the year, we did see close to $​200bn in AUM officially convert from prime to government fund status. With less than $​50bn left for conversion spread out over the course of 2016, we look for an additional $​400bn to leave the prime fund complex via investor outflows, likely to be back loaded during the second half of the year."

On yields, they state, "Since the Fed hiked rates on 12/​16, MMF yields have been on the rise. Indeed, both gross and net average yields on prime and government funds have increased by several basis points during recent weeks. This is ultimately good for MMF shareholders, but it may be awhile until higher yields are fully passed through to end investors. After years of waiving fees, many funds will need to reclaim lost revenue by initially not passing on higher asset yields. As such, it may take several months and multiple hikes for MMF shareholders to see substantial benefits from the rate hike."

JPM adds, "The 3 month maturity sector has served as a middle ground for where prime funds and banks have been getting done in fixed rate paper. While foreign banks have sought to issue in longer tenors for regulatory purposes, Fed expectations and liquidity management have led prime funds to keep maturities short. As such, issuers and investors have met in the middle in 3'​s. Indeed, holdings data shows a large of amount of bank CP/​CD rolling off during February and March."

They write, "Typical turn dynamics and prime to government conversions led to a stark reduction in holdings of bank debt at the end of the year. In total, prime fund bank holdings fell by $​173bn or 17%. While the decline was driven by time deposits, almost every other bank asset class fell by some degree. As usual, European banks were behind the pullbacks, likely because regulations require them to report their respective balance sheets based on a snapshot at year-​end, versus a daily average for their US counterparts."

On Fed RRP, JPM comments, "Fund allocations show that prime funds increased usage of the RRP as a substitute for reductions in bank supply. Indeed, prime money funds increased RRP facility usage by $​146bn month-​over-​month. Away from banks and RRP, most other sector allocations remained stable. Usage at the Fed RRP facility touched a new historical high at year end, receiving $​475bn in demand. While $​300bn in term RRP was offered, there were practically zero bidders as counterparties waited to tap the overnight facility. Of the $​475bn of RRP demand, money market funds represented $​409bn or 86% of usage. Government funds took down $​205bn while prime funds took down $​203bn."

They continue, "Interestingly, the new parameters of the overnight RRP facility ($​2tn aggregate cap and removal of auction mechanism) did not spur an increase in MMF usage. This was true for both prime and government funds. Comparing to the end of Q3, MMF demand for RRP increased by only $​9bn. Additionally, fund size did not seem to have an effect on whether RRP allocations were increased. Furthermore, it is also interesting to note the lackluster usage of the facility following its spike at year-​end. This week, usage of the RRP has averaged less than $​90bn, lower than levels under the previous $​300bn cap. Initially, we had called for demand to increase in the weeks following liftoff, and this has yet to materialize. For now, we think seasonal factors are at play."

Finally, on WAMs, the report adds, "Both prime and government MMF had very short WAMs at year-​end, and are likely extending these in the new-​year, and are now buying longer maturity instruments with yields above the ON RRP. GSEs were aggressive in courting MMF cash over the past two weeks, and that supply was likely absorbed. Likewise, dealers that had temporarily pulled back from the repo market at year end likely returned, prompting fund managers to use-​or-​lose their available lines. There will be plenty of redeploying and courting of cash in the money markets over the next few weeks. Ultimately, it will take some time to get a good picture of where the baseline demand for ON RRP will settle."

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The December interest rate hike has not only resulted in a jump in yields, but it has also been a "​lifeline" for money fund managers who have been waiving fees for the better part of 7 years. Mutual fund publication Ignites, in the story, "Fed Hike a '​Lifeline' for Money Funds, Waivers Drop to $​5.​5B," writes on the drop in fee waivers in 2015. Beagan Wilcox Volz writes, "​Happier days are here again for money market fund managers. After reaching a record-​high $​6.​3 billion in 2014, fee waivers dropped to $​5.​5 billion in 2015. That'​s also down from $​5.​8 billion in fees forgone in 2013, but up from the $​4.​8 billion providers waived in 2012, according to Investment Company Institute and iMoneyNet data." In other news, Fitch Ratings published a report on money market fund reforms in China, entitled, "New Chinese Money Fund Rules Move Closer to International Standards."

The Ignites article explains, "The [​December 16] Fed hike was a lifeline and huge windfall for money fund managers," writes Peter Crane, CEO of Crane Data, in an e-​mail response to questions. The 25-​basis-​point federal funds rate increase will likely increase the amount of fees shops can collect from managers by 5 to 10 basis points, Crane says. That would boost annualized revenues by $​1.​3 billion, to $​2.​6 billion, he adds. Waivers will likely decrease to 2009 levels this year and could eventually drop to levels last seen in 2007 and 2008 if the central bank raises rates again this year, says Crane. Money funds waived $​3.​6 billion in fees in 2009, $​1.​8 billion in 2008 and $​1.​4 billion in 2007, ICI and iMoneyNet data show. Many firms began waiving portions of the fees for money funds in order to keep yields positive after December 2008, when the Federal Reserve lowered the interest rate to between 0% and 0.​25%."

It continues, "Last month'​s rate increase pushed the average seven-​day gross yield from 22 basis points at the end of November to 32 bps at the end of December for the 100 largest money funds, as measured by assets. The average seven-​day gross yield for those funds stood at 17 bps at the end of 2014, slightly more than half of what it was last month, according to Crane Data. Expense ratios have also inched up. The 100 biggest money funds had an average total expense of 19 bps at the end of December, up from 17 bps a month earlier and 14 bps at the end of 2014, according to Crane Data."

The ignites article explains, "But the increase in gross yields has more than offset the expense ratio jumps, and the average seven-​day net yield for the 100 largest money funds more than doubled -- from 5 bps at the end of November to 13 bps a month later. That'​s up from just 3 bps at the end of 2014, according to Crane Data." The piece adds, "Firms may deal differently with increased yields on their money funds, says Crane. "​Some asset managers may have decided to wait to unwind their fee waivers. They may have said, '​A lot of people are watching because of the Fed hike; we'​d like to wait and show [​investors] some yields,'" says Crane."

Further, they write, "Schwab and Federated are among the firms most affected by waivers. Schwab waived $​519 million in money fund fees through the third quarter of 2015, down from the $​558 million the firm waived during the same period in 2014, according to regulatory filings. The firm announces fourth-​quarter earnings today. Schwab managed $​164 billion in money funds at the end of 2015, Crane Data reports. In 2014, Schwab waived a total of $​751 million in fees, after waiving $​674 million in 2013 and $​587 million in 2012, as previously reported. Federated also saw waivers dip during the first nine months of last year. It waived $​69.​5 million in fees through the third quarter of 2015, versus $​89.​5 million for the same period the previous year. The firm will announce fourth-​quarter earnings later this month.... Federated waived $​119 million in money fund fees in 2014, $​105 million in 2013 and $​71 million in 2012, according to regulatory filings."

It concludes, "Industrywide, money market fund assets were $​2.​7 trillion at the end of last year, up by $​26 billion at the end of 2014, the Investment Company Institute reports. It'​s the fourth consecutive year money fund assets have inched up, says Crane. Assets in the products have grown despite years of near-​zero interest rates, massive regulatory changes finalized by the SEC in 2014 and related concerns that other products, including bank deposits, would siphon away assets, says Crane. "If that hasn'​t moved the money, chances are nothing will."

In other news, Fitch Ratings writes about MMF reform in China in a new report, "New Chinese Money Fund Rules Move Closer to International Standards." It explains, "New rules on money market funds published by the China Securities Regulatory Commission (​CSRC) show some convergence with international standards, notably the introduction of liquidity requirements. In Fitch'​s view, the new regulations strengthen industry practices, foster greater investor protection and lower risk. Nonetheless, the regulations still permit Chinese money funds more latitude in taking investment risk than European or US money funds. The new money fund rules being implemented by the CSRC introduce liquidity requirements, broaden the investment scope, implement liquidity fees and gates, and specify the actions expected in the event the net asset value (​NAV) deviates from predetermined limits. The new rules, announced in December 2015, will take effect in February 2016 with an implementation period of up to a year for certain rules."

Fitch continues, "​Until now, the Chinese regulation had not set out specific liquidity requirements. The new rules require Chinese money market funds to hold a minimum of 5% of assets in cash, government bonds, central bank bills and policy bank bonds and a minimum of 10% in the above-​mentioned assets plus assets maturing within five trading days. Furthermore, non-​tradeable assets maturing in more than 10 business days should not exceed 30% of the portfolio. In comparison, money funds operating in the US are currently required to maintain 10% of their portfolios in assets that mature overnight and 25% [​sic] in assets that mature weekly; similar practices are followed by constant NAV European money funds. CSRC has also reduced the funds' leverage ratio to 20% from 40%. Leverage is rarely used by money funds in developed markets -- it is not allowed in the US and limited to 10% under the European UCITS (​Undertakings for Collective Investment in Transferable Securities) regulation."

On liquidity, they add, "Starting February 2016, Chinese money funds may invest in negotiable certificates of deposit (​NCDs), which should provide the funds with greater issuer diversification and access to an instrument that is tradeable in the secondary market. The market is, however, relatively new, and the ability of funds to effectively trade these securities, notably during periods of market stress, remains untested.... Chinese money funds' ability to invest in NCDs also grants them access to a broader universe of issuers.... [​T]​he new regulations do allow money funds to invest in lower-​quality corporate bonds: the minimum rating level for eligible corporate bonds has been reduced to '​AA+' (​local rating) from '​AAA' (​local rating)."

On fees and gates, Fitch'​s report says, "New rules require the asset managers to set up an internal liquidity risk management system and charge a 1% fee in case a single shareholder redeems more than 1% of the fund'​s assets when the five-​day liquid assets (​cash, government bonds, central bank bills, policy bank bonds and assets maturing within five trading days) on that day are below 5% of the fund and the NAV deviation is negative. Asset managers may partially meet or delay the redemption if a single shareholder redeems more than 10% of the fund on a single day. The liquidity fee and gates should be specified in the fund purchase contract."

On NAV deviation, it states, "Money fund portfolio managers using amortised cost valuation are required to mark-​to-​market (​MtM) the fund'​s NAV. If the MtM NAV negative deviation expands beyond the predetermined limits, asset managers should take measures to bring the deviation back within the limit. If the MtM NAV negative deviation has been more than -​0.​5% for two consecutive trading days, the asset manager should use fair value to adjust the book value of the holdings or suspend the subscription and redemption and terminate the fund."

Finally, on maturity limits, Fitch writes, "CSRC shortened the maximum weighted average maturity (​WAM) to 120 days from 180 days, and for the first time set a maximum limit on the weighted average life (​WAL) of 240 days. In comparison, European and US money funds operate with maximum WAM and WAL of 60 days and 120 days, respectively. Concentration limits are updated as well. For example, aggregated time deposits should not exceed 30% of a fund."

​

One year ago, Crane Data launched Bond Fund Intelligence, a monthly newsletter with news and performance data on bond mutual funds. With money market fund reform a reality, we saw an opportunity to broaden our scope beyond 2a-​7 money funds to cover the ultra-​short and short-​term bond fund market. In the first issue (​Jan. 2015), we began tracking about 200 bond funds, focusing primarily on the Ultra-​Short universe and our new "Conservative Ultra-​Short Bond" category. As the year went on, we expanded our coverage out to all types of bond funds, though the editorial focus is still primarily on the short end of the market. By December 31, we were tracking 375 bond funds (​and ETFs), totaling $​1.​663 trillion in assets -- over half of the market. Below, we excerpt from the article, "BFI'​s First Year, Top Stories & Funds in '​15, Outlook for '​16." Also, we report on Treasury Strategies' latest "Quarterly Cash Briefing," where the conversation turned to money fund reform and its impact on the market.

Our January Bond Fund Intelligence says, "It was a challenging year for bond funds, but not bad considering — both assets and returns were roughly flat overall. While assets are up slightly through Nov 30, there have been steady outflows through the second half of the year. According to ICI, bond fund assets stood at $​3.​465 trillion as of Nov. 30, up just $​5 billion from Dec. 31, 2014. But with outflows in December, they may finish the year in the red. This was just one of the big stories of 2015. Here are our "​Top 10 Stories of 2015," in chronological order."

It continues, "​In January, we introduced ourselves in the story, "Welcome to BFI! 2015 Outlook & Top Bond Funds of 2014." In February we wrote, "New Fund Launches Continue in Ultra Short, ETF Bond Space." It focused on the launch of the Vanguard Ultra- Short Term Bond Fund, which made a big splash in the space. The launch of new Ultra-​Shorts was a theme we'​d see throughout the year. In March we wrote, "ICI Analyzes Bond Fund Volatility," where we quoted ICI'​s Brian Reid on the historically low volatility of bond funds."

BFI tells us, "​In April we reported, "Who'​s the Biggest Bond Fund? A Look at the Largest and Top 10." It was on the changing of the guard as Vanguard Total Bond Market Index Fund surpassed Pimco Total Return as the largest bond fund in the world. In June, we wrote, "Bond Market Conundrum: Ultra-​Shorts Raise Profile." This story looked at the conundrum of asset inflows despite stalling returns for bond funds. Later in the year, we would see those inflows turn to outflows and stay that way throughout the latter half of the year. In the August story, "Bond Fund Assets Peak as Fed Rate Hike Draws Nigh," we saw the outflows begin and assets plateau."

We write, "​In September, "Bond Fund Assets Continue Slide," and October, "No Fed Rate Hike in Sept., But Dec.?," we saw the market slide further on the anticipation that the Federal Reserve was finally going to hike interest rates. Citing uncertainty in China, following its September stock market crash, the Fed did not raise rates. It would, however, raise rates in December. In November, we wrote about another money manager offering money market- like bond funds, "SSgA Intros New Bond Funds." As it prepares for "​the new world of cash," SSgA launched 3 new ultra-​short bond funds, along with 3 new 2a-​7 money funds.... Finally, in December, we wrote, "Junk Bond Fund Liquidates," on Third Avenue Management which liquidated its Focused Credit Fund. It sent shockwaves through the market and sparked concerns about volatility in the high yield sector."

