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The Investment Company Institute released its latest monthly "Trends in Mutual Fund Investing" and "Month-​End Portfolio Holdings of Taxable Money Funds" for October 2021 yesterday. ICI'​s monthly "Trends" report shows that money fund assets increased $​11.​1 billion in October to $​4.​554 trillion. This follows increases of $​6.​4 billion in September and $​25.​5 in August, decreases of $​24.​4 billion in July and $​73.​4 billion in June, and increases of $​78.​6 billion in May and $​31.​9 billion in April. MMFs increased by $​129.​4 billion in March and $​39.​4 billion in February, but decreased $​5.​2 billion in January, $​10.​0 billion in December and $​12.​0 billion in November. For the 12 months through Oct. 31, 2021, money fund assets have increased by $​197.​1 billion, or 4.​5%. (​Month-​to-​date in November through 11/​26, MMF assets have increased by $​67.​6 billion according to Crane'​s MFI Daily.)

The monthly release states, "The combined assets of the nation'​s mutual funds increased by $​828.​94 billion, or 3.​2 percent, to $​26.​75 trillion in October, according to the Investment Company Institute'​s official survey of the mutual fund industry. In the survey, mutual fund companies report actual assets, sales, and redemptions to ICI.... Bond funds had an inflow of $​13.​81 billion in October, compared with an inflow of $​28.​51 billion in September.... Money market funds had an inflow of $​10.​97 billion in October, compared with an inflow of $​6.​31 billion in September. In October funds offered primarily to institutions had an inflow of $​16.​31 billion and funds offered primarily to individuals had an outflow of $​5.​34 billion."

The Institute'​s latest statistics show that Taxable funds saw gains while Tax Exempt MMFs saw losses last month. Taxable MMFs increased by $​12.​2 billion in October to $​4.​466 trillion. Tax-​Exempt MMFs decreased $​1.​1 billion to $​87.​7 billion. Taxable MMF assets increased year-​over-​year by $​221.​3 billion (​5.​2%), while Tax-​Exempt funds fell by $​24.​2 billion over the past year (-​21.​6%). Bond fund assets increased by $​6.​9 billion in October to a $​5.​607 trillion; they'​ve risen by $​605.​0 billion (​12.​1%) over the past year.

Money funds represent 17.​0% of all mutual fund assets (​down 0.​5% from the previous month), while bond funds account for 21.​0%, according to ICI. The total number of money market funds was 307, the same number as the prior month and down from 347 a year ago. Taxable money funds numbered 247 funds, and tax-​exempt money funds numbered 60 funds.

ICI'​s "Month-​End Portfolio Holdings" confirms the huge rebound in Treasuries and drop in Repo last month. Repurchase Agreements remained the largest composition segment in October, though repos fell by $​77.​2 billion, or -​3.​8%, to $​1.​978 trillion, or 44.​3% of holdings. Repo holdings have increased $​1.​019 trillion, or 106.​2%, over the past year. (​See our Nov. 10 News, "Nov. MF Portfolio Holdings: Treasuries Recover But Repo Still No. 1.")

Treasury holdings in Taxable money funds rebounded sharply but remained the second largest composition segment. Treasury holdings jumped $​139.​0 billion, or 8.​7%, to $​1.​730 trillion, or 38.​7% of holdings. Treasury securities have decreased by $​498.​5 trillion, or -​22.​4%, over the past 12 months. U.​S. Government Agency securities were the third largest segment; they decreased $​33.​9 billion, or -​7.​6%, to $​413.​6 billion, or 9.​3% of holdings. Agency holdings have fallen by $​255.​1 billion, or -​38.​1%, over the past 12 months.

Certificates of Deposit (​CDs) remained in fourth place; they increased by $​33.​2 billion, or 21.​8%, to $​185.​5 billion (​4.​2% of assets). CDs held by money funds shrank by $​3.​2 billion, or -​1.​7%, over 12 months. Commercial Paper took fifth place, up $​3.​6 billion, or 2.​4%, to $​153.​2 billion (​3.​4% of assets). CP has decreased by $​16.​8 billion, or -​9.​9%, over one year. Other holdings decreased to $​23.​8 billion (​0.​5% of assets), while Notes (​including Corporate and Bank) were down to $​3.​3 billion (​0.​1% of assets).

The Number of Accounts Outstanding in ICI'​s series for taxable money funds decreased to 45.​938 million, while the Number of Funds was flat at 247. Over the past 12 months, the number of accounts rose by 5.​973 million and the number of funds decreased by 23. The Average Maturity of Portfolios was 37 days, up three days from September. Over the past 12 months, WAMs of Taxable money have decreased by 8.

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Earlier this month, Fidelity Investments hosted a webinar entitled, "Fidelity Conservative Income Bond Fund and the Markets," which featured Fidelity'​s Michael Morin, head of Fidelity Institutional Liquidity Management and CIB Portfolio Manager Julian Potenza. They discussed the latest strategies for Fidelity'​s offering just beyond money market funds and the overall ultra-​short bond fund market. Morin explains, "We designed the fund during the first zero interest rate policy period, and we spent a lot of time and energy with our quantitative team asking ourselves, '​How would this fund perform through market cycles?' We knew we were going to start off at a zero-​interest rate environment, which is where we are today, and [​then] would be in a rising rate environment."

He continues, "The goal really was to design a risk-​return profile just outside of prime money market funds that would be both attractive to money market investors who wanted to take on a little bit more risk with a potential higher return, as well as to attract fixed income investors who are maybe out the curve. [​These investors say], '​Gee, eventually the Fed is going to tighten, and in a rising rate environment ... I should lower duration.' And this fund was designed to be one of the lowest duration bond funds in the marketplace.... What I will say is we have very tight guidelines on this portfolio, both from a credit perspective and an interest rate sensitivity perspective."

Morin tells us, "As the Fed raises rates, obviously the NAV of the fund can go down. But the majority of ... downside NAV volatility is going to be more relevant for credit spreads than it is for interest rate spreads. Part of that is because of how short the fund is. So, we have two controls on the interest rate sensitivity of the portfolio. One is the duration itself. We'​re right in the middle of our benchmark of 3 to 6 months. So [​it'​s] clearly a very short duration benchmark [​and has] a dollar weighted average maturity limit of less than 3/​4 of a year. So [​there are] very tight restrictions from an interest rate sensitivity [​standpoint, and you'​re] only going to have so much volatility on the NAV of the fund."

He adds, "From a credit risk perspective, the final maturity is to the legal final maturity of fixed rate, two years, floating rate three years.... One of the reasons that we did that was really to eliminate structured risk, because one of the lessons from the GFC was obviously extension risk. We saw was a lot of ultra-​short bond funds get caught up with securitized risk. What you thought you were holding, a one-​year duration portfolio in some cases, blew all the way out to 5, 6, 7 years, and you were left holding long-​term assets. So, we wanted to avoid that. Just from a credit perspective, the portfolio is 95% high quality ... A-​minus or higher, and then it is allowed to have 5% lower quality. So [​it'​s a] very high-​quality portfolio, which we felt like through market cycles would limit the downside risk."

When asked, "What are you trying to accomplish now?" Potenza responds, "​The fund really thrives in a rising rate environment.... I think of this as the sweet spot in the short duration space. We have flexibility; we can buy fixed-​rate securities up to two years. We can buy longer floaters. We can start to take advantage of hikes as they get priced in sooner than a money market fund ... if we think we'​re getting compensated. At the same time, all the risk controls that you mentioned keep the funds aggregate exposure to changes in interest rates relatively modest. So, we'​re able to pursue yield in a way that'​s a little bit more opportunistic than a money fund, while still keeping an NAV volatility profile that works for strategic liquidity investors."

He says, "We have the ability to pick amongst a lot of different security types within this high-​quality, vanilla-​structure, investment grade universe ... ARM securities, fixed rate and floating money market securities, Treasury securities, commercial paper, repo, nontraditional repo. Working across our bond and money market trading desk and with all of our research teams across the corporate sector, we are able to navigate the different parts of the front-​end market as we see value and as we look to position the fund based on our expectations for the Fed."

Potenza explains, "[Let me] give you a very quick example of how we'​ve been doing that over the last year or so and what we'​re doing now. As COVID hit and we [​went] into ZIRP expecting to be there for a while, 2-​year fixed rate corporate bonds are what I'​m trying to buy.... The Fed'​s going to be on hold. We want to lock in as much yield as we can. Money markets are trading super rich. The situation is technically very tough. [There'​s] not a lot to do in commercial paper market, [​and there'​s] not much interest in floaters with the Fed not expected to hike."

He continues, "[​As we] get into early 2021, you may remember in February, the curve started to steepen. The front end was still untouched, but the five years sold off 20-​25 basis points. The 10-​Year got up to like 175. At that point, we said, '​OK, the market is telling us we'​re getting closer to the point where the Fed cycle is going to evolve. Let'​s start avoiding those 2-​year fixed rate securities.' What happened to the 5-​year note could happen to the 2-​year note soon. Let'​s focus on floaters, 1-​year and in corporate securities and even some tier-​2 money market securities. We did that for a while."

Potenza states, "Then the floating rate market got really, really tight. We were really hammering kind of tier-​2 money market names, 1-​year and in fixed-​rate stuff. And then in the last, call it, two months, that 2-​year move started to happen. So, we saw the hikes get moved into 2022 and the 2-​year go up to 50 basis points. At that point, we start saying, OK, I can start to consider 2-​years.... I'​m not saying it'​s a slam dunk. I'​m not saying we'​re going to put the whole portfolio into 2-​year fixed rate securities. That'​s not how we manage. But I'​m saying the opportunity set now at least provides enough yield and not Fed hiking priced in that there is the chance for that 2-​year to outperform my benchmark."

He tells the webinar, "So on the margin, we'​ve been doing a little bit more fixed rate securities while also trying to add appropriately priced floaters to prepare for the ultimate Fed hiking cycle. And you can see a little bit of that reflected in here. I think if you look between the middle of the year and … the end of September, ... you can still see that floaters were going up a little bit. We were avoiding two years. If you check more recently, you'​ll probably see our fixed rate securities start to increase as the yield environment has shifted."

Potenza adds, "But I think the big-​picture comment in terms of how we'​ve been positioning the fund is, we'​ve been trying to be patient, do what we can to hold the line on yield and wait for more opportunities on the credit spread side.... Interest rate sensitivity is something that we spend a lot of time managing, but corporate risk is really the key driver of our returns relative to our benchmark and our risk. So, we spend a lot of time thinking about our exposure to the corporate sector, a diversified mix of very high-​quality issuers across geographies, all developed markets, a lot of financial institutions given the part of the yield curve that we operate, working very closely with our research analysts."

Finally, he comments, "Another factor in an active management process is, of course, valuation. From the corporate side, corporate spreads, particularly at the front end, had been very tight. They'​ve widened a little bit as we'​ve seen central banks start to evolve their message.... So, when we think about our appetite for credit risk, we'​ve been trying to hold the line toward good issuers into the fund, maintain yield, but not push our metrics of credit risk, our credit spread duration out too far.... The Fed normalization process, while offering higher rates which provide an opportunity set for the fund, also have the potential to generate some pockets of volatility in credit spreads. And we have a lot of dry powder remaining to take advantage of those opportunities should they arise."

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J.​P. Morgan Securities released its "Short-​Term Fixed Income 2022 Outlook" earlier this week, and the update, entitled, "The same, only different," tells us, "In 2022, the prospect of Fed rate hikes should meaningfully boost yields away from the zero bound, allowing money funds to recapture some fee waivers. The Fed'​s balance sheet and US fiscal policy will also play a much smaller role and fade in the background. Even so, the amount of excess liquidity in the money markets, and the broader financial markets, will remain substantial. At the same time, overall money market supply will remain anemic as Treasury is unlikely going to revitalize its net T-​bill issuance. Much like this year, the supply-​demand mismatch will continue to pose challenges for participants in money markets. Usage at the Fed RRP is unlikely going to see much relief any time soon."

They explain that, "[T]​he pace of deposit growth at banks should slow materially given tapering and a rebound of Treasury'​s General Account to more normal levels. Moreover, banks will likely continue to face leverage constraints that limit their willingness to take on more deposits. We think this theme will continue to play a role next year in the absence of any SLR relief and given the tremendous amount of excess liquidity that already exists on their balance sheets."

The update continues, "Furthermore, deposit betas are unlikely to rise meaningfully even if the Fed begins to raise rates in 2H.... [​D]​uring the last tightening cycle in 2016-​2018, deposit betas were very slow to rise at the start, only to catch up towards the back end of the tightening cycle. Meanwhile, MMF yields were much more sensitive to Fed rate hikes and market rates. All of this is to say that MMFs could attract more money next year, or at a minimum, maintain their current balances. On margin, MMF reform may offset some of these inflows, but we think the impact is small, as the reforms primarily target prime funds and not government funds. To that end, we wouldn'​t be surprised if RRP balances trend even higher, potentially to as much as $​2tn."

J.​P. Morgan writes, "Second, duration will likely remain a focus among many investors.... Attempts by long-​end investors to shorten duration could boost demand in the front end of the curve. Indeed, AUMs at ultrashort and short-​term bond funds have increased by $​107bn or 12% YTD, predominately in the short-​term sector.... While we don'​t anticipate the same growth in short-​term bond funds next year given volatility in the 2y point of the curve, we could see a pickup in ultrashort bond funds, which tend to maintain a WAM of around 6 months."

They comment, "Third, sec lending reinvestment cash balances have surged to $​750bn this year after hovering around the $​600-$​700bn range for many years (​Source: RMA, JPMorgan). Our colleagues in sec lending have noted a combination of factors that are driving balances higher: 1) a growing short base in Treasuries, 2) a flat repo curve, which has allowed lenders to lock up more term funding, 3) higher equity valuations, which have resulted in higher cash collateral value, and 4) heavy new corporate issuance in 2021, which has brought forth more corporate GC collateral in the marketplace. In 2022, we believe many of these factors will remain in play given 1) the potential for upside surprises to inflation and employment, which could translate to a larger short base of Treasuries, 2) expectations that supply chains and COVID-​19 will normalize in the coming year, boosting equity valuations, and 3) another year of strong corporate issuance, driven by financials."

The Outlook tells us, "Fourth, liquidity portfolios of states and local governments have increased meaningfully over the past two years, as they were beneficiaries of both the CARES and ARP fiscal stimulus packages. Importantly, states and local governments are expected to receive the second portion of the ARP fiscal payments in 2022. Combining that with increased tax receipts (​which have so far outpaced spending), we would not be surprised if liquidity continues to accumulate among states and local governments next year."

It adds, "Last but not least, there continues to be a substantial amount of cash on corporate balance sheets, totaling $​2.​3tn as of 3Q21. Cash flow generation is strong among many of these corporations given consumer demand, as is their access to capital markets. To the degree that they are not spending as much on capex or increasing payouts to shareholders, this money will continue to accumulate. The top five corporate liquidity portfolios (​AAPL, GOOGL, MSFT, AMZN, GE) currently have close to $​615bn. All in all, regardless of when the Fed concludes tapering, liquidity will continue to be hanging around in the front end."

JPM also says, "In aggregate, we project total money market supply to increase by $​655bn or ~​5%, driven predominately by repo and Treasury coupons that are rolling into the money markets.... In fact, we estimate T-​bill outstandings will decrease slightly by $​37bn to $​3.​57tn, which would put the share of T-​bills as a percentage of marketable Treasury debt in Treasury'​s recommended 15-​20% range. The good news is that there are ~$​380bn of Treasury coupons rolling into the money markets, which should give overall supply a marginal boost.... Likewise, we project net issuance in other parts of the money markets to be flat year-​over-​year. Our Agency strategists project total net disco issuance to be flat as FNMA and FHLMC continue to shrink their retained portfolios offset by marginal needs from FHLB to fund a minor rise in advances."

They state, "We look for financial CP/​CD outstandings to rise moderately by $​36bn as an increased demand for loans on the back of a recovering economy and the desire to boost trading activity, particularly among foreign banks, increase issuance.... In non-​financial CP, we estimate balances will decline by about $​30bn.... As for ABCP, we look for ABCP balances to be flat in 2022.... Perhaps the only real bright spot in money market supply is repo. In 2022, we think fundamentals favor growth in this sector, with balances rising by $​200bn.... Overall, to the degree that dealers have capacity to expand their balance sheets, this will likely translate to higher repo balances among dealers and levered investors."

JPM summarizes, "For many short duration investors, the timing of liftoff and the pace of rate hikes will figure prominently in their asset allocation considerations next year. As the Fed initiates liftoff, short-​term interest rates -- that is, the benchmarks on which floating rate notes (​FRNs) are based—​will begin to rise. As they do, the relative performance between front-​end fixed and floating rate note securities will begin to shift, so it'​s worth understanding which asset class offers better value."

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This month, BFI interviews Steve Kane, co-​CIO and generalist portfolio manager at TCW Investment Management. We discuss the new ESG Securitized Bond Fund, TCW and MetWest'​s broader bond fund lineup, and the manager'​s latest observations. Our Q&​A follows. (Note: The following is reprinted from the November issue of our Bond Fund Intelligence, which was published on Nov. 15. Contact us at info@​cranedata.​com to request the full issue or to subscribe. Also, mark your calendars for our next Bond Fund Symposium, which will take place March 28-​29, 2022, in Newport Beach, Calif.)

BFI: Give us a little history. Kane: The fixed income team here at TCW, the core of it at least, originally came from Metropolitan West Asset Management. MetWest was founded by me and a few other PMs, including Tad Rivelle and Laird Landmann.... The three of us began our careers together at PIMCO back in the early 1990s…. MetWest focused initially on core, core plus and traditional multi-​sector fixed-​income strategies. We then built our team and came over to TCW through an acquisition in 2009. Since that point, we'​ve been heading up the TCW fixed income team.

TCW maintains mutual funds under the TCW and MetWest names, but for fixed income it'​s been the same team from 2009 forward. We'​ve grown the assets to about $​240 billion, and we have a team of 75 investment professionals. We have 4 generalist portfolio managers overseeing the investing activity and focusing on macro elements of strategy across portfolios -- duration and yield curve and broad sector exposure. Then the balance of the team, 71 people, are divided into sector teams.... There are the traditional fixed-​income sectors: corporate credit, securitized credit, government and the rates team, and emerging markets.

Like many of our peers, we use a combination of top-​down and bottom-​up strategies to attempt to add value and beat our objectives and indices. But where we are a little bit different is the emphasis on bottoms-​up relative to the top-​down. So, we'​re more disciplined and relatively risk controlled on the macro part of what we do, and we are much more opportunistic, bottom-​up, research-​driven on the security selection and sector rotation parts of what we do. That has historically resulted in the predominance of our outperformance.

BFI: Talk about the ESG Securitized Fund. Kane: In terms of fixed income, this is our first ESG-​labeled and ESG-​focused fund.... It'​s not only novel for us, [​but] we think it is somewhat novel in the marketplace today, being an ESG securitized fund.... ESG investing evolved initially in the equity markets, [​and it'​s] also begun to influence corporate bond investing. There'​s been green bonds.... But in the securitized area, it'​s less developed. There'​s not funds out there, and it'​s a new area of the fixed income market.

We think this fund provides a unique opportunity for investors to access this part of the market. The way we'​re doing it is by, in effect, investing in three segments of the securitized ESG market. One is ... the labeled ESG market, or bonds that are labeled and officially recognized by official organizations as green.... That'​s a very small segment of the market and our fund.