Our 1-​Year Anniversary issue adds, "What'​s ahead for 2016? It'​ll be another challenging year for bond funds as the Fed is expected to raise interest rates at least a couple more times this year. But most expect the Fed to be very gradual and cautious in its approach. The ultra-​short sector should see continued inflows as investors seek alternatives to Prime money funds once MMF reforms are implemented in October. Meanwhile, look for BFI to continue to expand its coverage and launch a new website in 2016." (Contact us if you'​d like to see the latest issue of Bond Fund Intelligence or if you'​d like to subscribe.)

Finally, under a "Top Performers for 2015" sidebar, we explain, "The table below lists the No.-​1 performing bond funds based on total return for through 12/​31/​15 in each of our 7 bond fund categories. PIMCO Short Asset Inv Fund Inst (​PAIDX) was the top performing fund in our Conservative Ultra-​Short category, Vanguard Total Intl Bond Mkt Ind Inv (​VTIBX) won in the Global category, Fidelity Capital & Income (​FAGIX) returned the most in our High Yield category, DoubleLine Total Return I (​DBLTX) was No. 1 among Intermediate-​Term Bond Funds, American Funds Govt R6 (​RGVGX) was No. 1 among Long Term Bond Funds, Invesco High Yield Muni A (​ACTHX) was No. 1 among Muni Bond Funds, PIMCO Income Inst (​PIMIX) was No. 1 among Short Term BFs, and Guggenheim Limited Duration Instl (​GILHX) placed first among Ultra-​Short Bond Funds. Congratulations to the winners! Note that we will continue to expand our collections and tweak our categorizations in the coming year, so watch for changes in 2016."

In other news, Treasury Strategies Quarterly Cash Briefing host Tony Carfang asked the panel -- Fitch Ratings' Roger Merritt, Federated Investors' Debbie Cunningham, and Association of Corporate Treasurers' Peter Matza –- about how the regulatory landscape will affect cash management strategies in 2016. Merritt said, "​We just did [​a] survey of corporate treasurers ... and it'​s very clear from our survey and those conversations [​that] the number one issue for them is fees and gates."

He explained, "​They'​ve always viewed money market funds as a very attractive option because they offered same day liquidity, preservation of capital, and yield. Now, or at least starting in October, that free lunch no longer exists. As a corporate treasurer, you'​ll have to give up one of those three features based on the products that will be available to you going forward. That is the key issue." Merritt added, "We also expect to see a proliferation of new liquidity products coming to market, trying to continue to meet the demands of cash investors."

Federated'​s Cunningham said, "We'​ve got two different implementation dates in 2016. The major changes will occur in mid-​October, but there are other changes that will occur in April that will maybe give will us some insight into what to expect from a cash flow perspective from customers. They are changes to reporting and disclosure. They will include reporting the information on the 4-​digit mark-​to-​market NAV for all funds ... on a daily basis. We'​ll be able to see that information for all funds and our clients will be able to see that information, in addition to the posting of the weekly liquidity numbers on a daily basis, which are the basis off which the potential for a fee or gate could potentially be triggered. That additional disclosure ... might be the beginning of what would be insightful information for expected cash flow."

Also, Cunningham commented on the billions of assets industrywide that are being converted from Prime to Government funds in response to reforms (​by our count, $​263 billion). She noted that about 80% of the conversions are complete with another $​40-$​50 billion to convert. She said, "What that doesn'​t take into consideration are people who are in a Prime fund that may withdraw their balances from their prime fund and go into the Government space. There have been estimates that that could be several more hundreds of billions of dollars, but there is no firmness in those estimates. It seems to be a moving target."

Cunningham added that when reforms were first introduced, many clients were adamant that they would not be in liquidity products that had fees and gates or a floating NAV. She explained, "​If you ask those same clients that same question today and you talk about yield spreads, there is much more potential interest and tolerance" for the unlikely occurrence of a fee or a gate being imposed, or mild volatility, given the potential for returns higher than a Government fund. "I think we still have a lot to learn and perhaps we start to learn some of that in April," she added. Carfang commented, "At Treasury Strategies, our clients clearly are less concerned about fees gates and floating NAV than they were six months ago ... nine months ago, and it'​s truly a question of spread between prime and government funds."

There was also some discussion of the High Yield bond fund market, specifically the Third Avenue Focused Credit Fund, which halted redemptions in December. Fitch'​s Merritt said that through research his firm did into the fund, he found it to be "​a bit of an outlier.... It was clear that the Third Avenue fund had a very high portion of its assets in what would appear to be in distressed or less liquid assets, whereas that'​s not the case for most other high yield funds." He said it may have been the case of essentially a hedge fund operating as an open-​ended mutual fund.

​

We'​ve reported extensively on the hundreds of billions ($​263.​7 billion and counting) that'​s converted or planning to convert from Prime to Government, but we also have gotten a number of questions about which of the remaining Prime money funds will declare as pure "​Retail" and which will become all "​Institutional" and float in October. We attempt to give you an extensive listing below, and examine the intentions of the 10 largest money fund complexes. We summarize those funds that have stated that they'​ll be Prime Inst, those that will be Prime Retail, and highlight the ones are converting from Inst to Retail. We also look at Tax-​Exempt lineups and declarations. Since the reforms (​and the majority of these changes) don'​t officially kick in until October 2016, many of these funds have not yet been re-​categorized in our database. Note that Crane Data, ICI and others have begun shifting and realigning "​retail" and "​institutional" share classes or funds to match these eventual designation, and this will continue in the coming months. So expect more distortions in the data and averages. (​For our latest full "Changes" summary, see our Jan. 6 News, "Rolling w/ Reform Changes II: Recap of '​15 Announcements, '​16 Plans.")

The largest money fund manager, Fidelity Investments, is maintaining just one Prime Institutional money fund, the $​56.​3 billion Fidelity Instit MM: Prime MMP. It is converting the $​62.​9 billion Fidelity Instit MM: MM Port to Prime Retail, as we discussed in our Oct. 15, 2015 News, "Fidelity Details Retail vs. Inst MMF Changes; Only One Floating Fund." The only other Prime Retail fund will be the $​5.​6 billion Fidelity Money Market Fund. (Note: While we have yet to reclassify the major share classes of Fidelity Inst MM: MM Port to "​Retail" from "​Inst," ICI shifted these, and other funds, last week causing an almost $​100 billion shift from Inst to Retail. They based their decision on the fact that these funds are no longer accepting Institutional money as of 12/​31/​15.)

Earlier this year, Fidelity converted 4 Prime Retail funds, totaling $​143.​7 billion, to Government, including CMF Prime (​merged into Fidelity Govt MMF), Cash Reserves (​to Govt Cash Reserves), Retirement Portfolio I (​to Retirement Govt Portfolio II), and VIP Money Market (​to VIP Govt MM). We originally wrote about these changes in our Feb 2, 2015 News, "Fidelity Announces Major Changes to MMFs; Staying Stable, Going Govt." Once these changes take effect, Fidelity will have $​61.​6 billion in Prime Retail and $​62.​9 billion in Prime Inst MMFs. On the Tax-​Exempt side, Fidelity won'​t have any Inst funds as it will convert the $​2.​2 billion `​Fidelity Instit MM: Tax Exempt I to Retail. All its other Muni funds are (​and will remain) Retail.

JP Morgan outlined its fund designations early on, as we wrote in our Feb 23, 2015 News, "JPMorgan Announces MMF Changes; Prime to Float; First Designations." The $​12.​1 billion JPMorgan Liquid Assets MMF has been designated as Prime Retail. The $​108.​5 billion JPMorgan Prime Money Market Fund has been designated as Prime Inst. On the Tax-​Exempt side, all JPMAM'​s funds will be Retail, including JPMorgan Tax Free Money Market Fund, JPMorgan California MMF, JPMorgan New York Municipal MMF, and JPMorgan Municipal MMF.

BlackRock, as we reported in our Dec. 1, 2015 News, "RBC Latest to Abandon Prime MMFs; BlackRock Designates Retail, Inst," will have 4 Prime Inst funds -- the $​61.​6 billion TempFund, the $​24.​1 billion BlackRock Cash Prime MM Portfolio, the $​47.​2 billion BlackRock Cash Institutional MM Portfolio; and the $​1.​1 billion TempCash, which will have a 7-​day maximum maturity. In all, BlackRock will have about $​134 billion in Prim Inst MMFs. Further, BlackRock will have 1 Prime Retail fund, the $​1.​3 billion BlackRock Money Market Portfolio.

In our July 31 News, "BlackRock to Liquidate 3 Muni MMFs, Convert Old Merrill Primes to Govt, we also wrote that BlackRock was converting 6 Prime Retail funds, totaling $​18.​1 billion, to Government funds. (​These conversions took place Jan. 4.) On the Tax-​Exempt side, BlackRock will have one Tax-​Exempt Inst fund, $​150 million MuniCash. It will have several Tax Exempt Retail funds, including BlackRock Liq MuniFund, California Money Fund, BlackRock Municipal MMP, BlackRock Municipal MMP, BlackRock Ohio Muni MMP, and BlackRock Pennsylvania Muni MMP.

Federated expects to have at least 3 Prime Inst funds, as we noted in our Nov. 17, 2015 News, "Federated Designates Inst MMFs; Wells, Goldman, BlackRock Gain in Oct.." The Prime Inst funds include the $​6.​1 billion Federated Money Market Management Fund, $​38.​1 billion Federated Prime Obligations, and $​7.​3 billion Federated Prime Value Obligations. Also, it will have 2 Prime Retail money funds, as we covered in our June 5, 2015 News, "Federated Announces Retail Money Fund Plan, Streamlines MF Lineup."

These include the $​14.​6 billion Federated Capital Reserves and the $​18.​2 billion Prime Cash Obligations. (​Note that Federated changed a number of "​IS" shares to "​WS" shares last week too. See the "Changes" tab in our MFI XLS for details.) Federated'​s Prime Inst portfolios total $​51.​5 billion while their Prime Retail portfolios total $​32.​8 billion. Also, Federated will have one Tax-​Exempt Inst fund, the $​56 million Federated Tax-​Free Trust. It will have 4 national Tax-​Exempt Retail funds -- Federated Municipal Obligations Fund ($​2.​3B), Federated Municipal Trust ($​641M) Federated Tax-​Free Obligations ($​6.​3B), and Federated Tax-​Free MMF ($​3.​8B) -- and 13 state-​specific Muni funds.

Vanguard won'​t have any Prime Inst funds, as we reported in our June 17, 2015 News, "Vanguard Sticks with Prime, Goes Pure Retail, Reopens Federal MMF." The company said that the $​113 billion Vanguard Prime MMF will be designated a Prime Retail fund, and it changed the name of its "​Institutional" share class to "​Admiral". (​Both ICI and Crane Data moved this class from Inst to Retail two weeks ago.) Vanguard won'​t have any Tax-​Exempt Inst funds either, as all 6 Tax-​Exempt funds will be Retail.

Schwab will likely have one Prime Inst fund, the pending Schwab Variable Share Price Money Fund (​see our Nov. 10, 2015 News, "Schwab Files Variable NAV Money Fund; Invesco Announces Changes"). This news followed our Oct. 13, 2015 News, "Schwab Going All Retail, Converting Inst Shares; MMP Switches to Govt," where we learned that Schwab would change its "​Institutional" share class in `​Schwab Value Advantage Money Fund to "​Ultra" (​Retail) shares. Also, Schwab will converted one Prime Retail fund, $​116 billion Schwab MM Portfolio, to Government in April. The rest of its Prime lineup, including Schwab MMF <​f:​swmxx>`​_ will remain as Prime Retail. All of Schwab'​s Tax-​Exempt funds will also be categorized as Retail, and Schwab Municipal Money Fund converted its Institutional share class to Premier (​Retail).

Goldman Sachs laid out its fund lineup in December, which we wrote about in our Dec. 21, 2015 News, "Goldman Sachs AM Details More MMF Changes, Portal Enhancements." Goldman Sachs designated two funds as Prime Inst. -- the $​37.​8 billion Goldman Sachs Financial Square Money Market Fund and the $​13.​2 billion GS FS Prime Obligations Fund. Also, Goldman will have one Prime Retail fund, the pending Goldman Sachs Investor Money Market Fund, which we wrote about in our July 30, 2015 News, "Goldman Sachs to Launch New Prime Retail, Treasury Fed RRP Funds." (​This new Prime Retail fund is set to launch on Jan. 29, 2016.)

Also, the $​316 million Goldman Sachs VIT MMF will be converted from Prime to Govt in April 2016. On the Tax-​Exempt side, the $​5.​4 billion Goldman Sachs FS Tax-​Free MMF will go all Retail and be renamed the Goldman Sachs Investor Tax-​Exempt MMF. However, Goldman will launch a new Tax-​Exempt Inst Fund, Goldman Sachs Financial Square Tax-​Exempt Money Market Fund. The Fund is projected to be launched on or around March 31, 2016.

Dreyfus will have 4 Prime Inst funds, as we reported in our Nov. 18, 2015 News, "Columbia Threadneedle Going Govt; Dreyfus Details MF Moves; Deutsche." They are: the $​23.​7 billion Dreyfus Cash Management; $​19.​3 billion Dreyfus Institutional Cash Advantage Fund, the $​3.​4 billion Dreyfus Institutional Preferred Money Market Fund Prime, and Dreyfus Institutional Preferred Plus Money Market Fund Prime. The $​2.​3 billion Dreyfus Inst Reserves Money Fund was converted to the Dreyfus Inst Preferred Govt MMF.