The other area we'​re investing in, which is a significant part of what we'​re doing, is the non-​labeled ESG themed debt. These are areas of the securitized market TCW identifies as ESG in some way, [​like] commercial mortgage-​backed securities backed by properties that are LEED certified, asset-​backed securities backed by solar [​and] agency mortgage-​backed securities.

BFI: Tell us about your other funds. Kane: We have the $​87 billion MetWest Total Return Bond Fund. This has a long history going back to 1997, and it fits within the core-​plus bond fund universe, seeking to outperform the Barclays Aggregate Bond Index.... That is our bread and butter, so to speak, meaning that it uses all of our expertise and all of the sectors, as well as the macro positioning in terms of interest rates/​duration, yield curve sector exposure, issue selection. That is a strategy that is long-​tenured ... and the core of many investors' portfolios. It includes mostly investment grade, but some high yield and some emerging market securities.

The MetWest Low Duration Fund is, just as the name describes, a short-​term bond fund managed to a one-​to-​three-​year Treasury index. So that has a duration of just about two [​years]. And it again is primarily about 90%, 90+% investment grade. Today, it'​s even higher than that. But it'​s usually 90+% investment grade, focused in on shorter-​term securities ... finding the best opportunities across the Treasury, corporate asset backed, mortgage-​backed securities markets, running a little bit more conservative ... than the MetWest Total Return Bond Fund.

Our interest rate positioning is more longer-​term oriented. What the Fed is likely to do factors into it, but not for a specific meeting ... rather over the course of quarters and years. So just to give you a flavor of what our thinking is, we'​re currently lined up with the market in terms of what the Fed is likely to do in the near term.... Where we differ from the market is ... out the curve.... We think ... inflation is likely to be running high for a period of time and that investors need to be compensated for higher interest rates from the Fed down the road.

We also have MetWest Unconstrained Bond Fund.... It'​s a go anywhere, do anything fund of sorts. It doesn’​t have a benchmark, and therefore has the flexibility to really move the duration around. It has some flexibility to own a lot of high yield if that'​s attractive, or emerging market if that'​s attractive. Today, we have that fund look very much like a low duration fund, meaning duration is short and credit risk is limited, given that yield spreads are relatively tight in the high yield market.... Even in a fund where we can take a lot of risk, we'​re choosing not to do so today.

BFI: What are you buying or not buying? Kane: A sector we don'​t like is corporate bonds, whether investment grade or high yield. The fundamentals are good ... but what we don'​t like is the pricing.... We just don'​t think there'​s a lot of value to high yield bonds.... We like agency and non-​agency mortgage-​backed securities [​and] the collateralized loan obligation, or CLO, market.... The summary would be we don'​t like corporate credit, but we do like securitized credit.

BFI: What'​s your biggest challenge? Kane: The issue is not supply, it'​s price. We'​re seeing a lot of supply, but we'​re seeing just as much demand, unfortunately.... The challenge is finding supply at the right price, and it'​s hard to do in the corporate market. We are seeing new issue opportunities in the securitized market that are still reasonably interesting. In part that'​s probably because it'​s a little bit more complex.

BFI: Talk about your customers. Kane: The majority are institutional. But our large Total Return Bond Fund also is on a lot of broker-​driven wealth platforms [​used by] financial advisors whose clients are retail.

BFI: What about ultra-​shorts? Kane: MetWest Ultra Short Bond Fund is very conservative ... meant to be in effect, a money market alternative. It doesn'​t qualify as a money market fund because it'​s buying instruments that are not '​2a-​7' eligible. But it is very short-​term focused, under a year in its average maturity, and ... high quality.... It owns very, very little high yield.... The fund owns mostly very short-​term floating rate agency mortgage-​backed securities, very short-​term investment grade corporate debt and very high-​quality triple-​A rated asset-​backed securities.

BFI: Tell us about your outlook. Kane: The positive for bond funds is there should continue to be high demand well into the future. We have an aging population, so you have a long-​term technical tailwind.... But given that the Fed'​s going to be tightening, and given that a lot of liquidity has already come into the bond market ... we don'​t see a lot of value.... We wouldn'​t be pounding the table today.... That'​s a bit of a near-​term headwind.... Of course, equities may be even more challenging [​going forward], so your [​minimal] return in your bond fund may be at the head of the class.

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The Federal Reserve Bank of New York'​s "​Liberty Street Economics" blog features an update entitled, "Preemptive Runs and the Offshore U.​S. Dollar Money Market Funds Industry." Authors Marco Cipriani and Gabriele La Spada tell us, "In March 2020, U.​S. dollar-​denominated prime money market funds (​MMFs) suffered heavy outflows as concerns about the COVID-​19 pandemic increased in the United States and Europe. Investors redeemed their shares en masse not only from funds domiciled in the United States ('​domestic') but also from offshore funds. In this post, we use differences in the regulatory regimes of domestic and offshore funds to identify the impact of the redemption gates and liquidity fees recently introduced as part of MMF industry reforms in both the United States and Europe."

They write, "Offshore USD MMFs are open-​end funds that invest in USD-​denominated money market instruments and are domiciled in the European Union, mostly in Ireland and Luxembourg. Like domestic funds, they can be divided into public debt funds, which invest in public debt securities and repurchase agreements backed by them (​just as domestic government funds can do), and prime funds, which can also invest in privately issued unsecured debt and asset-​backed commercial paper. Domestic and offshore USD MMFs invest in assets with similar credit and liquidity profiles. However, in contrast to domestic funds, which are sold to both retail and institutional investors, offshore USD MMFs cater almost exclusively to institutional investors."

The blog explains, "In 2017, the European Union adopted a reform of the MMF industry in response to the run on prime funds in September 2008. Following this reform, offshore prime MMFs can be divided into two main types based on how they price their shares: low volatility net asset value (​LVNAV) funds, which, similar to domestic retail prime funds, price their shares at amortized cost and offer their investors a stable net asset value (​NAV); and variable NAV (​VNAV) funds, which, similar to domestic institutional prime funds, operate with a floating NAV."

It continues, "Both the Securities and Exchange Commission (​SEC) reform of the domestic MMF industry in 2014 and the European reform of EU-​domiciled funds in 2017 allow prime funds to impose redemption gates or liquidity fees if the share of weekly liquid assets (​WLA) -- cash, Treasury securities, and other very liquid securities -- in the fund'​s portfolio falls below a given threshold. In the United States, all prime MMFs can impose fees or gates. In Europe, only LVNAV funds are allowed to do so; VNAV funds are not."

Cipriani and La Spada then discuss the role of gates and fees, saying, "Previous research has suggested that a system of gates and fees conditional on a fund'​s level of WLA may induce investors to run preemptively, ahead of the imposition of the redemption restrictions. The fact that, in contrast to the SEC MMF reform, the European reform created two types of prime funds -- one that is subject to gates and fees (​LVNAV) and one that is not (​VNAV) -- allows us to identify the role of WLA-​contingent gates and fees in generating preemptive runs."

The article then states, "If prime MMF investors run preemptively, one would expect LVNAV funds to suffer outflows similar to those of domestic prime funds, since they both operate under a regime of gates and fees. In contrast, if investors do not run preemptively, and runs are purely driven by liquidity or credit concerns, one would expect outflows from domestic institutional prime funds and from VNAV funds to be similar, since they both operate under a system of floating NAV, and outflows from LVNAV funds to be heavier, since offering a stable NAV exacerbates run dynamics."

It then says, "[O]​utflows from LVNAV funds were very similar to those of domestic institutional prime funds, suggesting that gates and fees likely played a role. In contrast, outflows from VNAV funds were much smaller. Indeed, regression analysis shows that, during the run period, daily outflows from VNAV funds were 1.​3 percentage points lower than those from domestic institutional prime funds, a cumulative difference of about 20 percentage points over the COVID-​19 run."

The blog post also says, "The results are surprising if one considers that, although LVNAV funds are required by regulation to hold larger liquidity buffers than VNAV funds, they nevertheless experienced heavier outflows. Moreover, although a floating NAV is supposed to mitigate run incentives, this does not seem to have happened: outflows from domestic institutional prime funds and offshore LVNAV funds were very similar, though the former operates under a floating NAV and the latter under a fixed NAV."

It adds, "If investors ran preemptively in order to avoid the imposition of gates and fees, it is reasonable to expect that outflows would be larger for those funds that had lower WLAs and therefore a higher likelihood of being subject to the imposition of gates and fees."

The posting studies "the relationship between daily percentage outflows from LVNAV funds and the funds' WLA level using regression analysis, allowing for the effect of WLA on outflows to be different during the run (​March 6-​26). The regression is estimated over the first three months of 2020. To avoid endogeneity, we take as a fund'​s WLA its average WLA during the fourth quarter of 2019. We find that lower WLA levels lead to relatively larger outflows during the March 2020 run: a reduction in the share of WLA in a fund'​s portfolio by 10 percentage points leads to an increase in the fund'​s daily outflows by 0.​6 percentage point, or an increase in cumulative outflows by roughly 10 percentage points, during the COVID-​19 run period."

It concludes, "We assess the impact of redemption gates and liquidity fees on the run behavior of MMF investors by looking at the experience of offshore USD prime MMFs during the COVID-​19 run. Investors exited funds in which redemption restrictions were more likely to be imposed, suggesting that they may have run preemptively."

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Crane Data is making plans for its fifth annual ultra-​short bond fund event, Bond Fund Symposium, which will take place March 28-​29, 2022 at the Hyatt Regency Newport Beach (​Calif.). Crane'​s Bond Fund Symposium offers a concentrated and affordable educational experience, as well as an excellent networking venue, for bond fund and fixed-​income professionals. After cancelling our 2020 Boston event and holding a virtual BFS last year, we look forward to seeing the "​cash-​plus" community in person again in 2022! Registrations are now being accepted ($​750) and sponsorship opportunities are available. We review the preliminary draft agenda and details below, and we also give an update on our upcoming "​basic training" show, Money Fund University, which will be held in Boston, January 20-​21, 2022.

Bond Fund Symposium'​s Day One (​3/​28) morning agenda includes: Welcome to Bond Fund Symposium 2022, with Peter Crane of Crane Data; Keynote: The Time Is Now For Ultra-​Shorts with Jerome Schneider of PIMCO; Bond Market Strategists: Rates & Risks with Michael Cloherty of UBS, Ira Jersey of Bloomberg Intelligence and Alex Roever of J.​P. Morgan Securities; and ETF & Near-​Cash ETF Trends, with Brian McMullen of Invesco and James Palmieri of State Street Global Advisors. (Note: The agenda is still a work in progress, so let us know if you'​re interested in speaking or have any requests.)

The Day One afternoon agenda includes: Senior Portfolio Manager Perspectives with Dave Martucci of J.​P. Morgan AM Dave Rothweiler of UBS Asset Management and Brett Davis of BlackRock; Ultra-​Short LGIPs & European USBFs with Peter Gargiulo of Fitch Ratings and Emelyne Uchiyama of S&​P Global; Major Issues in Fixed-​Income Investing featuring Logan Miller as moderator, Matthew Brill of Invesco, Morten Olsen of Northern Trust AM ; and, Money Funds & Conservative Ultra-​Shorts with Crane Data'​s Peter Crane and Kerry Pope of Fidelity Investments. Monday will close with a reception sponsored by Wells Fargo Securities.

Day Two'​s agenda includes: State of the Bond Fund Marketplace with Crane and Shelly Antoniewicz of the Investment Company Institute; Regulatory Update: Bond Fund Issues '​22 with Aaron Withrow of Dechert LLP and Jamie Gershkow of Stradley Ronon Stevens & Young; ESG Issues in the Bond Fund Space with Henry Shilling of Sustainable Research & Analysis ; Government & Muni Bond Fund Discussion with Sue Hill of Federated Hermes and Kristian Lind of Neuberger Berman.

Portfolio managers, analysts, investors, issuers, service providers, and anyone interested in expanding their knowledge of bond funds and fixed-​income investing will benefit from our comprehensive program. A block of rooms has been reserved at the Hyatt Regency. We'​d like to thank our past sponsors and exhibitors -- Wells Fargo Securities, Fitch Ratings, Fidelity Investments, J.​P. Morgan Asset Management, Wells Fargo Asset Management, S&​P Global Ratings, DTCC, StoneX, Invesco, BofA Securities, Northern Trust, Bloomberg Intelligence, Goldman Sachs, Federated, Payden & Rygel, PIMCO and Dechert -- for their support (​and we'​d love to get some new ones!). E-​mail us for more details.

Also, our 10th Annual Crane'​s Money Fund University will be held January 20-​21 at the Hyatt Regency Boston. Crane'​s Money Fund University covers the history of money funds, interest rates, regulations (​Rule 2a-​7), ratings, rankings, money market instruments such as commercial paper, CDs and repo, and portfolio construction and credit analysis. We also include segments on offshore money funds and ultra-​short bond funds.

Money Fund University'​s comprehensive program is good for anyone -- beginners and experienced professionals looking for a refresher -- alike. The agenda is available online and we are now accepting registrations. (​We'​re also willing to "​comp" tickets for large Crane Data or sponsor clients, so let us know if you'​re interested.)

Finally, mark your calendars for our big show, Crane'​s Money Fund Symposium, which will be held June 20-​22, 2022, at the Hyatt Regency Minneapolis. The preliminary agenda will be available next month, and we'​re starting to take registrations at: www.​moneyfundsymposium.​com. We'​ve also set the dates and location for our next European Money Fund Symposium. It is scheduled for Sept. 27-​28, 2022, in Paris, France. Let us know if you'​d like more details on any of our events, and we hope to see you in Boston, Newport Beach, Minneapolis or Paris in 2022!

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The Securities and Exchange Commission'​s latest monthly "Money Market Fund Statistics" summary shows that total money fund assets rose by $​7.​9 billion in October to $​5.​038 trillion. (Month-​to-​date in November, assets are up $​22.​4 billion through 11/​17, according to our MFI Daily.) The SEC shows that Prime MMFs declined by $​12.​0 billion in October to $​857.​8 billion, Govt & Treasury funds increased $​21.​0 billion to $​4.​084 trillion and Tax Exempt funds decreased $​1.​1 billion to $​96.​5 billion. Yields were flat or slightly higher in October. The SEC'​s Division of Investment Management summarizes monthly Form N-​MFP data and includes asset totals and averages for yields, liquidity levels, WAMs, WALs, holdings, and other money market fund trends. We review their latest numbers below.

October'​s asset increase follows gains of $​19.​9 billion in September and $​24.​9 billion in August, and decreases of $​39.​9 billion in July and $​86.​9 billion in June. Assets increased $​72.​4 billion in May, $​46.​3 billion in April, $​146.​1 billion in March, $​30.​5 billion in February and $​35.​4 billion in January. Over the 12 months through 10/​31/​21, total MMF assets have increased by $​249.​2 billion, or 5.​2%, according to the SEC'​s series. (​Note that the SEC'​s series includes a number of internal money funds not tracked by ICI, though Crane Data includes most of these assets in its collections.) The SEC'​s stats show that of the $​5.​038 trillion in assets, $​857.​8 billion was in Prime funds, down $​12.​1 billion in October. This follows an increase of $​2.​6 billion in September, declines of $​8.​1 billion in August, $​19.​4 billion in July, $​19.​9 billion in June and $​14.​6 billion in May, and increases of $​1.​3 billion in April and $​7.​2 billion in March. Prime funds represented 17.​0% of total assets at the end of October. They'​ve decreased by $​104.​2 billion, or -​10.​8%, over the past 12 months.

Government & Treasury funds totaled $​4.​084 trillion, or 81.​1% of assets. They increased by $​21.​0 billion in October, $​20.​4 billion in Sept. and $​32.​8 billion in August, but decreased $​18.​7 billion in July and $​67.​8 billion in June. Govt MMFs also increased $​90.​3 billion in May, $​48.​4 billion in April and $​140.​9 billion in March. Govt & Treasury MMFs are up $​376.​5 billion over 12 months, or 10.​2%. Tax Exempt Funds decreased $​1.​1 billion to $​96.​5 billion, or 1.​9% of all assets. The number of money funds was 314 in October, the same as the previous month but down 37 funds from a year earlier.

Yields for Taxable MMFs were flat or higher in October. The Weighted Average Gross 7-​Day Yield for Prime Institutional Funds on October 31 was 0.​09%, unchanged from the prior month. The Weighted Average Gross 7-​Day Yield for Prime Retail MMFs was 0.​15%, up 1 bps from the previous month. Gross yields were 0.​07% for Government Funds, unchanged from last month. Gross yields for Treasury Funds were also unchanged at 0.​06%. Gross Yields for Tax Exempt Institutional MMFs were up one basis points to 0.​07% in October. Gross Yields for Tax Exempt Retail funds were up two bps to 0.​10%.

The Weighted Average 7-​Day Net Yield for Prime Institutional MMFs was 0.​06%, unchanged from the previous month but down 5 basis points from 12/​31/​20. The Average Net Yield for Prime Retail Funds was 0.​02%, unchanged from the previous month, and down a basis point since 12/​31/​20. Net yields were 0.​02% for Government Funds, unchanged from last month. Net yields for Treasury Funds were also unchanged from the previous month at 0.​01%. Net Yields for Tax Exempt Institutional MMFs were up one bps from September at 0.​03%. Net Yields for Tax Exempt Retail funds were unchanged at 0.​01% in October. (​Note: These averages are asset-​weighted.)

WALs and WAMs were mostly higher in October. The average Weighted Average Life, or WAL, was 54.​0 days (​up 3.​7 days) for Prime Institutional funds, and 60.​0 days for Prime Retail funds (​up 7.​4 days). Government fund WALs averaged 80.​1 days (​up 4.​3 days) while Treasury fund WALs averaged 87.​7 days (​down 1.​3 days). Tax Exempt Institutional fund WALs were 15.​3 days (​down 1.​3 days from the previous month), and Tax Exempt Retail MMF WALs averaged 27.​0 days (​up 0.​3 days).

The Weighted Average Maturity, or WAM, was 37.​8 days (​up 4.​2 days from the previous month) for Prime Institutional funds, 50.​6 days (​up 8.​1 days from the previous month) for Prime Retail funds, 34.​6 days (​up 4.​1 days) for Government funds, and 39.​0 days (​down 0.​7 days) for Treasury funds. Tax Exempt Inst WAMs were down 1.​1 days to 15.​1 days, while Tax Exempt Retail WAMs increased 0.​2 days to 26.​3 days.

Total Daily Liquid Assets for Prime Institutional funds were 50.​6% in October (​down 3.​6% from the previous month), and DLA for Prime Retail funds was 25.​7% (​down 9.​6% from previous month) as a percent of total assets. The average DLA was 75.​8% for Govt MMFs and 96.​4% for Treasury MMFs. Total Weekly Liquid Assets was 63.​6% (​up 0.​4% from the previous month) for Prime Institutional MMFs, and 43.​3% (​down 5.​2% from the previous month) for Prime Retail funds. Average WLA was 86.​5% for Govt MMFs and 98.​7% for Treasury MMFs.