The firm also designated which funds will be Prime Retail. These include the $​190 million Dreyfus BASIC Money Market Fund, $​905 million Dreyfus Liquid Assets, and $​15.​8 billion General Money Market Fund. Overall, it will have about $​46.​4 billion in Prime Inst and $​16.​9 billion in Prime Retail. Dreyfus will have one Tax Exempt Inst fund, the $​2.​0 billion Dreyfus Tax Exempt Cash Management Fund. It will have several Tax-​Exempt Retail funds, including Dreyfus AMT-​Free Municipal Reserves; Dreyfus California AMT-​Free Municipal Cash Management; Dreyfus Municipal Cash Management Plus; Dreyfus New Jersey Municipal MMF; Dreyfus New York Municipal Cash Mgmt; General California Municipal MMF; General Municipal MMF; and General New York Municipal MMF.

Wells Fargo announced its plan back in May, which we covered in our News, "Wells Fargo Announces Money Fund Lineup Changes; Splits Retail, Inst." Wells Fargo will have two Prime Inst funds, the $​12.​1 billion Wells Fargo Cash Investment MMF and the $​43.​1 billion Wells Fargo Heritage MMF. In total, WF will have $​55.​2 billion in Prime Inst. Also, it has one Prime Retail fund, the $​2.​7 billion Wells Fargo Money Market Fund. On the Tax-​Exempt side, WF has one Tax Exempt Inst, the $​1.​0 billion Wells Fargo Municipal Cash Management MMF, and three Tax Exempt Retail -- Wells Fargo California Municipal MMF, Wells Fargo Municipal MMF, and Wells Fargo National Tax-​Free MMF.

Morgan Stanley has not made any official lineup announcement to our knowledge. Deutsche, on the other hand, will have one Prime Inst Fund, the $​113 million Deutsche Variable NAV Money Market Fund, we reported in our July 21, 2015 News, "Deutsche Announces Reform Plans, Will Convert Most Prime MFs to Govt ." The "​Institutional" share class in the $​3.​2 billion Daily Assets Fund were converted to "​Capital" (​retail) shares. (​See our Dec. 1, 2015 News, "Columbia Threadneedle Going Govt; Dreyfus Details MF Moves; Deutsche.") Further, Deutsche will have one Prime Retail fund, Deutsche MM Prime Series. It will convert 5 Prime funds, totaling $​18.​3 billion, to Govt funds on May 2. Also, it will have two Tax Exempt Retail funds -- Tax-​Exempt Portfolio, a series of Cash Account Trust; and Tax Free Money Fund Investment.

​

Commonfund, a "​cash" asset manager specializing in colleges and nonprofits, will be closing its cash investment platform, Treasury Access, the firm announced on its website. The statement, "Important Information for Treasury Access Users," says, "In light of new regulations issued by the SEC governing money market funds that will take effect later this year we have decided, in consultation with our banking partner, The Bancorp Bank, to close the Treasury Access platform effective February 11, 2016." In other news, Prudential issued a press release, "New research from Prudential predicts expansion of stable value market," which predicts a move away from money funds to stable value funds in retirement plans. (​See also our Dec. 9 News, "MetLife Stable Value Study Says Time to Reconsider Money Markets.")

Commonfund'​s letter to clients, dated January 8, 2016, explains, "We are writing to inform you that Commonfund is discontinuing the Treasury Access cash platform effective February 11, 2016. In light of new regulations issued by the SEC governing money market funds, we recognized that the platform would require modifications prior to the regulations' effective date in October. However, in consultation with our banking partner, The Bancorp Bank, we have decided to announce the closing of the platform at this time. We understand that many of our clients have valued the convenience of Treasury Access and we will work with you to assess the best solution for your institution going forward. Further, we want to assure you that we will do everything in our power to make this transition as seamless as possible."

Commonfund'​s Treasury Access platform first opened in 2009. A press release from Nov. 16, 2009, "Commonfund Introduces Treasury Access, Its New Cash Investment Platform for Higher Education and Nonprofit Institutions" (​cached by Google) provides some background. It explained, "Commonfund today introduced Treasury Access, its new cash investment platform for nonprofit institutions. Treasury Access offers a diversified approach to investing cash. The web-​based platform includes electronic banking services for flexible short-​term cash management as well as investment options spread across multiple money market mutual fund families and providers."

The release continued, "Treasury Access is designed to help nonprofit institutions manage operating reserves and working capital balances. Its web-​based platform allows institutions to make seamless transactions to and from their local bank disbursement and collection accounts; fund payroll accounts, bond payments and other obligations; automatically receive government and other third-​party transfer payments; move funds into Treasury Access' money market mutual funds; and send or receive payments from pre-​registered accounts."

It added, "Treasury Access will offer a choice of nine money market mutual funds from different fund families or providers.... State Street Global Advisors is the transfer agency partner and will maintain accounts for all money funds offered by Treasury Access and individual investor records. State Street also provides the first two Treasury Access investment funds: The State Street Institutional Liquid Reserves Money Market Fund, which is rated AAAm by Standard & Poor'​s, and The State Street Institutional US Government Money Market Fund."

In other news, Prudential Retirement put out a press release on a new white paper called, "Expanding the Case for Stable Value." The release says, "Growing numbers of plan sponsors and intermediaries may be open to embracing stable value in the coming years, according to a new white paper released today by Prudential Retirement, a business unit of Prudential Financial, Inc. Favorable perceptions of stable value among plan sponsors and intermediaries coupled with the changing regulatory environment for money market funds could boost demand for stable value funds. The paper is based on the survey of 400 plan sponsors and 300 intermediaries, which identified the factors that motivated them to adopt stable value and recommend the asset class to others."

It continues, "The survey revealed a number of key findings: the top two reasons for stable value adoption were capital preservation and steady returns; 54 percent of plan sponsors and 75 percent of intermediaries cited capital preservation as their main reason for adoption; 54 percent of plan sponsors and 70 percent of intermediaries cited steady returns as a deciding factor in adoption; stable value recommendations were primarily based on three factors: 1) the returns the asset class delivered versus other fixed-​income investments 2) their role in boosting plan participation and deferral rates, and, 3) for the intermediaries, their liquidity for participants; non-​adoption of stable value stemmed mainly from three factors: 1) perceptions about cost 2) their performance relative to equities and other non-​fixed income asset classes, and 3) the notion that they may be difficult for plan participants to understand; 53 percent of plan sponsors and 69 percent of intermediaries saw the cost of stable value funds as a challenge."

Prudential explains, "The white paper also points out that another reason for non-​adoption might be that stable value is less well known than other investment options, including money market funds and mutual funds -- and familiarity is a key driver of acceptance for most investment products in the marketplace. "​Over the past 40 years, stable value funds have performed remarkably well, even through economic downturns, like the financial crisis in 2008," says Gary Ward, head of Stable Value at Prudential. "Yet, the number of DC plans offering stable value funds remains at less than 50 percent, leaving significant numbers of plan participants without access to the asset class. Through this new research, we were able to uncover what motivates decision-​makers to adopt and recommend stable value and why some aren'​t taking advantage of it."

They add, "Among plan sponsors, 55 percent of non-​adopters plan to offer stable value in the future, while only 9 percent of adopters are at risk of getting rid of it. For intermediaries, 30 percent of those who recommend stable value to clients are doing so more often today than they did a year ago, and 35 percent expect this trend to accelerate over the next three years."

Finally, the survey says, "Another factor is the changing regulatory environment for money market funds. Beginning in October 2016, the U.​S. Securities and Exchange Commission will allow money market funds to impose redemption fees, or temporarily halt redemptions, when the funds fall below certain liquidity thresholds, which could spur more interest in stable value funds as an alternative. Sixty-​three percent of sponsors that currently offer money market funds and 49 percent of intermediaries who currently recommend them say the SEC ruling is likely to drive changes in their allocation to money market funds. In addition, 39 percent of plan sponsors who moved money out of a money market fund in the past year or plan to do so in the next three years, switched some of it to stable value funds or plan to do so."

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Crane Data released its January Money Fund Portfolio Holdings yesterday, and our latest collection of taxable money market securities, with data as of Dec. 31, 2015, shows a huge gain in (​Fed) Repo holdings, a small increase in Agencies, and a big decline in Other (​Time Deposits). CDs, CP, and Treasuries all saw declines too. Money market securities held by Taxable U.​S. money funds overall (​those tracked by Crane Data) `​decreased by $​2.​2 billion in December to $​2.​606 trillion. MMF holdings decreased by $​7.​8 in November, increased by $​61.​8 billion in October, decreased by $​30.​1 billion in September, and increased by $​35.​0 billion in August. Repos remained the largest portfolio segment, while Treasuries stayed in second place. Agencies moved into third, ahead of CDs, which fell to 4th place. Commercial Paper was the 5th largest composition segment, while Other (​mainly Time Deposits) securities were sixth and VRDNs were seventh. Money funds' European-​affiliated securities represented 15.​1% of holdings, down dramatically from the previous month'​s 25.​2%. Below, we review our latest Money Fund Portfolio Holdings statistics.

Among all taxable money funds, Repurchase Agreements (​repo) skyrocketed at quarter-​end, as they normally do, increasing $​176.​6 billion (​31.​6%) to $​735.​4 billion, or 28.​2% of assets, after decreasing $​49.​9 billion in November, decreasing $​119.​8 billion in October, and increasing $​172.​6 billion in September. (`​Fed Repo increased by a massive $​283.​8 billion to a record $​408.​5 billion.) Treasury holdings fell $​33.​2 billion (​6.​2%) to $​500.​7 billion, or 19.​2% of holdings, after jumping $​110.​2 billion in November and increasing $​9.​3 billion in October. Government Agency Debt increased $​35 billion (​7.​6%) to $​483.​8 billion, or 18.​6% of holdings, after decreasing $​3.​6 billion in November and increasing $​34.​1 billion in October, $​34.​5 in September and $​29.​8 billion in August. The steady rise by Treasuries and Agencies reflects the shift of about $​190 billion (​so far) of Prime fund to Govt fund assets.

Certificates of Deposit (​CDs) were down $​51.​8 billion (​11.​2%) to $​409.​9 billion, or 15.​7% of assets, after falling $​36.​1 billion in November, increasing $​15.​8 billion in October, and dropping $​55.​3 billion in September. Commercial Paper (​CP) fell $​26.​5 billion (​7.​2%) to $​343.​4 billion, or 13.​2%, while Other holdings, primarily Time Deposits, tanked $​101.​2 billion (​46.​5%) to $​116.​4 billion, or 4.​5% of assets. VRDNs held by taxable funds decreased by $​1.​1 billion (​6.​3%) to $​16.​3 billion (​0.​6% of assets).

Among Prime money funds, CDs represent under one-​third of holdings at 29.​1% (​down from 29.​5% a month ago), followed by Commercial Paper at 24.​4% (​up from 23.​7%). The CP totals are primarily Financial Company CP (​13.​6% of total holdings), with Asset-​Backed CP making up 7.​0% and Other CP (​non-​financial) making up 3.​8%. Prime funds also hold 7.​7% in Agencies (​up from 11.​5%), 6.​4% in Treasury Debt (​up from 3.​7%), 5.​4% in Treasury Repo (​up from 3.​5%), 2.​1% in Other Instruments, 1.​3% in Other Instruments (​Time Deposits), and 4.​6% in Other Notes. Prime money fund holdings tracked by Crane Data total $​1.​409 trillion (​down from $​1.​565 trillion last month), or 54.​1% of taxable money fund holdings' total of $​2.​606 trillion.

Government fund portfolio assets totaled $​687 billion, up from $​541 billion in November, while Treasury money fund assets totaled $​510 billion, up from $​502 billion in November. Government money fund portfolios were made up of 54.​7% Agency Debt, 14.​7% Government Agency Repo, 8.​0% Treasury debt, and 22.​2% in Treasury Repo. Treasury money funds were comprised of 72.​5% Treasury debt, 27.​1% in Treasury Repo, and 0.​4% in Government agency, repo and investment company shares. Government and Treasury funds combined total $​1.​197 trillion, or 45.​9% of all taxable money fund assets.

European-​affiliated holdings fell $​265.​5 billion in December to $​392.​2 billion among all taxable funds (​and including repos); their share of holdings plunged to 15.​1% from 25.​2% the previous month. Eurozone-​affiliated holdings fell $​146.​5 billion to $​230.​6 billion in December; they now account for 8.​9% of overall taxable money fund holdings. Asia & Pacific related holdings decreased by $​5.​0 billion to $​284.​9 billion (​10.​9% of the total). Americas related holdings increased $​268.​2 billion to $​1.​925 trillion and now represent 73.​9% of holdings.

The overall taxable fund Repo totals were made up of: Treasury Repurchase Agreements, which were up $​215.​5 billion, or 74.​3%, to $​505.​6 billion, or 19.​4% of assets; Government Agency Repurchase Agreements (​down $​32.​2 billion to $​160.​8.​9 billion, or 6.​2% of total holdings), and Other Repurchase Agreements ($​69.​1 billion, or 2.​6% of holdings, down $​6.​6 billion from last month). The Commercial Paper totals were comprised of Financial Company Commercial Paper (​down $​22.​3 billion to $​191.​5 billion, or 7.​3% of assets), Asset Backed Commercial Paper (​up $ 11.​4 billion to $​98.​6 billion, or 3.​8%), and Other Commercial Paper (​down $​15.​7 billion to $​53.​4 billion, or 2.​0%).

The 20 largest Issuers to taxable money market funds as of Dec. 31, 2015, include: the US Treasury ($​500.​7 billion, or 19.​2%), Federal Reserve Bank of New York ($​408.​5B, 15.​7%), Federal Home Loan Bank ($​323.​0B, 12.​4%), Wells Fargo ($​72.​0B, 2.​8%), Federal Home Loan Mortgage Co. ($​70.​8B, 2.​7%), RBC ($​57.​9B, 2.​2%), Bank of Tokyo-​Mitsubishi UFJ Ltd ($​57.​3B, 2.​2%), Federal Farm Credit Bank ($​51.​4B, 2.​0%), Bank of Nova Scotia ($​51.​0B, 2.​0%), Bank of America ($​45.​6B, 1.​7%), BNP Paribas ($​45.​3B, 1.​7%), JP Morgan ($​43.​5B, 1.​7%), Toronto-​Dominion Bank ($​39.​5B, 1.​5%), Sumitomo Mitsui Banking Co ($​39.​2B, 1.​5%), Credit Agricole ($​37.​3B, 1.​4%), Bank of Montreal ($​35.​2B, 1.​4%), Federal National Mortgage Association ($​34.​5B, 1.​3%), Citi ($​33.​0B, 1.​3%), HSBC ($​31.​5B, 1.​2%), and Mizuho Corporate Bank ($​29.​4B, 1.​1%).

In the repo space, the Federal Reserve Bank of New York'​s RPP program issuance (​held by MMFs) remained the largest repo program with $​408.​5B, or 55.​5% of money fund repo. The 10 largest Fed Repo positions among MMFs on 12/​31 include: Fidelity Inst MM MMkt ($​18.​9B), Fidelity Govt Cash Reserves ($​18.​1B), BlackRock Lq TempFund ($​15.​2B), Fidelity Inst MM Prime ($​14.​9B), JP Morgan US Govt ($​14.​0B), Fidelity Govt Money Market ($​13.​0B), Wells Fargo Adv Govt MMkt ($​13.​0B), BlackRock Cash Inst MMkt ($​12.​6B), JP Morgan Prime MM ($​12.​5B), and BlackRock Lq T-​Fund ($​10.​5B).

The 10 largest Repo issuers (​dealers) with the amount of repo outstanding and market share among the money funds we track) include: Federal Reserve Bank of New York ($​408.​5B, 55.​5%), Wells Fargo ($​43.​8B, 6.​0%), Bank of America ($​35.​0B, 4.​8%), BNP Paribas ($​22.​7B, 3.​1%), JP Morgan ($​21.​6B, 2.​9%), Citi ($​21.​6B, 2.​9%), RBC ($​21.​2B, 2.​9%), Bank of Nova Scotia ($​17.​5B, 2.​4%), HSBC ($​16.​6B, 2.​3%), and Societe Generale ($​16.​0B, 2.​2%),

The 10 largest issuers of "​credit" -- CDs, CP and Other securities (​including Time Deposits and Notes) combined -- include: Bank of Tokyo-​Mitsubishi UFJ Ltd ($​45.​6B, 6.​0%), Sumitomo Mitsui Banking Co ($​39.​2B, 5.​2%), RBC ($​36.​8B, 4.​8%), Bank of Nova Scotia ($​33.​5B, 4.​4%), Toronto-​Dominion Bank ($​28.​9B, 3.​8%), Wells Fargo ($​27.​7B, 3.​6%), Credit Agricole ($​27.​5B, 3.​6%), Bank of Montreal ($​27.​1B, 3.​6%), Mizuho Corporate Bank Ltd ($​25.​3B, 3.​3%), and Canadian Imperial Bank of Commerce ($​22.​9B, 3.​0%).

The 10 largest CD issuers include: Bank of Tokyo-​Mitsubishi UFJ Ltd ($​32.​2B, 8.​0%), Sumitomo Mitsui Banking Co ($​28.​1B, 7.​0%), Toronto-​Dominion Bank ($​26.​8B, 6.​6%), Bank of Montreal ($​23.​8B, 5.​9%), Mizuho Corporate Bank Ltd ($​22.​0B, 5.​4%), Bank of Nova Scotia ($​22.​0B, 5.​4%), Wells Fargo ($​20.​8B, 5.​1%), Canadian Imperial Bank of Commerce ($​19.​3B, 4.​8%), RBC ($​18.​6B, 4.​5%), and Sumitomo Mitsui Trust Bank ($​18.​3B, 4.​5%).

The 10 largest CP issuers (​we include affiliated ABCP programs) include: Commonwealth Bank of Australia ($​17.​2B, 6.​2%), JP Morgan ($​17.​1B, 5.​9%), RBC ($​14.​4B, 5.​0%), Westpac Banking Co ($​14.​1B, 4.​9%), Bank of Tokyo-​Mitsubishi UFJ Ltd ($​13.​2B, 4.​6%), BNP Paribas ($​11.​2B, 3.​9%), Australia & New Zealand Banking Group Ltd ($​11.​0B, 3.​8%), Sumitomo Mitsui Banking Co. ($​10.​5B, 3.​6%), Bank of Nova Scotia ($​10.​1B, 3.​5%), and HSBC ($​9.​8B, 3.​4%).

The largest increases among Issuers include: Federal Reserve bank of New York (​up $​238.​8B to $​408.​5B), Federal Home Loan Bank (​up $​19.​9B to $​323.​0B), Federal Home Loan Mortgage Co. (​up $​15.​3B to $​70.​8B), Citi (​up $​3.​8B to $​33.​0B), Federal Farm Credit Bank (​up $​2.​8B to $​51.​4B), HSBC (​up $​2.​3B to $​31.​5B), Sumitomo Mitsui Banking Co. (​up $​2.​1B to $​39.​2B), RBC (​up $​1.​1B to $​57.​9B), Australia & New Zealand Banking Group Ltd. (​up $​0.​3B to $​19.​4B), and Sumitomo Mitsui Trust Bank (​up $​0.​1B to $​22.​2B).

The largest decreases among Issuers of money market securities (​including Repo) in December were shown by: Credit Agricole (​down $​36.​5B to $​37.​3B), US Treasury (​down $​33.​3B to $​500.​7B), DnB NOR Bank ASA (​down $​27.​0B to $​7.​5B), Skandinaviska Enskilden Banken AB (​down $​26.​1B to $​8.​3B), BNP Paribas (​down $​25.​5B to $​45.​3B), Natixis (​down $​22.​2B to $​14.​6B), Credit Suisse (​down $​19.​9B to $​24.​4B), Societe Generale (​down $​18.​9B to $​27.​2B), Swedbank AB (​down $​16.​5B to $​6.​3B), and Barclays PLC (​down $​12.​3B to $​9.​4B).

The United States remained the largest segment of country-​affiliations; it represents 65.​1% of holdings, or $​1.​697 trillion (​up $​280.​0B). Canada (​8.​7%, $​226.​4B) jumped to second, while Japan (​6.​8%, $​176.​4B) vaulted to third place. France dropped to fourth from second (​5.​4%, $​139.​9B), while Australia (​3.​1%, $​80.​5B) moved up to fifth. The United Kingdom (​2.​7%, $​70.​9B) is sixth, followed by The Netherlands (​2.​0%, $​50.​8B) in seventh and Sweden (​1.​8%, $​46.​7B) in eighth. Germany (​1.​3%, $​34.​3B) and Switzerland (​1.​3%, $​34.​1B) round out the top 10 among country affiliations. (​Note: Crane Data attributes Treasury and Government repo to the dealer'​s parent country of origin, though money funds themselves "​look-​through" and consider these U.​S. government securities. All money market securities must be U.​S. dollar-​denominated.)

As of Dec. 31, 2015, Taxable money funds held 33.​9% (​up from 29.​8%) of their assets in securities maturing Overnight, and another 9.​4% maturing in 2-​7 days (​down from 12.​0%). Thus, 43.​3% in total matures in 1-​7 days. Another 22.​0% matures in 8-​30 days, while 13.​1% matures in 31-​60 days. Note that over three-​quarters, or 78.​4% of securities, mature in 60 days or less, the dividing line for use of amortized cost accounting under the new pending SEC regulations. The next bucket, 61-​90 days, holds 9.​8% of taxable securities, while 9.​7% matures in 91-​180 days, and just 2.​1% matures beyond 180 days.

Crane Data'​s Taxable MF Portfolio Holdings (​and Money Fund Portfolio Laboratory) were updated Tuesday, and our MFI International "​offshore" Portfolio Holdings and Tax Exempt MF Holdings will be released later this week. Visit our Content center to download files or visit our Portfolio Laboratory to access our "​transparency" module. Contact us if you'​d like to see a sample of our latest Portfolio Holdings Reports.

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Crane Data recently announced its 7th annual Money Fund Intelligence Awards, recognizing the top-​performing money market mutual funds, ranked by total returns, for calendar year 2015, as well as the top ranked funds for the past 5-​year and 10-​year periods. The January issue of our Money Fund Intelligence newsletter recognized the No. 1-​ranked funds based on 1-​year, 5-​year and 10-​year returns, through Dec. 31, 2015, in each of our major fund categories -- Prime Institutional, Government Institutional, Treasury Institutional, Prime Retail, Government Retail, Treasury Retail and Tax-​Exempt. We review these below, and also review our monthly Market Share rankings, which list the largest money market fund managers for December 2015 and highlight their asset gains and losses over the past month.

Reviewing our annual MFI Awards, the Top-​Performing Taxable fund overall in 2015 and top among Prime Institutional funds was BlackRock Cash Inst MMF SL (​BRC01), which returned 0.​19%. Next (​and first among non-​restricted funds) was Deutsche Daily Assets Fund Cap (​DAFXX), which returned 0.​16%. Among Prime Retail funds, Invesco STIC Prime Personal (​AIM22) and Vanguard Prime MMF Adm (​VMRXX) had the best returns in 2015 (​0.​11%).

The Top-​Performing Government Institutional fund in 2015 was Invesco Govt TaxAdvantage Inst (​TSPXX), which returned 0.​11%. Davis Govt MMF (​RPGXX) won the Top Government Retail fund over a 1-​year period with a return of 0.​06%. Morgan Stanley Inst Liq Treasury Inst (​MISXX) and Western Asset Inst US Treasury Oblig MMF Inst (​LUIXX) shared No. 1 in the Treasury Institutional class with returns of 0.​03%, while Morgan Stanley Inst Liq Treasury Inv (​MTNXX) ranked tops among Treasury Retail funds with a return of 0.​03%.

For the 5-​year period through Dec. 31, 2015, BlackRock Cash Inst MMF SL (​BRC01) took top honors for the best performing Prime Institutional money fund with returns of 0.​17%. BlackRock Cash Inst MMF Inst (​BGIXX) was No. 2. Vanguard Prime MMF Adm (​VMRXX) ranked No. 1 among Prime Retail with an annualized return of 0.​09%. (Meeder MMF Retail was No. 2 with a return of 0.​08% annualized.) BlackRock Premier Govt Inst Fund (​MLPXX) ranked No. 1 among Govt Institutional funds with a return of 0.​12%, while Davis Government MMF (​RPGXX) ranked No. 1 among Govt Retail funds over the past 5 years with a return of 0.​04%. BlackRock Cash Treasury MMF Inst (​BRIXX) ranked No. 1 in 5-​year performance among Treasury Inst money funds with a return of 0.​02%, and Morgan Stanley Inst Liq Treas Cash Mgt (​MREXX) and Invesco Treasury Personal (​AIM24) ranked No. 1 among Treasury Retail funds with returns of 0.​02%.

The highest‐​performers of the past 10 years include: Fidelity Inst MM: MM Port Inst (​FNSXX), which returned 1.​51% (​it was No. 1 overall and first among Prime Inst MMFs); Meeder Money Market Fund Retail (​FFMXX), which returned 1.​39% (​the highest among Prime Retail); BlackRock Premier Govt Inst (​MLPXX), which returned 1.​45%, (​No. 1 among Govt Inst funds); and Vanguard Federal Money Market Fund (​VMFXX), which ranked No. 1 among Govt Retail funds (​1.​27%). BlackRock Cash Treasury MMF Inst (​BRIXX) returned the most among Treasury Inst funds over the past 10 years at 1.​26%; and, Morgan Stanley Inst Liq Treasury Inv (​MTNXX) ranked No. 1 among Treasury Retail MMFs at 1.​12%.

We'​re also giving out awards for the best‐​performing Tax‐​Exempt money funds. USAA Tax Exempt CA MMF (​UCAXX) ranked No. 1 for the 1-​year period ended Dec. 31, 2015, with a return of 0.​10%. Over the last 5 years, BMO Tax Free MMF Premier (​MFIXX) was the top performer with a return of 0.​13%. BMO Tax Free MMF Premier also was the top ranked fund for the 10-​year period ended Dec. 31, 2015, with a return of 1.​15%. Winners will receive a letter and certificate stating their No. 1 ranking, the number of funds in their category, and the criteria used. (​The tables in our latest MFI show the No. 1 ranked money fund for each category based on 1‐​year, 5‐​year, and 10‐​year annualized total returns.)

Our January Money Fund Market Share, with data as of Dec. 31, 2015, shows asset increases for just over half of the largest US money fund complexes in the latest month and increases for most complexes over the past 3 months. Assets increased by $​44.​1 billion overall, or 1.​6%, in December; over the last 3 months, assets are up $​101.​4 billion, or 3.​9%. For the past 12 months through Dec. 31, total assets are up $​32.​6 billion, or 1.​2%.

The biggest gainers in December were Fidelity, Goldman Sachs, BlackRock, Federated, Schwab, and BofA, rising by $​14.​0 billion, $​13.​5B, $​9.​3B, $​7.​2B, $​4.​5B, and $​3.​5 billion, respectively. Goldman Sachs, Fidelity, Wells Fargo, SSGA, and BlackRock had the largest increases over the 3 months through Dec. 31, 2015, rising by $​30.​6 billion, $​27.​9B, $​11.​8B, $​11.​3B, and $​8.​0B, respectively. (​Our domestic U.​S. "Family" rankings are available in our MFI XLS product, our global rankings are available in our MFI International product, and the combined "​Family & Global Rankings" are available to our Money Fund Wisdom subscribers.)