In the SEC'​s "Prime Holdings of Bank-​Related Securities by Country table for Oct. 2021," the largest entries included: Canada with $​94.​0 billion, France with $​80.​6 billion, Japan with $​71.​6 billion, the U.​S. with $​47.​3B, Germany with $​36.​4B, the Netherlands with $​33.​5B, the U.​K. with $​27.​0B, Aust/​NZ with $​26.​9B and Switzerland with $​8.​0B. The gainers among the "Prime MMF Holdings by Country" were: France (​up $​15.​2 billion), Japan (​up $​4.​9B), Germany (​up $​4.​0B), the U.​S. (​up $​2.​1B), Aust/​NZ (​up $​0.​9B) and Switzerland (​up $​0.​4B). Decreases were shown by: Canada (​down $​2.​9B), the Netherlands (​down $​2.​7B) and the U.​K. (​down $​0.​9).

The SEC'​s "Prime Holdings of Bank-​Related Securities by Region" table shows the Eurozone subset had $​168.​9B (​up $​25.​9B), while Europe (​non-​Eurozone) had $​78.​6B (​up $​4.​1B from last month). The Americas had $​141.​4 billion (​down $​0.​7B), while Asia Pacific had $​116.​3B (​up $​10.​1B).

The "​Prime MMF Aggregate Product Exposures" chart shows that of the $​857.​2B billion in Prime MMF Portfolios as of Oct. 31, $​298.​3B (​34.​8%) was in Government & Treasury securities (​direct and repo) (​down from $​355.​8B), $​223.​0B (​26.​0%) was in CDs and Time Deposits (​up from $​179.​9B), $​175.​7B (​20.​5%) was in Financial Company CP (​up from $​172.​6B), $​123.​8B (​14.​4%) was held in Non-​Financial CP and Other securities (​up from $​119.​4B), and $​36.​4B (​4.​2%) was in ABCP (​up from $​35.​9B).

The SEC'​s "Government and Treasury Funds Bank Repo Counterparties by Country" table shows the U.​S. with $​133.​3 billion, Canada with $​138.​7 billion, France with $​158.​8 billion, the U.​K. with $​47.​1 billion, Germany with $​21.​4 billion, Japan with $​124.​2 billion and Other with $​27.​2 billion. All MMF Repo with the Federal Reserve was down $​93.​2 billion in October to $​1.​346 trillion.

Finally, a "Percent of Securities with Greater than 179 Days to Maturity" table shows Prime Inst MMFs 7.​7%, Prime Retail MMFs with 7.​5%, Tax Exempt Inst MMFs with 2.​1%, Tax Exempt Retail MMFs with 5.​0%, Govt MMFs with 14.​3% and Treasury MMFs with 15.​1%.

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The U.​S. Treasury'​s Office of Financial Research published its "OFR 2021 Annual Report to Congress" Wednesday, which analyzes threats to the financial stability of the U.​S. and contains several sections relating to money market funds. Under "Assessing Risks Inside the Markets," the OFR writes, "With respect to the financial markets themselves, vulnerabilities pose potential liquidity risks. While liquidity risks were contained this year at the printing of this report, the OFR continues to study the uncertainty surrounding the impact of future investor runs in short-​term funding markets. Sudden pressure on money market funds and other alternative cash vehicles to raise large amounts of cash strained liquidity in these markets in 2020 and prompted intervention by the Federal Reserve. As regulators explore reform options, there is a continuing need to monitor the interconnectedness of these markets and their participants."

They tell us, "To increase the transparency of financial data, the OFR in 2021 updated its U.​S. Money Market Fund (​MMF) Monitor to show both the principal amount of repurchase agreement (​repo) transactions and the collateral pledged against these loans. The Short-​term Funding Monitor was also upgraded to shed more light on the repo markets and to include a new collateral product that the Fixed Income Clearing Corporation (​FICC) rolled out in September."

The OFR comments on "Stable Coins," "It bears emphasizing that run-​like events could occur even for stablecoins fully backed by assets. A stablecoin that is 100% backed by short-​term, liquid assets denominated in U.​S. dollars is similar to a money market mutual fund in that it aims to meet the liquidity needs of holders while maintaining a value at or very close to par. In September 2008, and again in March 2020, some money market mutual funds experienced runs by their investors that ended only after the U.​S. Treasury and the Federal Reserve intervened. Under the right set of conditions, stablecoins could face similar runs."

They explain, "​This comparison also highlights that the precise assets held by a stablecoin arrangement may prove important in determining its ability to weather financial stress. There were no runs on government money market mutual funds, which hold only obligations of the U.​S. government and government-​sponsored enterprises, in either 2008 or 2020. However, runs did occur on prime funds even though these funds only hold short-​term obligations of highly rated corporations. A lack of transparency about the assets backing existing stablecoin arrangements is worrisome in this regard. In February 2021, Tether reached an agreement with the New York State Attorney General'​s office that included a fine of $​18.​5 million to settle charges that it made false statements about the assets backing its coins."

"What are the risks if things go wrong?" OFR'​s report comments, "The modern financial market has become far more complex. The flow of monies from borrowers to lenders occurs through a variety of financial instruments that span the various timeframes and risk tolerances. These instruments range from loans, stocks, and bonds to commercial paper and money market fund shares, providing capital to businesses to expand operations and to consumers to purchase homes, goods, and services. In the modern U.​S. financial system, banks are not the sole intermediaries. Increasingly, the financial system is reliant on nonbank financial institutions to transfer money through financial markets. This is known as 'market-​based finance.'"

It states, "The repo market has become an increasingly critical link among financial intermediaries and provides an important example of market-​based finance.... In the repo market, financial institutions lend or borrow cash using securities as collateral. Funds invested with money market funds or other asset managers are transferred to cash borrowers such as hedge funds and foreign banks through intermediaries. The cash borrowers then use these funds to purchase securities issued by the Treasury, U.​S. government agencies, or corporations. The daily volume of transactions in the repo market exceed $​2 trillion. Data from OFR'​s cleared repo collection shows that most of these transactions occur within a tight window between 7:​30 and 8:​30 a.​m. Eastern time."

OFR continues, "​When the repo market is working well, large amounts of cash flow quickly and safely among varying types of institutions, meeting the needs of borrowers and lenders. However, since market-​based finance directs cash through multiple layers of intermediation, through asset managers to dealers and large banks and finally to hedge funds and other cash borrowers, there are several ways the system can break down."

On page 60, the report says, "Market turmoil in March 2020 once again highlighted vulnerabilities with open-​ended funds, in particular, prime money market funds. During this time, investors withdrew substantial amounts from these funds as they redeemed their shares for cash. Subsequent flows back into prime money market funds, combined with renewed risk-​taking and the continued mismatch in liquidity of shares relative to the underlying assets, potentially increase risks to financial stability."

It continues, "Through August 2021, excluding reorganized and liquidated funds, assets in prime money market funds were up 3.​2% since March 2020. At the same time, the share of commercial paper and deposits included in underlying assets are near pre-​pandemic levels, while the share of U.​S. Treasury debt and certain government securities are at or near pre-​pandemic levels."

OFR writes, "Investors use money market funds as a cash-​management tool because they promise safety and liquidity, regardless of the value and liquidity of the underlying assets. An imbalance between the value and liquidity of a fund and its underlying assets can create a first-​mover advantage for investors and precipitate a run. Runs, in turn, can depress asset prices. Stresses on money market funds and the broader money markets in March 2020 led to increased redemptions and, in turn, stressed the short-​term funding markets. Over a two-​week period from March 11 to March 24, net redemptions at publicly offered prime institutional money market funds amounted to roughly $​100 billion, or 30% of assets."

They add, "Flows out of retail prime money market funds and tax-​exempt funds were lower than outflows from institutional prime funds. Similar to actions taken during the 2008 financial crisis, the Federal Reserve stepped in to support money markets through its Money Market Mutual Fund Liquidity Facility, slowing redemptions and easing stress in the funding markets. Fund sponsors also provided support."

The Annual Report explains, "Money market funds are a key provider of short-​term funding.... They held over $​4.​9 trillion in assets at the end of September 2021. The U.​S. government and the Federal Home Loan Banks (​FHLBs) are the largest recipients of funding from government and Treasury funds. Banks, particularly foreign-​owned banks, are the largest recipients of funding from prime money market funds. The sudden investor withdrawals from prime funds in March 2020 reduced the availability of short-​term funding for foreign banks, prompting the Federal Reserve to ease pressure through a central bank swap credit facility."

It also says, "The SEC'​s 2010 and 2014 regulatory reforms boosted the liquidity of MMFs, but they did not completely eliminate the risk of investor runs. The reforms also tightened the quality of assets held by money market funds, allowed for gates and fees on redemptions in certain circumstances, and required prime institutional funds to float their net asset values. Despite these reforms, prime institutional money market funds had outflows of 30% in aggregate during March 2020. It is possible these funds would have experienced further stress without government support."

The OFR adds, "The SEC is currently evaluating several reform options identified by the President'​s Working Group on Financial Markets to make money market funds more resilient under stress. They include changes to the fund structure that reduce losses for remaining investors, new liquidity risk tools that deter runs, and a new regulatory framework governing sponsor support. A combination of the proposals may mitigate the knock-​on effects of risks posed by money market funds but is unlikely to eliminate liquidity risk in the underlying short-​term wholesale funding markets for a couple of reasons."

Finally, they write, "One reason is that other investment funds also experienced heavy outflows contributing to the stress in the funding markets in March 2020. These included dollar-​denominated off shore prime funds, some private liquidity funds, and ultra-​short corporate bond mutual funds. These funds serve a similar purpose as money market funds but are subject to varying degrees of regulatory oversight and portfolio transparency. Arguably, investors in these products have the same incentive to run when markets are under severe stress. SEC Form PF data have also showed a dash for cash in private liquidity funds, with aggregate commercial paper and deposit holdings declining 34% and 23%, respectively.... Last year'​s financial stress precipitated widespread runs in similar cash management products with floating net asset values (​NAVs), such as dollar-​denominated offshore prime funds, local government investment pools, and ultra-​short corporate bond mutual funds." (​The OFR report also lists the PWG Proposals for MMF Reform.)

​

Money market fund managers continue to launch "​D&​I" share classes, the latest trend in the ESG money fund space, according to a recent trio of announcements. The most recent moves comes from SSGA, which announced new "Opportunity" share classes, and BlackRock, which went live with its new Bancroft and Cabrera classes. The first press release, entitled, "State Street Global Advisors Introduces I&​D Focused Share Class within Cash Management Suite," tells us, "State Street Global Advisors, the asset management business of State Street Corporation (​STT), announced the launch of a new money market fund share class, the Opportunity Class, which will benefit philanthropic organizations whose values align with State Street'​s commitment to racial equity and social justice. With the launch of the new Opportunity Class shares within State Street Global Advisors' existing money market fund suite, the firm is answering the call from clients who are increasingly interested in supporting I&​D initiatives with their strategic cash investments."

Kim Hochfeld, SSGA'​s Global Head of Cash, comments, "​As one of the world'​s largest fiduciary managers who is deeply committed to ESG-​focused asset stewardship, we see it as our responsibility to offer our clients an opportunity to have a positive impact within their cash investment strategy.... Our clients are more interested than ever in a holistic, action-​oriented approach to inclusion and diversity initiatives."

The release explains, "The State Street money market funds' investment adviser, SSGA Funds Management, Inc., will donate out of its own assets at least 20% of its annual net management fee received from assets invested in the Opportunity Class shares to charitable organizations that align with State Street'​s 10 Actions Addressing Racism and Inequality. Leveraging the grantmaking guidelines and methodology of State Street Foundation, State Street'​s charitable arm, State Street Global Advisors identifies recipient philanthropic organizations to support."

State Street Foundation President Joe McGrail adds, "The State Street Foundation is pleased to partner with the cash business in identifying recipient organizations whose focus aligns with the objectives of the Opportunity Class shares.... The State Street Foundation seeks to bring communities lasting economic benefits, with primary strategic focus areas of education and workforce development. Our grantmaking guidelines explicitly incorporate racial equity and social justice criteria, including diversity across dimensions of population served, organizational leadership, staff, and board of directors."

SSGA money funds that will offer Opportunity Class shares include: State Street Institutional U.​S. Government Money Market Fund (​OPGXX), State Street Institutional Treasury Plus Money Market Fund (​OPTXX), State Street Institutional Treasury Money Market Fund (​OPRXX), State Street Institutional Liquid Reserves Fund (​OPIXX) and State Street ESG Liquid Reserves Fund (​OPEXX).

Another release, "Bancroft Capital Announces New Share Classes of BlackRock Money Market Funds," states, "Bancroft Capital (​a certified Service-​Disabled Veteran Broker Dealer) is pleased to announce the launch of new dedicated share classes of certain BlackRock money market funds exclusively for clients of Bancroft Capital and its affiliates. Starting on Veterans' Day 2021, dedicated share classes will be offered in BlackRock'​s Liquid Federal Trust Fund ... and BlackRock'​s Liquid Environmentally Aware Fund (​LEAF).... These offerings will help bring sustainable investment principles to our institutional clients to help meet their cash & liquidity needs while seeking to create more positive social outcomes for our nation'​s diverse youth. This partnership will merge the powers of BlackRock'​s cash management expertise with Bancroft'​s commitment to serving clients, our country, and our veterans who have sacrificed on our behalf."

CEO Cauldon Quinn comments, "Bancroft Capital is proud to partner with BlackRock, the world'​s largest asset manager, in the creation of the Bancroft suite of money market funds. The credibility of this partnership and quality of the strategies we are providing to clients will allow us to grow our current cash and investment offering as we set the standard for excellence in this arena."

BlackRock Cash Management Head Tom Callahan adds, "BlackRock'​s and Bancroft'​s shared success amplifies our ability to drive positive social and environmental outcomes through cash management solutions.... We are honored to have been able to contribute to the business growth of diverse, women-​owned and veteran owned broker-​dealers for the past decade -- and even prouder to work in partnership with Bancroft to provide this expanded suite of unique liquidity strategies to our mutual clients."

Finally, a third release, "Cabrera Capital Markets and BlackRock Partner to Announce Dedicated Cash Management Share Classes," says, "Cabrera Capital Markets ('​CCM') announced today three new Cabrera Capital Markets Share Classes on money market funds offered by BlackRock Global Cash Management, expanding our cash management solutions offerings for our institutional clients. The share classes, backed by BlackRock'​s leading cash management platform, are BlackRock Liquid Federal Trust Fund (​CCMXX), BlackRock Liquid Environmentally Aware Fund (​CCLXX) and TempFund (​CCPXX).... Through this partnership, Cabrera'​s institutional clients now have access to expanded offerings of cash management solutions which emphasize environmental considerations (​through the BlackRock Liquid Environmentally Aware Fund) and positive social outcomes through education (​through the BlackRock Liquid Federal Trust Fund), all while seeking to conserve principal and liquidity."

Callahan states in this release, "BlackRock has long-​standing relationships with diverse, women-​owned and veteran-​owned broker-​dealers, and we'​re proud to have been able to contribute to the business growth of this community over the past ten years.... Now, both Cabrera Capital Markets and BlackRock will be working side by side to drive positive outcomes through the distribution of our unique fund suite, while providing world class liquidity solutions for our mutual clients."

The release adds, "The Cabrera Capital Markets Share Classes bring together the sustainable investment principles and cash solutions expertise of BlackRock coupled with the opportunity to invest with a certified minority-​owned business (​MBE) with deep history such as Cabrera."

Martin Cabrera, CEO & Founder, states, "This partnership with BlackRock serves to expand the long relationship of our firms with each other and grow into the cash solutions space together.... As a result, our clients will benefit with access to cash solutions that balance ESG considerations, impact through investment in a minority-​owned firm and the scale and expertise of BlackRock'​s cash management business."

Crane Data currently tracks 26 Social, ESG, Minority or Veteran-​affiliated MMFs with $​71.​1 billion (​as of 10/​31/​21), representing 1.​5% of the total $​4.​89 trillion in taxable MMFs. Social or "​Impact" MMFs (​all Govt MMFs) total $​27.​5 billion and include: Dreyfus Govt Sec Cash Instit (​DIPXX, $​4.​3B), Federated Hermes Govt Ob Tax-​M IS (​GOTXX, $​7.​0B), Goldman Sachs FS Fed Instr Inst (​FIRXX, $​2.​9B) and Morgan Stanley Inst Liq Govt Sec Inst (​MUIXX, $​17.​6B). ESG MMFs (​All Prime) total $​9.​0B and include: BlackRock LEAF Direct (​LEDXX, $​1.​1B), BlackRock Wealth LEAF Inv (​PINXX, $​1.​5B), DWS ESG Liquidity Inst (​ESGXX, $​619M), Morgan Stanley Inst Liq ESG MMP I (​MPUXX, $​3.​6B), State Street ESG Liq Res Prem (​ELRXX, $​1.​4B) and UBS Select ESG Prime Inst Fund (​SGIXX, $​783M).

Social and Veteran-​Affiliated MMF Share Classes (​Prime and Govt) total $​34.​7B and include: BlackRock Lq FedFund Mischler (​HUAXX, $​1.​6B), Goldman Sachs FS Govt Drexel Hamilton (​VETXX, $​4.​8B), Goldman Sachs FS Prm Ob Drexel Hamilton (​VTNXX, $​31M), Invesco Govt & Agency Cavu (​CVGXX, $​3.​7B), Invesco Liquid Assets Cavu (​CVPXX, $​1M), Invesco Treasury Cavu (​CVTXX, $​1.​1B), JPMorgan 100% US Trs MM Academy (​JACXX, $​119M), JPMorgan Prime MM Academy (​JPAXX, $​921M), JPMorgan Prime MM Empower (​EJPXX, $​15M), JPMorgan US Govt MM Academy (​JGAXX, $​6.​7B), JPMorgan US Govt MM Empower (​EJGXX, $​3.​3B), JPMorgan US Trs Plus MM Academy (​JPCXX, $​1M), JPMorgan US Trs Plus MM Empower (​EJUXX, $​140M), Morgan Stanley Inst Liq ESG MMP CastleOak (​OAKXX, $​255M), Morgan Stanley Inst Liq Govt CastleOak (​COSXX, $​372M) and Northern Instit Govt Select SWS (​WCGXX, $​11.​6B). (​Some other funds are pending, including: HSBC ESG Prime and Goldman'​s Loop Capital shares.)

For more on ESG and "​Social" MMFs, see these Crane Data News pieces: "More D&​I: State Street Files for Blaylock Van Shares; WSJ Hits Tether" (​10/​27/​21); "BlackRock Expands ESG Lineup; Files for New Bancroft, Cabrera Shares" (​8/​19/​21); "Northern Renames Diversity Shares Siebert Williams; Safened Platform" (​4/​20/​21); "Morgan Stanley Files for CastleOak Shares; Bond Fund Symposium Today" (​3/​25/​21); "JP Morgan Launches "​Empower" Share Class to Support Minority Banks" (​2/​24/​21); "Invesco Files for Cavu Secs Class" (​12/​18/​20); "ESG and Social MMF Update: Mischler News, Green Deposits, Reg Debate" (​12/​4/​20); "Goldman Launches Social Class; Tiedemann Adds FICA; CS Green ABCP" (​1/​24/​20); "Mischler Financial Joins "​Impact" or Social Money Market Investing Wave" (​12/​5/​19); and "Dreyfus Launches "​Impact" or Diversity Government Money Market Fund" (​11/​21/​19). Click here to see the Federal Home Loan Bank Office of Finance'​s list of D&​I or diversity and inclusion, dealers.