Over the past year through Dec. 31, 2015, Fidelity showed the largest asset increase (​up $​31.​7B, or 7.​6%), followed by Morgan Stanley (​up $​17.​6B, or 15.​5%), SSgA (​up $​13.​7B, or 16.​7%), Goldman Sachs (​up $​7.​4B, or 4.​6%), and Vanguard (​up $​5.​7B, or 3.​3%). Other asset gainers for the year include: Northern (​up $​4.​8B, 6.​0%), BlackRock (​up $​3.​2B, or 1.​4%), Wells Fargo ($​3.​1B, 2.​6%), Franklin (​up $​2.​0B, 9.​3%), and HSBC (​up $​1.​7B, or 13.​4%). The biggest decliners over 12 months include: JP Morgan (​down $​14.​8B, or -​5.​7%), Invesco (​down $​8.​3B, or -​13.​9%), Dreyfus (​down $​7.​0B, or -​4.​1%), Federated (​down $​4.​1B, or -​1.​9%), and Deutsche (​down $​4.​1B, or -​11.​9%). (​Note that money fund assets are volatile month to month.)

Our latest domestic U.​S. money fund Family Rankings show that Fidelity Investments remains the largest money fund manager with $​445.​5 billion, or 16.​6% of all assets (​up $​14.​0 billion in December, up $​27.​9B over 3 mos., and up $​31.​7B over 12 months). Fidelity was followed by JPMorgan with $​244.​7 billion, or 9.​1% market share (​down $​4.​5B, down $​9.​9B, and down $​14.​8B for the past 1-​month, 3-​mos. and 12-​mos., respectively). BlackRock remained the third largest MMF manager with $​225.​1 billion, or 8.​4% of assets (​down $​9.​3B, up $​8.​0B, and up $​3.​2B). Federated Investors was fourth with $​211.​9 billion, or 7.​9% of assets (​up $​7.​2B, up $​5.​7B, and down $​4.​0B). Vanguard remained in fifth place with $​179.​3 billion, or 6.​7%, (​up $​2.​1B, up $​3.​5B, and up $​5.​7B).

Both Goldman Sachs and Schwab moved ahead of Dreyfus to become the sixth and seventh largest MMF manager, respectively. Goldman Sachs moved to sixth place from eighth place with $​167.​8 (​6.​3%), while Schwab ($​164.​5B, 6.​1%) stayed in seventh place. Dreyfus fell to eighth place from sixth with $​163.​0B (​6.​1%). Also, Morgan Stanley moved up a spot to ninth place with $​131.​0B (​4.​9%), dropping Wells Fargo to tenth place with $​122.​8B (​4.​6%). The eleventh through twentieth largest U.​S. money fund managers (​in order) include: SSgA ($​95.​7B, or 3.​6%), Northern ($​85.​3B, or 3.​2%), BofA ($​51.​7B, or 1.​9%), which moved ahead of Invesco ($​51.​6B, or 1.​9%), Western Asset ($​44.​0B, or 1.​6%), First American ($​40.​0B, or 1.​5%), UBS ($​36.​8B, or 1.​4%), Deutsche ($​30.​5B, or 1.​1%), Franklin ($​23.​6B, or 0.​9%), and RBC ($​16.​1B, or 0.​6%), which displaced American Funds from the top 20. Crane Data currently tracks 65 U.​S. MMF managers, one less than last month. (Delaware exited the space).

When European and "​offshore" money fund assets -- those domiciled in places like Dublin, Luxembourg, and the Cayman Islands -- are included, the top 10 managers match the U.​S. list, except for Goldman moving up to No. 4 (​dropping Vanguard to 7). Looking at the largest Global Money Fund Manager Rankings, the combined market share assets of our MFI XLS (​domestic U.​S.) and our MFI International ("​offshore"), the largest money market fund families are: Fidelity ($​452.​0 billion), JPMorgan ($​381.​6 billion), BlackRock ($​325.​6 billion), Goldman Sachs ($​262.​9 billion), and Federated ($​220.​0 billion). Dreyfus/​BNY Mellon ($​188.​9B), Vanguard ($​179.​3B), Schwab ($​164.​5B), Morgan Stanley ($​153.​2B), and Wells Fargo ($​123.​7B) round out the top 10. These totals include offshore US Dollar money funds, as well as Euro and Pound Sterling (​GBP) funds converted into US dollar totals.

Finally, our January Money Fund Intelligence and MFI XLS show that both net and gross yields increased sharply in December, driven by the Fed'​s rate hike. The Crane Money Fund Average, which includes all taxable funds covered by Crane Data (​currently 813), rose 3 basis points to 0.​06% for the 7-​Day Yield (​annualized, net) Average, while the 30-​Day Yield also went up 3 basis points 0.​05%. The Gross 7-​Day Yield was 0.​26% (​up 8 basis points), while the 30-​Day Yield was 0.​24% (​up 6 basis points). Our Crane 100 Money Fund Index shows an average 7-​Day Yield of 0.​13 (​up 8 basis points) and an average 30-​Day Yield of 0.​10% (​up from 0.​05%). Also, our Crane 100 shows a Gross 7-​Day Yield of 0.​32% (​up 10 basis points), and a 30-​Day Yield of 0.​29% (​up 7 basis points). For the 12 month return through 12/​31/​15, our Crane MF Average returned 0.​02% and our Crane 100 returned 0.​04%. The number of funds dropped to 813, from 817 last month.

Our Prime Institutional MF Index (​7-​day) yielded 0.​16% (​up 9 bps), while the Crane Govt Inst Index was at 0.​06% (​up 4 basis points). The Crane `​Treasury Retail and Govt Retail Index yielded 00.​1% (​unchanged). The Treasury Inst Index yielded 0.​04% (​up 3 basis points), while the Prime Retail Index yielded 0.​03% (​up 2 bps). The Crane Tax Exempt MF Index also yielded 0.​01% (​unchanged). The Gross 7-​Day Yields for these indexes were: Prime Inst 0.​39% (​up 12 basis points from last month), Govt Inst 0.​23% (​up 9 bps), Treasury Inst 0.​17% (​up 7 bps), and Tax Exempt 0.​10% (​up 2 bps) in December. The Crane 100 MF Index returned on average 0.​01% for 1-​month, 0.​02% for 3-​month, 0.​04% for YTD, 0.​04% for 1-​year, 0.​03% for 3-​years (​annualized), 0.​04% for 5-​year, and 1.​27% for 10-​years. (Contact us if you'​d like to see our latest MFI XLS, Crane Indexes file or market share numbers.)

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The Investment Company Institute released its latest "Worldwide Mutual Fund Assets and Flows" data collection last week, which shows that global money market mutual fund assets increased sharply in the Third Quarter of 2015. The latest report says total worldwide money fund assets rose $​247 billion, or 5.​4%, to $​4.​832 trillion. (If we include Australia'​s approximately $​322.​1 billion, total Worldwide money fund assets stand at $​5.​154 trillion.) Money fund growth in China continues to be the big news; the country moved ahead of Ireland to become the second largest MMF market. Chinese MMFs saw a huge $​188.​5 billion jump in Q3, while the largest market, the US, No. 3 Ireland, and No. 4 France also all gained assets in Q3. Globally, MMF assets increased by $​21.​6 billion, or 0.​4%, over the past year (​through 9/​30/​15).

ICI'​s latest quarterly release says, "Worldwide regulated open-​end fund assets decreased 5.​6 percent to $​36.​15 trillion at the end of the third quarter of 2015.... Worldwide net cash flow to all funds was $​223 billion in the third quarter, compared with $​589 billion of net inflows in the second quarter of 2015. The Investment Company Institute compiles worldwide open-​end fund statistics on behalf of the International Investment Funds Association, the organization of national fund associations. The collection for the second quarter of 2015 contains statistics from 46 countries."

It continues, "​Bond fund assets decreased 3.​7 percent to $​7.​90 trillion in the third quarter.... Money market fund assets rose 5.​4 percent globally to $​4.​82 trillion. ICI'​s quarterly report adds, "Money market funds worldwide experienced an inflow of $​201 billion in the third quarter of 2015 after registering an outflow of $​22 billion in the second quarter of 2015. The global inflow to money market funds in the third quarter was driven by inflows of $​124 billion in the Asia-​Pacific region, $​51 billion in the Americas, and $​25 billion in Europe..... Money market fund assets represented 13.​7 percent of the worldwide total."

According to Crane Data'​s analysis of ICI'​s "​Worldwide" fund data, the U.​S. maintained its position as the largest money fund market in Q3'​15 with $​2.​668 trillion (​or 54.​4% of all global MMF assets). U.​S. MMF assets increased by $​52.​6 billion in Q3'​15 and by $​64.​2B in the 12 months through Sept 30, 2015. China continues to gain market share, jumping up to second place among countries overall, leapfrogging over Ireland. China saw assets grow a massive $​188.​5 billion (​up 48.​5%) in Q3 to $​577.​3 billion (​11.​8% of worldwide assets). Over the last 12 months through June 30, 2015, Chinese MMF assets have doubled, up$​289.​6 billion, or 100.​6%.

Ireland fell to third in the rankings, ending Q3 with $​475.​4 billion (​9.​7% of worldwide assets), up $​25.​4B for the quarter, or 5.​7%, and up $​86.​5B, or 22.​2%, over the last 12 months. France remained in fourth place with $​349.​8 billion (​7.​1% of worldwide assets), up $​14.​5 billion, or 4.​3%, in Q3, but down $​30.​9 billion, or 8.​1%, over 1 year. Luxembourg moved up to fifth place with $​323.​9B, or 6.​6% of the total (​up $​7.​0 billion in Q3 and up $​17.​8B for 1 year). Australia was in 6th place worldwide with $​322.​1 billion (​6.​6%). (​ICI'​s data didn'​t include money fund figures for Australia again this quarter. We continue to estimate these at $​322 billion. Australia'​s MMF assets were shifted into the "​Other" category several quarters ago.)

Korea, the 7th ranked country, fell $​9.​4 billion to $​86.​2 billion (​1.​8% of total) in Q3 but assets rose $​4.​6 billion (​5.​6%) for the year. Mexico was in 8th place, dropping $​3.​4 billion to $​56.​4 billion (​1.​2% of total assets) in Q3 and increasing $​1.​2 billion (​2.​2%) over the previous 12 months. ICI'​s latest Worldwide statistics show Brazil with $​33.​6B (​down $​10.​5B and down $​18.​8B on the quarter and year, respectively) in 9th place. Rounding out the top 10 is Taiwan, with $​27.​6 billion in assets, moved ahead of India, rising $​1.​0B in Q3 and $​806 million for the year.

India ($​27.​2B, down $​5.​3B for the quarter and down $​2.​7 billion for the year), Sweden ($​22.​2B, up $​978M and up $​919M), Switzerland ($​19.​2B, down $​858M and up $​3.​2B),`​South Africa <​b:>`​_ ($​19.​1B, down $​1.​5B and down $​2.​3B), and Canada ($​18.​9B, down $​632M and down $​4.​1B) ranked 11th through 15th, respectively. Japan, Chile, Germany, United Kingdom, and Norway round out the 20 largest countries with money market mutual funds.

Note that Ireland and Luxembourg'​s totals are primarily "​offshore" money funds marketed to global multinationals, while most of the other countries in the survey have primarily domestic money fund offerings. (​Crane Data believes that some of these countries, like France and Italy, do not have true "​money market funds" due to their lack of strict guidelines and "​accumulating" NAVs instead of stable NAVs.) Contact us if you'​d like our latest "Largest Money Market Funds Markets Worldwide" spreadsheet, based on ICI'​s data, or if you'​d like to see our MFI International product.

Crane Data'​s Money Fund Intelligence International shows assets in "​offshore" money market mutual funds, U.​S.-​style funds domiciled in Dublin or Luxemburg and denominated in USD, Euro and GBP (​sterling), up slightly in December, increasing by $​3.​8 billion to $​699.​1 billion through 12/​31/​15. U.​S. Dollar (​USD) funds (​157) tracked by Crane Data'​s MFII account for over half ($​392.​1 billion, or 56.​1%) of the total, while Euro (​EUR) money funds (​98) total E75.​4 billion and Pound Sterling (​GBP) funds (​110) total L150.​5. For all of 2015, total offshore money fund assets were down $​55.​6 billion, or 7.​3%, to $​699.​1 billion.

USD funds were up $​3.​2 billion, or 0.​8%, in December and up $​8.​4 billion, or 2.​2%, in 2015. Euro funds were up E2.​3 billion, or 3.​1%, for the month and E15.​3 billion, or 16.​9%, in '​15, while GBP funds are up L2.​3 billion in November, or 1.​6%, and down L1.​9 billion, or 1.​2%, for the year through 12/​31. Offshore USD MMFs yielded 0.​16% (​7-​Day) as of December 31, up 8 basis for the month. EUR MMFs yielded -​0.​18% for the average 7-​Day Yield, down 4 basis points, and GBP MMFs yielded 0.​34%, down 4 basis points.

The USD funds tracked by MFI International contain, on average (​as of 11/​30/​15), 22.​0% in Certificates of Deposit (​CDs), 24.​0% in Commercial Paper (​CP), 24.​0% in Treasury securities, 13.​0% in Other securities (​primarily Time Deposits), 12.​0% in Repurchase Agreements (​Repo), 3.​0% in Government Agency securities, and 2.​0% in VRDNs (​Variable-​Rate Demand Notes). USD funds have on average 29.​8% of their portfolios maturing Overnight, 8.​4% maturing in 2-​7 Days, 16.​1% maturing in 8-​30 Days, 16.​0% maturing in 31-​60 Days, 13.​7% maturing in 61-​90 Days, 12.​8% maturing in 91-​180 Days, and 3.​1% maturing beyond 181 Days. USD holdings are affiliated with the following countries: US (​35.​3%), France (​15.​0%), Japan (​9.​0%), Canada (​8.​9%), Sweden (​6.​4%), Great Britain (​4.​6%), Australia (​4.​6%), Germany (​4.​2%), Netherlands (​3.​5%), and Switzerland (​1.​9%).

The 10 Largest Issuers to "​offshore" USD money funds include: the US Treasury with $​105.​9 billion (​23.​5% of total portfolio assets), Credit Agricole with $​19.​0B (​4.​2%), Bank of Tokyo-​Mitsubishi UFJ Ltd with $​12.​5B (​2.​8%), BNP Paribas with $​12.​2B (​2.​7%), Natixis with $​11.​4B (​2.​5%), Wells Fargo with $​10.​4B (​2.​3%), Bank of Nova Scotia with $​9.​6B (​2.​1%), Societe Generale with $​9.​4B (​2.​1%), RBC with $​8.​8B (​1.​9%), and Skandinaviska Enskilda Banken AB (​SEB) with $​8.​4B (​1.​9%).

The EUR funds tracked by Crane Data contain, on average, 23.​0% in CDs, 45.​0% in CP, 20.​0% in Other (​primarily Time Deposits), 7.​0% in Repo, 1.​0% in Agency securities, and 4.​0% in Treasury securities. Euro funds have on average 14.​1% of their portfolios maturing Overnight, 12.​2% maturing in 2-​7 Days, 15.​7% maturing in 8-​30 Days, 21.​4% maturing in 31-​60 Days, 14.​4% maturing in 61-​90 Days, 18.​2% maturing in 91-​180 Days, and 3.​9% maturing beyond 181 Days. EUR MMF holdings are affiliated with the following countries: France (​30.​1%), US (​14.​6%), Japan (​11.​1%), Sweden (​7.​2%), Great Britain (​7.​8%), Germany (​6.​6%), Netherlands (​6.​9%), Belgium (​4.​2%), Switzerland (​3.​5%), and Canada (​1.​5%).

The 10 Largest Issuers to "​offshore" EUR money funds include: Republic of France with E3.​7B (​5.​2%), BNP Paribas with E3.​7B (​5.​1%), HSBC with E3.​0B (​4.​2%), Proctor & Gamble with E3.​0B (​4.​1%), General Electric with E2.​8B (​3.​9%), Credit Agricole with E2.​7B (​3.​8%), Rabobank with E2.​7B (​3.​8%), Svenska Handelsbanken with E2.​6B (​3.​7%), Societe Generale with E2.​6B (​3.​7%), and Nordea Bank with E2.​5B (​3.​5%).

Finally, the GBP funds tracked by MFI International contain, on average (​as of 11/​30/​15) 25.​0% in CP, 31.​0% in Other (​Time Deposits), 30.​0% in CDs, 5.​0% in Repo, 6.​0% in Treasury, 1.​0% in Agency, and 2.​0% in VRDNs. Sterling funds have on average 19.​2% of their portfolios maturing Overnight, 8.​0% maturing in 2-​7 Days, 15.​0% maturing in 8-​30 Days, 18.​4% maturing in 31-​60 Days, 16.​3% maturing in 61-​90 Days, 18.​6% maturing in 91-​180 Days, and 4.​3% maturing beyond 181 Days. GBP MMF holdings are affiliated with the following countries: France (​14.​5%), Great Britain (​14.​6%), Japan (​12.​8%), Germany (​9.​7%), US (​6.​6%), Netherlands (​7.​8%), Australia (​6.​2%), Canada (​6.​9%), Sweden (​5.​6%), and Switzerland (​3.​5%).

The 10 Largest Issuers to "​offshore" GBP money funds include: UK Treasury with L6.​8B (​5.​2%), Bank of Tokyo-​Mitsubishi UFJ Ltd with L5.​0B (​3.​8%), Nordea Bank with L4.​4B (​3.​4%), Sumitomo Mitsui Banking Co with L4.​3B (​3.​3%), BNP Paribas with L4.​1B (​3.​1%), Mizuho Corporate Bank Ltd with L4.​0B (​3.​1%), ING Bank with L3.​9B (​3.​0%), HSBC with L3.​8B (​2.​9%), Rabobank with L3.​6B (​2.​7%), and Bank of Nova Scotia with L3.​4B (​2.​6%). (​E-​mail us at info@​cranedata.​com to request a copy of our latest MFI International or MFII Portfolio Holdings, or to request our spreadsheet of ICI'​s largest Worldwide Money Fund Markets.)

​

The January issue of our flagship Money Fund Intelligence newsletter, which was sent to subscribers Friday morning, features the articles: "Money Fund Highlights of '​15; More Changes Ahead in '​16," which looks at the major trends and stories from 2015; "RBC Global on Going Govt; Rethinking Liquidity," where we talk to RBC'​s money market fund management team on their view of the markets; and "Top Money Funds of 2015; 7th Annual MFI Awards," which honors the best performing MMFs in a variety of categories. We have also updated our Money Fund Wisdom database query system with Dec. 31, 2015, performance statistics, and sent out our MFI XLS spreadsheet this morning. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our December Money Fund Portfolio Holdings are scheduled to ship Tuesday, January 12, and our January Bond Fund Intelligence is scheduled to go out Friday, January 15.

MFI'​s lead article, "Money Fund Highlights of '​15,” says, "​Between 2014, when Money Market Fund Reforms were passed, and 2016, when those reforms go into effect, 2015 was a year of transition. Ahead of the Oct. 14, 2016 implementation date, money fund managers tweaked, revamped, and even scrapped their money fund lineups. The most notable trend we saw was managers converting Prime funds to Government funds to maintain the stable NAV."

The piece adds, "It was also the year that the Federal Reserve finally raised interest rates; its first hike in almost 10 years. The long-​awaited Fed move was a welcome relief for money fund managers, and investors, as we head into 2016. In just the few weeks since the Dec. 16 rate hike, yields have already increased, though by far less than 25 bps. (​Part of the move was no doubt absorbed by fund managers unwinding fee waivers.)"

Our latest MFI "​profile" reads, "​This month, Money Fund Intelligence profiles the liquidity management team at RBC Global Asset Management in the U.​S., including Brandon Swensen, Senior Portfolio Manager and Co-​Head of U.​S. Fixed Income; John Donohue, Head of Liquidity Management; and, Matthew Appelstein, Head of U.​S. Sales and Distribution. They discuss RBC'​s decision to no longer offer the RBC Prime Money Market Fund, the firm’​s growth in the U.​S., and the opportunities that exist in the new liquidity management landscape."

We ask, "Tell us about your recent changes. Why are you getting out of prime?" Donohue answers, "​The decision was driven by conversations with our clients -- they just don'​t feel the need to be involved in a variable rate NAV product. What we'​ve seen is that the majority of our clients are considering a move to our government money market fund, while also evaluating our ultra-​short products. In addition, clients continue to explore customized separate account strategies for their core cash positions. We have approximately $​30 billion of short duration assets, which enables us to be large enough in the market, but remain flexible. We believe clients will scrutinize their cash investing practices more than ever before."

Swensen continues, "​While we'​re not predicting the demise of prime funds, we are in the camp that believes they have been fundamentally changed and are less desirable in terms of delivering the liquidity solution our clients are looking for. Prime funds now exhibit liquidity characteristics that aren'​t quite the same as what a liquidity investment should look like. We think government funds are still a pure play liquidity product, but prime funds have this baggage associated with it. Fundamentally, we feel that clients that are looking for yield should be in something other than a prime fund, and that'​s where our separately managed accounts will come in to fill that void. The government funds are there to provide that pure play liquidity with no strings attached."

The "7th Annual MFI Awards" article says, "In this issue, we once again recognize some of the top‐​performing money funds, ranked by total returns, for calendar year 2015, as well as the top-​ranked funds for the past 5‐​year and past 10-​year periods. We present the following funds with our annual Money Fund Intelligence Awards. These include the No. 1‐​ranked funds based on 1‐​year, 5‐​year and 10‐​year returns, through Dec. 31, 2015, in each of our major fund categories -- Prime Institutional, Government Institutional, Treasury Institutional, Prime Retail, Government Retail, Treasury Retail, and Tax‐​Exempt. (​Watch for the full Awards story in coming days.)

We also review the latest Prime to Govie moves in a sidebar entitled, "More Funds Go Govie." It says, "Money market fund conversion announcements have accelerated in the final weeks of the year -- 7 additional fund managers have filed recently to change their Prime MMFs into Government funds since our last update. The recent batch of Prime to Govie conversions include: Cavanal Hill, John Hancock, Prudential, SunAmerica, Thrivent, TIAA-​CREF, and Voya." We also have a sidebar called, "Goldman Sachs AM Details More MMF Changes."

Our January MFI XLS, with Dec. 31, 2015, data, shows total assets increasing $​44.​2 billion in December after increasing $​3.​5 billion in November, jumping $​56.​5 billion in October, declining by $​9.​4 billion in September, and rising $​7.​2 billion in August. In 2015, MMF assets rose by $​39.​4 billion, or 1.​5%. Our broad Crane Money Fund Average 7-​Day Yield doubled, rising by 3 bps to 0.​06% for the month, while our Crane 100 Money Fund Index (​the 100 largest taxable funds) jumped 8 basis points to 0.​13% (​7-​day).

On a Gross Yield Basis (​before expenses were taken out), funds averaged 0.​26% (​Crane MFA, up 6 basis points) and 0.​32% (​Crane 100, up 10 bps). Charged Expenses averaged 0.​20% (​up 4 bps) and 0.​19% (​up 2 bps) for the two main taxable averages. The average WAM (​weighted average maturity) for the Crane MFA was 34 days (​up 1 day from last month) and for the Crane 100 was 34 days (​down 1 days). (​See our Crane Index or craneindexes.​xlsx history file for more on our averages.)

​

We'​ve gotten a number of requests for a basic recap and the current status of the latest round of money market fund reforms, so we wanted to produce a quick summary of the latest regulatory and fund changes. The following brief answers a number of frequently asked questions (​FAQs) on the reforms and provides an overview of the major issues. As many of you know, the Securities & Exchange Commission, which regulates mutual funds, amended "Rule 2a-​7" and approved new rules for money market funds in July 2014, which are still in the process of being implemented. The massive (​893-​page) "Money Market Fund Reform" document explains, "​The amendments are designed to address money market funds' susceptibility to heavy redemptions in times of stress, improve their ability to manage and mitigate potential contagion from such redemptions, and increase the transparency of their risks, while preserving, as much as possible, their benefits."

The SEC'​s press release explains, "​The amendments make structural and operational reforms to address risks of investor runs in money market funds, while preserving the benefits of the funds. Today'​s rules build upon the reforms adopted by the Commission in March 2010 that were designed to reduce the interest rate, credit and liquidity risks of money market fund portfolios.... The new rules require a floating net asset value (​NAV) for institutional prime money market funds, which allows the daily share prices of these funds to fluctuate along with changes in the market-​based value of fund assets and provide non-​government money market fund boards new tools -- liquidity fees and redemption gates -- to address runs."

The most critical changes -- the "​Floating NAV" and "​Fees and Gates" -- go into effect Oct. 14, 2016, others "​go live" on April 14, 2016, and some of the minor changes have already been implemented. We briefly review the key features of the SEC'​s reforms below, then we discuss moves fund companies (​and investors) have made in reaction to these changes. In particular, a number of funds have chosen to "​go Government" and become Government money market funds, which will still be allowed to keep a stable $​1.​00 share price (​and use "​amortized cost" to value securities). Most investors have stayed put to date, though, waiting to see how the new regulations might impact them.

Q: What kinds of money funds are there? While in the past categorization of money funds – retail, institutional, prime, Treasury, government -- has been done by various rankings agencies, like Crane Data, and by language in funds' prospectuses, the SEC'​s latest amendments outline new classifications of money market funds. They will define "Government," "Retail," and "Institutional," and investment managers are in the process of altering their funds to meet these pending definitions. Government funds must invest at least 99.​5% of assets in cash, government securities, and/​or government securities-​backed repurchase agreements. Government MMFs may impose a liquidity fee or redemption gate, but they are not required to. (​Almost all government funds have chosen not to have gates and fees.) Further, Government MMFs can use amortized cost accounting and have a Stable NAV.

Retail MMFs must limit investors to people and have "​policies and procedures designed to reasonable limit all beneficial owners of the fund to natural persons." Like Government funds, Prime Retail money market funds can use amortized cost accounting and maintain a Stable NAV. However, unlike Government funds, fees and gates will apply to all Prime Retail money market funds. Prime (​or Tax Exempt) funds that do not qualify as Government funds or Retail funds will have to adapt a Floating NAV. Prime Institutional will not be able to use the amortized cost or penny rounding methods to maintain a stable value; they must use "​mark-​to-​market" pricing. Further, Prime Institutional funds will also be subject to fees and gates.

What is the Floating NAV? Will it float? Effective Oct. 14, 2016, Prime and Tax-​Exempt Institutional funds will be required to round and transact going out to 4 decimal places (​i.​e., $​1.​0000) and to "​value their portfolio securities using market-​based factors and will sell and redeem shares based on a floating NAV." The SEC rules explain, "​When a money market fund'​s shadow price is less than the fund'​s $​1.​00 share price, shareholders have an economic incentive to redeem shares ahead of other investors." Funds have always been required to "​shadow" price underneath and monitor any deviations. Going forward these miniscule deviations (​except in the case of a financial crisis) should cause these funds to move on occasion. Money funds will continue to invest in safe and stable securities, and any variations should be infrequent and minor.