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The SEC recently released its quarterly "Private Funds Statistics" report, which summarizes Form PF reporting and includes some data on "Liquidity Funds," or pools which are similar to but not money market funds. The publication shows overall Liquidity fund assets were lower in the latest reported quarter (​Q1'​21) to $​296 billion (​down from $​313 billion in Q4'​20 but up from $​291 billion in Q1'​20). The SEC'​s "Introduction" tells us, "This report provides a summary of recent private fund industry statistics and trends, reflecting data collected through Form PF and Form ADV filings. Form PF information provided in this report is aggregated, rounded, and/​or masked to avoid potential disclosure of proprietary information of individual Form PF filers. This report reflects data from Second Calendar Quarter 2019 through First Calendar Quarter 2021 as reported by Form PF fi​lers." (Note: Crane Data believes the largest portion of these liquidity fund assets are securities lending reinvestment pools, and note too that we'​d been adding the SEC'​s Liquidity Fund and Section 3 Liquidity Fund totals in past quarters, but we recently learned that the latter is a subset of the former and not a separate group.)

The tables in the SEC'​s "Private Funds Statistics: First Calendar Quarter 2021," with the most recent data available, show 72 Liquidity Funds (​most of which are "Section 3 Liquidity Funds," which are Liquidity Funds from advisers with over $​1 billion total in cash), up 1 from last quarter and up 9 from a year ago. (​There are 53 Section 3 Liquidity Funds out of the 72 Liquidity Funds.) The SEC receives Form PF reports from 36 Liquidity Fund advisers, 23 of which are Section 3 Liquidity Fund advisers, the same number as last quarter (​up one from a year ago).

The SEC'​s table on "​Aggregate Private Fund Net Asset Value" shows total Liquidity Fund assets at $​296 billion, down $​17 billion from Q4'​20 but up $​5 billion from a year ago (​Q1'​20). Of this total, $​293 billion is in Section 3 (​large manager) Liquidity Funds. The SEC'​s table on "​Aggregate Private Fund Gross Asset Value" shows total Liquidity Fund assets at $​306 billion, down $​12 billion from Q4'​20 but up $​11 billion from a year ago (​Q1'​20). Of this total, $​304 billion in is Section 3 (​large manager) Liquidity Funds.

A table on "Beneficial Ownership for Section 3 Liquidity Funds" shows $​80 billion is held by Other (​27.​3%), $​72 billion is held by Unknown Non-​U.​S. Investors (​24.​5%), $​54 billion is held by Private Funds (​18.​5%), $​24 billion is held by SEC-​Registered Investment Companies (​8.​1%), $​7 billion in held by Pension Plans (​2.​4%), $​9 billion is held by Insurance Companies (​3.​1%), $​2 billion is held by Non-​Profits (​0.​8%) and $​1 billion is held by State/​Muni Govt. Pension Plans (​0.​2%).

The tables also show that 71.​4% of Section 3 Liquidity Funds have a liquidation period of one day, $​271 billion of these funds may suspend redemptions, and $​247 billion of these funds may have gates. WAMs average a short 31 days (​45 days when weighted by assets), WALs are 48 days (​59 days when asset-​weighted), and 7-​Day Gross Yields average 0.​20% (​0.​10% asset-​weighted). Daily Liquid Assets average about 46% (​40% asset-​weighted) while Weekly Liquid Assets average about 60% (​59% asset-​weighted). Overall, these portfolios appear shorter with a heavier Treasury exposure than money market funds in general; almost half of them (​43.​4%) are fully compliant with Rule 2a-​7. When calculating NAVs, 75.​5% are "Stable" and 24.​5% are "Floating."

In other news, Crane Data'​s latest MFI International shows that assets in European or "​offshore" money market mutual funds jumped over the past month to $​1.​058 trillion, following three months in a row of asset declines. These U.​S.-​style money funds, domiciled in Ireland or Luxembourg but denominated in US Dollars, Pound Sterling and Euros, increased by $​51.​8 billion over the 30 days through 11/​14. They'​re down $​0.​9 billion (-​0.​1%) year-​to-​date. Offshore US Dollar money funds are up $​17.​0 billion over the last 30 days and are up $​6.​6 billion YTD to $​542.​3 billion. Euro funds are up E14.​0 billion over the past month, but YTD they'​re down E3.​8 billion to E153.​5 billion. GBP money funds jumped L13.​2 billion over 30 days, but are down by L14.​3 billion YTD to L242.​3B. U.​S. Dollar (​USD) money funds (​192) account for half (​51.​2%) of the "​European" money fund total, while Euro (​EUR) money funds (​94) make up 17.​1% and Pound Sterling (​GBP) funds 122) total 31.​7%. We summarize our latest "​offshore" money fund statistics and our Money Fund Intelligence International Portfolio Holdings (​which went out to subscribers Monday), below.

Offshore USD MMFs yield 0.​02% (​7-​Day) on average (​as of 11/​14/​21), down from 0.​05% on 12/​31/​20, 1.​59% on 12/​31/​19 and 2.​29% on 12/​31/​18. EUR MMFs yield -​0.​67% on average, compared to -​0.​71% at year-​end 2020, -​0.​59% at year-​end 2019 and -​0.​49% at year-​end 2018. Meanwhile, GBP MMFs yielded 0.​01%, up from 0.​00% on 12/​31/​20, down from 0.​64% on 12/​31/​19 and 0.​64% on 12/​31/​18. (​See our latest MFI International for more on the "​offshore" money fund marketplace. Note that these funds are only available to qualified, non-​U.​S. investors.)

Crane'​s November MFII Portfolio Holdings, with data as of 10/​31/​21, show that European-​domiciled US Dollar MMFs, on average, consist of 24% in Commercial Paper (​CP), 15% in Certificates of Deposit (​CDs), 13% in Repo, 30% in Treasury securities, 17% in Other securities (​primarily Time Deposits) and 1% in Government Agency securities. USD funds have on average 36.​3% of their portfolios maturing Overnight, 10.​2% maturing in 2-​7 Days, 12.​0% maturing in 8-​30 Days, 11.​4% maturing in 31-​60 Days, 10.​0% maturing in 61-​90 Days, 14.​4% maturing in 91-​180 Days and 5.​8% maturing beyond 181 Days. USD holdings are affiliated with the following countries: the US (​38.​3%), France (​13.​3%), Canada (​8.​2%), Japan (​7.​7%), Sweden (​5.​6%), Germany (​4.​3%), the Netherlands (​3.​8%), Australia (​3.​2%), the U.​K. (​2.​7%) and Norway (​2.​1%).

The 10 Largest Issuers to "​offshore" USD money funds include: the US Treasury with $​168.​2 billion (​30.​0% of total assets), Credit Agricole with $​17.​2B (​3.​1%), BNP Paribas with $​16.​4B (​2.​9%), Federal Reserve Bank of New York with $​13.​7B (​2.​4%), Skandinaviska Enskilda Banken AB with $​13.​2B (​2.​4%), Mizuho Corporate Bank Ltd with $​12.​3B (​2.​2%), Societe Generale with $​11.​8B (​2.​1%), RBC with $​11.​2B (​2.​0%), DNB ASA with $​11.​1B (​2.​0%) and Barclays PLC with $​9.​7B (​1.​7%).

Euro MMFs tracked by Crane Data contain, on average 35% in CP, 20% in CDs, 28% in Other (​primarily Time Deposits), 12% in Repo, 5% in Treasuries and 0% in Agency securities. EUR funds have on average 32.​0% of their portfolios maturing Overnight, 12.​8% maturing in 2-​7 Days, 14.​6% maturing in 8-​30 Days, 6.​3% maturing in 31-​60 Days, 15.​1% maturing in 61-​90 Days, 16.​2% maturing in 91-​180 Days and 3.​0% maturing beyond 181 Days. EUR MMF holdings are affiliated with the following countries: France (​36.​0%), Japan (​11.​9%), the U.​S. (​10.​6%), Sweden (​6.​8%), Germany (​5.​6%), Switzerland (​5.​4%), Belgium (​3.​7%), Supranational (​3.​5%), the U.​K. (​3.​2%) and Canada (​2.​7%).

The 10 Largest Issuers to "​offshore" EUR money funds include: Credit Agricole with E10.​4B (​7.​3%), BPCE SA with E7.​5 (​5.​3%), BNP Paribas with E7.​5B (​5.​3%), Societe Generale with E6.​5B (​4.​6%), Republic of France with E5.​5B (​3.​9%), Mizuho Corporate Bank with E5.​1B (​3.​6%), Zü​rcher Kantonalbank with E4.​7B (​3.​3%), Citi with E4.​6B (​3.​2%), Nordea Bank with E4.​2B (​3.​0%) and KBC Group NV with E4.​1B (​2.​9%).

The GBP funds tracked by MFI International contain, on average (​as of 10/​31/​21): 35% in CDs, 19% in CP, 27% in Other (​Time Deposits), 15% in Repo, 4% in Treasury and 0% in Agency. Sterling funds have on average 36.​1% of their portfolios maturing Overnight, 10.​4% maturing in 2-​7 Days, 11.​2% maturing in 8-​30 Days, 5.​7% maturing in 31-​60 Days, 13.​7% maturing in 61-​90 Days, 17.​7% maturing in 91-​180 Days and 5.​1% maturing beyond 181 Days. GBP MMF holdings are affiliated with the following countries: France (​18.​0%), Japan (​17.​4%), the U.​K. (​16.​5%), Canada (​10.​5%), the Netherlands (​7.​9%), the U.​S. (​4.​2%), Sweden (​4.​2%), Australia (​3.​7%), Germany (​3.​6%) and Switzerland (​2.​5%).

The 10 Largest Issuers to "​offshore" GBP money funds include: the UK Treasury with L18.​3B (​9.​0%), Mizuho Corporate Bank Ltd with L11.​8B (​5.​9%), Mitsubishi UFJ Financial Group Inc with L8.​8B (​4.​3%), BPCE SA with L8.​2B (​4.​0%), Rabobank with L8.​1B (​4.​0%), Sumitomo Mitsui Banking Corp with L7.​3B (​3.​6%), RBC with L7.​2B (​3.​6%), BNP Paribas with L6.​3B (​3.​1%), Toronto-​Dominion Bank with L6.​1B (​3.​0%) and Credit Agricole with L5.​7B (​2.​8%).