A critical piece of the SEC'​s money market reform rules is a proposal by the U.​S. Department Treasury and IRS to allow floating NAV money market fund investors to use a simplified tax accounting method to track gains and losses and provide relief from the "​wash sale" rules. The Treasury release explains, "An MMF that uses market factors to value its securities and uses basis point rounding to price its shares ... has a share price that is expected to change regularly, or "​float." Floating-​NAV MMFs therefore resemble in some respects other mutual funds that are not MMFs, but they remain subject to the risk-​limiting conditions in Rule 2a–​7 and are expected to continue to fulfill MMFs' unique role. In the absence of the simplified method of accounting ... current law would require shareholders to compute gain or loss on every redemption of shares in a floating-​NAV MMF." In response to these concerns, "​the Treasury and IRS approved a simplified method which aggregates all transactions in a period and on aggregate fair market values."

What are Liquidity Fees and Redemption Gates? "​Emergency" fees and gates also go into effect Oct. 14, 2016 for all non-​Government funds. The fees and gates, which a board may implement in an emergency situation, are designed to work in concert with the floating NAV rule to stem heavy redemptions and avoid the type of contagion that occurred in the 2008 Financial Crisis. The rules explain, "The amendments will allow a money market fund to impose a liquidity fee of up to 2%, or temporarily suspend redemptions (​also known as "​gate") for up to 10 business days in a 90-​day period, if the fund'​s weekly liquid assets fall below 30% of its total assets and the fund'​s board of directors (​including a majority of its independent directors) determines that imposing a fee or gate is in the fund'​s best interests. Additionally ... a money market fund will be required to impose a liquidity fee of 1% on all redemptions if its weekly liquid assets fall below 10% of its total assets, unless the board of directors of the fund (​including a majority of its independent directors) determines that imposing such a fee would not be in the best interests of the fund." This will allow funds to moderate redemption requests and, in certain cases, stop heavy redemptions in times of market stress.

Are there any other major changes? The SEC'​s Money Fund Reforms include a number of additional minor tweaks, including: a new Form N-​CR, which will disclose certain specified events, such as fund "​bailouts" (​Form N-​CR rule went into effect July 14, 2015); and, a revised Form N-​MPF, which includes disclosure of monthly portfolio holdings. This latter mandate, with a number of additional website disclosures (​4-​digit NAV per share, daily and weekly liquid assets, shareholder flows), goes into effect April 14, 2016. The final rules also enhance "​stress testing" requirements adopted by the SEC in 2010 and they remove references to credit ratings agencies.

How are these changes impacting fund managers and investors? The complexity and costs of the new rules have caused a number of funds to convert into Government-​only money funds or to exit the business entirely. We'​ve seen dozens of funds representing almost $​265 billion declare their intent to "​go Government," and we'​ve seen over $​190 billion of this total already switch. We'​ll no doubt see more funds switch going forward, since Government funds will see the least amount of change under the new regulations. For investors, the safety and simplicity of Government money funds will meet many of their cash management needs, so it'​s expected that Government funds will see additional inflows from investors beyond these fund changes.

But additional yield and spreads between Prime and Government funds will matter too. So fund companies and investors are looking to keep their options open, and many have launched or offer short-​term bond funds or separately managed accounts. With yields rising for the first time in almost 10 years, the playing field for money funds and cash investors is indeed changing. The coming year figures to be an exciting one, but everyone in the money markets will have to adjust and prepare for the new world of cash in 2016.

​

On July 22, we ran a story entitled, "Managers Rolling with Reform Changes; Recap of Announcements So Far," which summarized all of the money market fund reform related changes that had taken place in the first half of 2015. Since then, we have seen many more announcements and shifts, so we'​ve hit the reset button to update all of the fund lineup changes that occurred in 2015, starting with the largest MMF managers and working our way down. Note: Readers may also review www.​cranedata.​com'​s "News Archives" (​we recommend choosing "List Archives by Title Only" if you'​re browsing the history and selecting month by month to browse), "Link of the Day Archives" and "Money Fund Intelligence Archives" for more details.

On Feb. 2, 2015, we reported on Fidelity'​s announcement that it was shifting about $​143.​7 billion from Prime Retail to Government, including the world'​s largest money market, Fidelity Cash Reserves (​now Fidelity Govt Cash Reserves. An Operational Update issued April 14 revealed additional details, including some new share classes for some existing funds. The main Prime to Govt conversions were completed on December 1. On Oct. 15, Fidelity announced plans for its Prime Institutional money market fund lineup. The changes include converting the $​65.​5 billion Fidelity Institutional Money Market Portfolio, the 4th largest money fund portfolio overall, to Prime Retail. Fidelity will retain one Prime Institutional fund, the $​47.​8 billion FIMM Prime Money Market Portfolio, the 7th largest. Fidelity will also convert its $​2.​2 billion FIMM Tax Exempt Portfolio to Retail, so it will have no T-​E Inst funds.

Also in February, JP Morgan informed us that JP Morgan Prime, the largest Institutional Prime fund, will remain as such and will be subject to Floating NAV, while JP Morgan Liquid Assets will shift to Retail. JPM'​s also detailed which funds will be retail and which will be institutional among its lineup. (​See the press release here.)

BlackRock has also been extremely busy. In April, BlackRock said its largest money market fund, TempFund, will remain a Prime Institutional fund, subject to floating NAV. The Prime Institutional $​2.​4B TempCash will remain Prime Institutional, but it will be converted to a 7-​day maximum maturity fund, while some Muni funds will also be converted to 7-​day funds. In July, we reported on further changes -- specifically, that BlackRock would liquidate 3 Muni funds and Convert 3 Prime Inst and 3 Prime Retail funds into Govt Funds. Those 6 Prime to Govie conversions, totaling $​18.​1 billion, occurred on Jan. 4, 2016. The big news, however, occurred in November, when BlackRock said it was buying BofA'​s $​87B ($​43B in MMFs) liquidity business. When this biggest-​ever cash deal goes through in April 2016, BlackRock will become the second largest MMF firm. Then, on Nov. 30, we reported on a note BlackRock sent to clients that outlined which money funds will be categorized as Retail and Institutional.

Federated said in February that it will convert some of its Prime Institutional Funds to 60-​day maximum maturity funds. (​See our Feb. 20, 2015, News.) In June, Federated issued a second update, announcing it will have 6 Prime Retail and Muni funds, and will merge away 7 funds, including 3 Retail and 4 Government funds. In September, we reported on Federated'​s acquisition of Huntington Advisors' MMF assets. This was the third money market fund acquisition that Federated made in 2015, following the purchase of Reich & Tang'​s MMF business back in April, and the acquisition of Touchstone'​s Ohio Tax Free MMF in March. In November, Federated named which funds will be institutional -- Federated Money Market Management, Federated Prime Obligations Fund, Federated Prime Value Obligations Fund, and Federated Tax-​Free Trust. The company also plans to launch a stable value private fund for in the first quarter of 2016.

Vanguard announced that it won'​t offer any Prime Institutional or Municipal floating NAV funds, but it didn'​t "​go government" like many. Vanguard Prime MMF was designated a Prime Retail fund, and its Institutional Shares were renamed as Admiral (​retail) Shares. Also, it reopened its Federal MMF, designated 6 muni funds as retail, and renamed the Vanguard Admiral Treasury Fund the Vanguard Treasury MMF. In March, Dreyfus said it was considering offering 60-​day maximum maturity Prime Institutional funds. Dreyfus will offer all types of money funds and same-​day settlement on floating NAV MMFs. Also in March we learned that Dreyfus acquired the bulk of Touchstone'​s money market fund business. In November, we reported on which funds Dreyfus will categorize as Retail, Institutional, and Govt. It also converted two Prime funds to Government funds.

In May, Charles Schwab said it will not implement fees and gates on its Government funds. In October, we got more details on Schwab'​s plans. They will rename all of its existing "​Institutional" share classes to retail share classes. Schwab also said its $​111 million Schwab Money Market Portfolio intends to convert to a "​government money market fund" as of April 14, 2016. In November, we learned that Schwab will launch a new floating NAV money market fund, the Schwab Variable Share Price Money Fund, which should go live in January 2016.

Goldman Sachs was the first company to make a reform-​related announcement; it said in January that it will start complying with the new definition of Government MMFs, converting 4 Government MMFs to the 99.​5% requirement and stating that these won'​t have fees and gates. (​See our Jan. 22, 2015, News.) In a follow up statement in July, Goldman said it was going to launch a new Prime Retail fund, convert a Prime fund to a Government fund, reposition a Government fund as a Treasury fund, and launch a new Government fund. (​See our July 30 News.) On Dec. 21, Goldman detailed more changes in a press release, announcing their full lineup of money funds. (​See our Dec. 21 News.) Specifically, they are keeping two Prime Institutional funds, expanding one Prime fund to include foreign securities, converting a Tax Free fund to Retail, launching a Tax Exempt Inst fund, and liquidating two other muni funds.

Morgan Stanley won'​t impose fees and gates on government funds, and anticipates adapting its current funds to the new rules (see News here). However, MSIM is planning on developing new products that meet the needs of investors in this space. Stay tuned for more from MSIM. Wells Fargo designated which funds will be Institutional, Retail, and Government (​see Wells update here). It is also working on new products and won'​t impose fees and gates on Government Funds. In September, Wells said it will rebrand by taking out the "​Advantage" name from its funds (​see this News here). This went into effect in December. The 11th largest MMF manager, Northern Trust, has also been fairly quiet. In September, they filed with the SEC to make 3 of its Government funds to comply with the new regulations.

SSgA won'​t impose fees and gates on government funds, and the flagship State Street Institutional Liquid Reserves, a Prime Institutional fund, will adapt to reforms and offer the floating NAV, the firm said in June. Since then, State Street filed to launch 3 new money market funds, including a 60-​day maximum maturity fund, and 3 new ultra short bond funds, including one that looks like a money fund in disguise. In October, we reported on SSgA'​s press release and white paper detailing the changes.

Early on, Invesco said it won'​t impose fees and gates on its Government funds. In November, we reported on more money fund changes at Invesco. The firm announced which funds will be Govt, Inst, and Retail. Also, the company said Invesco VI Money Market Fund will be converted from Prime to Govt on April 29, 2016. In our last update we said BofA hadn'​t made any announcements -- and now we know why. As referenced earlier in this piece, BlackRock will acquire BofA'​s money market fund business. Western Asset Management will also adapt funds to new requirements, but won'​t have fees and gates on Government funds. It will also launch two Short-​Term Bond Funds. Also, in October, Western filed with the SEC to launch a new Prime Retail fund, the Western Prime Obligations MMF.

First American won'​t impose fees and gates on Government funds and is also considering developing 60 day funds and Private funds. UBS also won'​t impose fees and gates on its Government funds. It will have full roster of funds, including FNAV funds, and is looking to develop Private Funds, SMAs, and Ultra-​short Bond funds, they said in June. In November, we learned that UBS filed with the SEC to launch 3 Prime Retail money market funds, each of which will invest through the same underlying master fund. They are the UBS Prime Investor, UBS Prime Preferred, and UBS Prime Reserves funds (​with minimum investments of $​10,​000, $​50,​000,​000, and $​1,​000,​000, respectively). They will go live on Oct. 14, 2016.

Deutsche Wealth and Asset Management announced in July that it will convert 5 Prime Institutional portfolios into Government funds and will keep just one Prime Institutional Fund, the $​113 million Deutsche Variable NAV Money Market Fund. It will also offer Retail funds, SMAs, and is considering new products as well. In November, Deutsche said it will introduce 2 Ultra-​Short bond funds, Deutsche Limited Maturity Quality Income Fund and Deutsche Ultra-​Short Investment Grade Fund. Also, we reported in December that Deutsche converted the Inst shares of its Daily Assets fund to Capital shares.

In September, we wrote that Franklin filed to convert all of its Prime portfolios into Government money funds, including Franklin Money Fund, Franklin Templeton Money Fund, and Franklin Institutional Fiduciary Trust (​IFT) Money Market Portfolio. Overall, these 3 portfolios have about $​24.​5 billion in assets. The conversions were completed in November 2015. The 20th largest MMF manager, American Funds also will convert the $​12 billion American Funds Money Market Fund to a Government fund, American Funds US Government MMF. The change will go into effect on April 1, 2016.

Rounding out the top 25, RBC Global Asset Management said in December it will close its $​8 billion RBC Prime Money Market Portfolio on Sept. 30, 2016. Shareholders invested in the fund will be notified of their options, including eligibility to exchange shares into shares of RBC U.​S. Government Money Market Fund. (​Also, in November, RBC acquired City National Bank, which runs the CNR funds.)

T. Rowe Price will convert its largest Prime fund, Prime Reserve, to Government and will launch a new Prime Institutional fund. SEI liquidated share classes of several money funds -- Prime Obligations, Money Market Fund, Government, Government II, Treasury, and Treasury II. The B, C, and H shares were converted into the A shares. HSBC added a new "​portal" share class for 3 of its MMFs. Also, Oppenheimer announced will convert all $​10.​1B of its Prime funds to Government funds, on Sept. 28, 2016, including Oppenheimer MMF, Oppenheimer Cash Reserves, and Oppenheimer Inst MMF. Also, Oppenheimer Money Fund/​VA will become Oppenheimer Govt Money Fund/​VA on April 29. 2016.

A number of other money fund managers have also made or announced changes. American Century converted its $​1.​4 billion American Century Premium MMF to a Government fund on December 1; Pioneer converted its $​260 million Pioneer Cash Reserves to a Government fund in November; and Nationwide will convert the Nationwide MMF and the Nationwide VIT MMF to Government funds on October 14, 2016. In a December News story, we reported on 6 small managers that converted Prime funds to Government funds. The conversions include: John Hancock Money Market Fund into John Hancock Government Money Market Fund; Prudential Money Mart Assets into Prudential Govt MMF; SunAmerica MMF into SunAmerica Government MMF, Thrivent Money Market Fund into a Government fund; TIAA-​CREF MMF into a Govt fund; and Cavanal Hill Cash Management Fund into Cavanal Hill Government Securities Money Market Fund. Also, we wrote in December about Voya converting 3 Prime funds -- Liquid Assets Portfolio; Money Market Portfolio; and Money Market Fund -- to Government funds.

Finally, the SEC'​s pending reforms (​and presumably ultra-​low yields) have prompted several managers to get out of the money fund business, including the aforementioned Reich & Tang, Touchstone, Huntington, and BofA. Others that have exited the business via liquidations or other means include Alpine, William Blair, Delaware (​which converted its only MMF to an Ultra-​Short BF), Forwards Funds, and Eaton Vance. We'​ll no doubt see more changes in 2016, and Crane Data will be sure to keep you updated. Thanks for your support in 2015, and Happy New Year!

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In a letter to clients posted last week, Invesco Fixed Income announced the retirement of its Head of Global Liquidity, Lu Ann Katz. The Atlanta-​based investment manager also made a series of other internal appointments within its "​cash" team. We review these "People" moves below, and we write on the rate outlook and most recent Prime to government moves. Yesterday'​s Wall Street Journal discussed the uncertainty of future interest rate hikes in 2016 in the article, "The Fed'​s Interest-​Rate Path: Who Has the Map?." We also excerpt commentary from Federated'​s CIO for Global Money Markets, Debbie Cunningham, on rates in her latest "Month in Cash" piece. Finally, BlackRock converted $​18.​1 billion of assets from Prime to Government yesterday (​1/​4), and we recap this shift below. (​See our July 31, 2015 News, "BlackRock to Liquidate 3 Muni MMFs, Convert Old Merrill Primes to Govt," and our Dec. 22 News, "More Funds Jump on Prime to Govt Conversion Bandwagon; Mergers.")

The Invesco letter, from Fixed Income CEO Greg McGreevey, says, "​At Invesco Fixed Income (​IFI), we are dedicated to maximizing the expertise and talents of our investment professionals in order to provide positive outcomes for our clients. With that in mind, we wanted to share with you some details regarding some internal moves and expanded roles for a number of key leaders within IFI."

He explains, "Lu Ann Katz, Head of Global Liquidity for IFI, has decided to retire effective March 2016 after 23 years with Invesco. Ms. Katz has made numerous contributions to our firm, having served in a number of fixed income investment leadership roles in Houston, London, and Atlanta. Ms. Katz will continue to be involved as needed to ensure a smooth transition internally and externally. I want to thank Lu Ann for her many years of service and commitment to the organization. We wish her the very best in the next exciting chapter of her life." (​See our Nov. 28, 2014 News, "MFI Profiles Invesco'​s Katz on Adapting to a Changing Liquidity Market" and our November 2014 Money Fund Intelligence for our latest "​profile" with Katz.)

Invesco'​s statement continues, "Tony Wong will assume business and strategic oversight for our Global Liquidity business in addition to his current responsibilities as Head of Global Credit Research. Mr. Wong has been with IFI since 1996, and has extensive experience across the platform." Further, "Laurie Brignac, Head of Government/​Short Duration/​EMEA Portfolio Management and Senior Portfolio Manager, will assume responsibility for all portfolio management within the Invesco Global Liquidity team, working closely with Justo Gonzalez. Mr. Gonzalez will expand his responsibilities as the Head of Global Liquidity Research to include strengthening our business partnerships."

It adds, "Esther Chance will take on new responsibilities as Head of IFI Platform, an important role for the entire fixed income business. In this role, Ms. Chance will partner with key supporting functional groups, leading our global efforts to strengthen our engagement and processes across a variety of support activities. This position will leverage her strong experience in both investments and operations. She will work closely with Aaron Uhde, our Chief Administration Officer for IFI."

McGreevey concludes, "It'​s important to note that there is no change to our process, funds, or fund objectives as a result of these internal moves. The Invesco Global Liquidity team is highly experienced with tremendous bench strength; these changes will provide greater strategic focus and alignment with our Global Liquidity business." Crane Data wishes Katz the best of luck and thanks her for her extensive service to the money fund industry. We'​d also like congratulate the other Invesco team members on their new positions.

Now that the first Fed hike is a done deal, what'​s next? Yesterday'​s WSJ "​Fed'​s Interest-​Rate Path" story," says the "only certainty is more uncertainty on which way rates will go." It explains, "Federal Reserve policy makers and credit-​market participants have a fundamental disagreement about what will happen to interest rates this year. The uncomfortable prospect for investors is that either group could turn out to be woefully wrong."

It explains, "​The debate over how far and fast the Fed may raise rates this year was kicked off by its move last month to raise the target range on overnight rates for the first time in nearly a decade. Now, projections from policy makers center on a forecast that they will further raise their target range by a full percentage point over the course of 2016, to 1.​25% to 1.​5%. On the other hand, federal-​funds futures, which price on traders' rate expectations, tell a different story. They imply the Fed will raise its rate range by just a half point."

Federated'​s Cunningham writes in a piece, "Now Things Get Interesting," "When the Federal Reserve finally hiked rates last month after seven years at near zero, cash managers breathed a sigh of relief. But our next breath was just as deep as we got ready for what'​s next. The frustrating certainty of postponed action has been replaced by the uncertainty of a rising-​rate environment. I'​ll take the uncertainty any time, but 2016 is going to be intriguing. Perhaps a better word is "​shifting." Coinciding with moving the target range to 0.​25-​0.​50%, the Fed implied in its economic projections that it would raise that by 25 basis points four times in 2016 to reach 1.​375% at year'​s end. But let'​s face it, this could change at any one of its Federal Open Market Committee (​FOMC) meetings."

She explains, "On a deeper, more technical level, I think the rate picture next year is also going to be determined by cash flows. When we started talking about money market reform in 2014, there was a high expectation that more than half of the $​1.​5 trillion in Prime money funds would go into governments. However, recent surveys and client discussions lead us to surmise that a larger portion likely will stay in Prime funds.... It may be a portion of deposits move to the money fund market where a competitive yield would have the added benefit of liquidity. And if that is the case, after taking a hit to assets under management, Prime funds as an industry may grab some of that back in 2017 if the outflows create a wider spread that will attract money back to them. That especially could be the case as investors become more comfortable with the implementation of the floating NAV."

Finally, Cunningham comments, "And let'​s not forget the news on the reverse repo program. This normally flies under the radar, but now that the Fed intends to use the overnight facility to set a floor for the new target fed funds range, it is front and center. The FOMC uncapped the amount of collateral approved participants can ask for from $​300 billion ceiling to about $​2 trillion of eligible treasury securities. It seems that would be enough to satisfy the equation for demand, but you just don'​t know. I think supply and demand is going to have a whole lot to do with next year'​s rate outlook, as much as the Fed. So is there uncertainty? Yes, but we are prepared, not the least of which is a continued focus on shorter Weighted Average Maturity (​WAM), in the mid to high 30s, and elevated percentages of floating-​rate securities and liquidity."

In other news, BlackRock shifted $​18.​1 billion of its money fund assets from Prime to Government funds yesterday. These latest funds to "go government" include: the $​2.​5 billion BBIF Money Fund portfolio; the $​5.​1 billion BIF Money Fund; the $​1.​9 billion FFI Institutional, which became BlackRock Govt Inst Fund; the $​3.​8 billion FFI Premier Institutional, which became BlackRock Premier Govt Inst Fund; the $​1.​5 billion FFI Select Institutional, which became BlackRock Select Govt Inst Fund; the $​2.​2 billion Ready Assets Prime, which became Ready Assets Govt Liquidity Fund, and the $​1.​2 billion Retirement Reserves Fund. To date, $​190.​5 billion in money fund assets have converted from Prime to Government, representing 72.​2% of the $​263.​7 billion in total that is slated to convert between now and Oct. 14, 2016.

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Money fund assets jumped in the last week of the year, making December the 7th monthly asset increase out of the past 8. MMFs will likely finish 2015 with a another small gain, the fourth year in a row that assets have increased (​barely). Asset levels are now at their highest point since January 2011 The Investment Company Institute'​s weekly statistics show assets up $​18 billion in December, and assets up $​26 billion, or 1.​0%, year-​to-​date. We review ICI'​s latest "Money Market Fund Assets" report, and their latest monthly "Trends in Mutual Fund Investing," below. We also discuss ICI'​s "Month-​End Portfolio Holdings of Taxable Money Funds," which confirms that holdings of US Treasury Bills skyrocketed in November (​and Agencies gained), while Commercial Paper, Repo, and CDs dropped. (​See our December 10 News, "Dec. Portfolio Holdings: Treasuries Skyrocket; Repo, CD, CP Decline.")

ICI'​s latest weekly asset update says, "Total money market fund assets increased by $​16.​03 billion to $​2.​76 trillion for the eight-​day period ended Wednesday, December 30, the Investment Company Institute reported today. Among taxable money market funds, government funds increased by $​720 million and prime funds increased by $​14.​86 billion. Tax-​exempt money market funds increased by $​460 million."

The release explains, "Assets of retail money market funds increased by $​5.​17 billion to $​939.​10 billion. Among retail funds, government money market fund assets increased by $​2.​21 billion to $​346.​04 billion, prime money market fund assets increased by $​2.​48 billion to $​408.​63 billion, and tax-​exempt fund assets increased by $​490 million to $​184.​42 billion.... Assets of institutional money market funds increased by $​10.​87 billion to $​1.​82 trillion. Among institutional funds, government money market fund assets decreased by $​1.​49 billion to $​874.​77 billion, prime money market fund assets increased by $​12.​39 billion to $​875.​16 billion, and tax-​exempt fund assets decreased by $​30 million to $​69.​98 billion."

A Footnote adds, "In anticipation of the Securities and Exchange Commission'​s (​SEC) new money market fund regulations, many advisers are changing their prime money market funds into government money market funds. As a result, there have been, and will continue to be, large shifts in assets from prime funds to government funds before the October 2016 deadline." (There were no shifts in the latest week, but watch for BlackRock'​s BIF, FFI and Ready Assets funds to be reclassified by ICI and Crane Data in the coming week.)

ICI'​s "Trends in Mutual Fund Investing November 2015" confirms a minor increase in MMF assets in November, up $​4.​8 billion, or 0.​2%, to $​2.​720 trillion. Assets have increased in 6 of the last 7 months (​it'​ll be 7 of 8 once December is official) -- assets were up $​45.​2 billion in October, down $​5.​1 billion in September, and up $​8.​1 billion in August, $​45.​9 billion in July, $​12.​9 billion in June, and $​38.​0 billion in May. In the 12 months through Nov. 30, 2015, money fund assets are up $​74.​4 billion, or 2.​8%, according to ICI.

It says, "​The combined assets of the nation'​s mutual funds decreased by $​23.​65 billion, or 0.​1 percent, to $​15.​94 trillion in November.... Bond funds had an outflow of $​5.​06 billion in November, compared with an inflow of $​4.​36 billion in October.... Money market funds had an inflow of $​2.​84 billion in November, compared with an inflow of $​45.​52 billion in October. In November funds offered primarily to institutions had an inflow of $​2.​45 billion and funds offered primarily to individuals had an inflow of $​384 million." Money funds now represent 17.​1% of all mutual fund assets, while bond funds represent 21.​7%. The total number of money market funds dropped to 496 in November, from 502 the previous month.

ICI'​s latest "​Portfolio Holdings" summary shows that US Treasury Bills skyrocketed and Agencies gained, while CDs, Repo, and CP dropped. CDs (​including Eurodollar CDs) remained the largest portfolio segment, despite decreasing $​32.​4B, or 5.​4%, in November to $​567.​6 billion. (​ICI'​s CD totals likely include Time Deposits, which Crane Data and the SEC categorize as "​Other" -- we reported a decrease in Other/​TDs in November.) CDs make up 23.​0% of all holdings. Repurchase agreement stayed the second largest portfolio segment, but these also fell, declining $​40.​7 billion, or 6.​9%, in November to $​547.​7 billion. Repo represents 22.​1% of taxable MMF holdings.

Treasury Bills & Securities were the big gainer, jumping ahead of Agencies into third place among composition segments. Treasuries increased a massive $​98.​6 billion, or 24.​4%, in November to $​503.​1 billion (​20.​3% of assets). This reflects the shift of Prime funds to Government funds, as well as an increase in T-​bill issuance following the raising of the Treasury debt ceiling. U.​S. Government Agency Securities continued moving higher, increasing $​2.​0 billion, or 0.​5%, to $​434.​7 billion (​17.​6% of assets). Commercial Paper was still fifth, declining $​15.​3B, or 4.​6%, to $​319.​8 billion (​12.​9% of assets). Notes (​including Corporate and Bank) dropped by $​2.​3 billion, or 2.​9%, to $​75.​8 billion (​3.​1% of assets), and Other holdings (​including Cash Reserves) fell $​8.​7 billion to stood at $​24.​3 billion.

The Number of Accounts Outstanding in ICI'​s series for taxable money funds decreased by 24.​6 thousand to 23.​213 million, while the Number of Funds fell by 5 to 345. Over the past 12 months, the number of accounts fell by 373.​7 thousand and the number of funds declined by 20. The Average Maturity of Portfolios dropped to 35 days in November, down 3 days from October. Over the past 12 months, WAMs of Taxable money funds have declined by 11 days. At 35, WAM'​s dropped back to September 2015 levels, which was the lowest level since June 2010, according to our analysis of ICI'​s data.

Note: Crane Data also updated its December MFI XLS last week to reflect the 11/​30/​15 composition data and maturity breakouts for our entire fund universe. (​Visit our Content Center and the latest Money Fund Portfolio Holdings download page to access our December Money Fund Portfolio Holdings and the latest files.)

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