​

The November issue of our Bond Fund Intelligence, which was sent to subscribers Monday morning, features the lead story, "SSGA on The Rise of ESG in Fixed Income; ETFs Gaining," which reviews a new State Street survey on social trends in bond funds; and "TCW'​s Steve Kane on MetWest ESG Securitized," which interviews the TCW portfolio manager and looks at their latest offerings. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that bond fund returns fell again in October and yields inched higher. We excerpt from the new issue below. (Contact us if you'​d like to see our latest Bond Fund Intelligence and BFI XLS spreadsheet, or our Bond Fund Portfolio Holdings data.)

BFI'​s "SSGA ESG" piece reads, "State Street Global Advisors published, 'The Rise of ESG Fixed Income,' which reviews recent trends in environmental, social and governance impacting bond funds and ETFs. They write, 'According to our recent survey of more than 350 global institutional investors, ​61% are prioritizing the integration of ESG factors in their fixed income portfolios over the next three years. ​This validates the strong trend of asset growth in the evolving fixed income ESG universe now comprised of nearly 1,​000 funds globally with total assets of $​450 billion under management, with $​41 billion in North America and $​404 billion in Europe.'"

SSGA'​s piece continues, "​Although most of these assets have been invested in active mutual funds, there has been a meaningful uptick in both the number of ESG fixed income exchange traded funds (​ETFs) and their adoption by investors. In 2020, ESG fixed income ETFs had inflows of $​12.​9 billion, more than three times the previous record year. Inflows the first eight months of 2021 have already surpassed that figure. More than half (​58%) of all respondents in our survey noted that they will most likely use ETFs as their preferred investment vehicle for increasing allocations to fixed income ESG strategies, with investors in North America (​68%) having a stronger preference for ESG-​related ETFs than those in Europe (​50%)."

The TCW "​profile" states, "This month, BFI interviews Steve Kane, co-​CIO and generalist portfolio manager at TCW Investment Management. We discuss the new ESG Securitized Bond Fund, TCW and MetWest'​s broader bond fund lineup, and the manager'​s latest observations. Our Q&​A follows."

BFI says, "Give us a little history." Kane explains, "The fixed income team here at TCW, the core of it at least, originally came from Metropolitan West Asset Management. MetWest was founded by me and a few other PMs, including Tad Rivelle and Laird Landmann.... The three of us began our careers together at PIMCO back in the early 1990s.... MetWest focused initially on core, core plus and traditional multi-​sector fixed-​income strategies. We then built our team and came over to TCW through an acquisition in 2009. Since that point, we'​ve been heading up the TCW fixed income team."

Kane continues, "TCW maintains mutual funds under the TCW and MetWest names, but for fixed income it'​s been the same team from 2009 forward. We'​ve grown the assets to about $​240 billion, and we have a team of 75 investment professionals. We have 4 generalist portfolio managers overseeing the investing activity and focusing on macro elements of strategy across portfolios -- duration and yield curve and broad sector exposure. Then the balance of the team, 71 people, are divided into sector teams.... There are the traditional fixed-​income sectors: corporate credit, securitized credit, government and the rates team, and emerging markets."

Our News brief, "Returns Fall Again, Yields Rise in Oct.," states, "Bond fund returns dropped and yields inched higher last month. Our BFI Total Index fell 0.​15% for 1-​month but rose 2.​79% for 12 months. The BFI 100 returned -​0.​10% in Oct. and 2.​74% over 1-​year. Our BFI Conservative Ultra-​Short Index was down 0.​06% for 1-​mo and 0.​21% for 1-​yr; Ultra-​Shorts declined 0.​10% and rose 0.​84%, respectively. Short-​Term decreased 0.​32% but rose 1.​63%, and Intm-​Term fell 0.​16% in Oct. but rose 1.​58% over 1-​year. BFI'​s Long-​Term Index rose 0.​14% in Oct. and gained 1.​95% over 1-​year. Our High Yield Index fell 0.​12% in Oct. but gained 9.​16% over 1-​year."

Another News brief, entitled, "Morningstar Says 'Short-​Term Bond Fund Investors Get Active,'" explains, "The short-​term bond Morningstar Category has seen increased inflows in the past couple of years -- and in September, it took in more money than any other category. That makes sense given investor worries about future interest rate increases. Perhaps more surprising is that a lot of this money has gone to actively managed funds, reversing a previous trend where short-​term bond fund investors favored cheaper passive vehicles."

A third News brief, "PGIM Investments Launches ESG Multisector Fixed Income Fund," quotes a statement from the company, "PGIM Investments is expanding its commitment to environmental, social and governance (​ESG) investing with the launch of the PGIM ESG Total Return Bond Fund, its first dedicated ESG strategy offered to U.​S. investors. The new fund is an alternative but complementary offering to PGIM'​s $​60 billion PGIM Total Return Bond Fund."

A BFI sidebar "JPM Launches Income ETF," quotes the release, "J.​P. Morgan Asset Management Launches Active Fixed Income ETF: JPMorgan Income ETF (​JPIE)." They explains, "J.​P. Morgan Asset Management announced the launch of JPMorgan Income ETF (​JPIE), an active fixed income ETF which targets debt securities across the fixed income universe, seeking to deliver yield with lower volatility and attractive distributions. Using sector allocation shifts, JPIE invests in a wide variety of debt securities that have the potential to maximize income while reducing portfolio-​level risk. JPIE draws upon the combined expertise of the firm'​s Global Fixed Income Currency and Commodities (​GFICC) platform, providing the best ideas from diverse asset class expertise and broad investment capabilities."

Finally, a sidebar entitled, "Bond Fund Assets Fall Again," tells readers, "Bond fund inflows slowed and overall assets fell in October, though inflows rebounded the first week of November. ICI'​s 'Combined Estimated Long-​Term Fund Flows and ETF Net Issuance,' says, 'Bond funds ​had estimated inflows of $​12.​18 billion for the week, compared to estimated inflows of $​7.​21 billion during the previous week. Taxable bond funds saw estimated inflows of $​10.​69 billion, and municipal bond funds had estimated inflows of $​1.​49 billion.' Over the past 5 weeks, bond funds and bond ETFs have seen inflows of $​35.​1 billion."

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Earlier this week, the Association for Financial Professionals hosted its Annual Conference in person again for the first time since 2019. While the show was only about a third of its usual crowd of 5,​000+, there was still a respectable showing among the corporate treasurer, cash manager, banker and institutional money market fund audience. (​It was great to see so many money fund investors and professionals in person again!) Though the agenda was thin on money fund-​related topics, there were several sessions of interest. The highlight was probably, "Are Zero Interest Rates Really Different This Time?," which featured State Street Global Advisors' William Goldthwait hosting a panel including Fastly'​s Michael Scott, Creative Artists Agency'​s Garima Thakur, and American Honda Motor Company'​s Kim-​Kelly Lippert. We quote from this segment below. (​See also our Nov. 8 Link of the Day, "ICD Hosts Treasury Tech Panel with Coca-​Cola, Summit Utilities at AFP 2021" and our Sept. 27 Link of the Day, "AFP Conference Preps for Washington.")

Goldthwait asks, "What'​s top of mind for you as you go through your day-​to-​day routines?" Lippert comments, "For American Honda, we basically have a really very short portfolio. We have a very large OEM monthly payment that we make, and, in addition to that, we'​re considered the global liquidity provider for the company. To achieve the liquidity, we invest mostly in money market funds and bank deposits. We have a few year-​old time deposits, and, for a pickup in yield, we take advantage of very selective direct purchases. But our strategic cash is managed mostly at parent level at Honda Motor."

She continues, "Even with the with our super short portfolio, we do try to raise our overall return. As I mentioned, we invest mostly in money market funds and in bank deposits. Our first allocation that we do goes to our bank deposits ... for two reasons. One is, we'​re supporting our ECR [​earnings credit rates]. And in addition to that, we'​re supporting our bank relationships. We have quite a bit invested with our Japanese banks. They tend to pay very good rates and also are encouraging [​us to give] them more cash. The deposits don'​t fluctuate that much through the month, so they enjoy that."

Lippert tells us, "As with all rates, the ECR rates have declined. We try to manage that as well as we can. In addition to that, we negotiate regularly with our banks. The second allocation that we have goes to our government money market funds, that'​s our primary source of liquidity.... We want it in very liquid and conservative investments. We [​try] squeezing a little bit extra out of it, so we invest through a portal. On that portal, we look at a lot of different attributes, and one of those are the daily factors. Some are paying a full 3 basis points, but some are paying 2.​6 or 2.​5 bps that ... round up to 3 bps. We look at that to try to ... squeeze that little bit extra out of it to help raise the yield."

She adds, "We also have an allocation to high quality prime funds from managers we know well, and we stay informed of the risks and characteristics of the funds. We capture the tech credits that are paid by the funds for trading through the portal, and that is one thing we use to reduce our treasury workstation annual bill. So basically, in a very competitive yield environment, very low yield environment, we analyze our investment options very carefully. We manage down to that little, tiny basis point, and basically try to produce the best overall returns."

Thakur responds, "​I think for my company and for a lot of corporates right now ... it'​s a question of, 'How far on the yield curve can you go?' either based on investment policy or capital allocation needs. How much can you increase yields incrementally by doing that and what is the risk you want to take as a management team? For us, we'​ve decided, no, we don'​t want to do that. We want to stay on the short end, very similar to what Kim said."

She says, "So we'​re focused on money market funds, primarily government. We don'​t want to deal, frankly, with the floating NAVs, so we'​re staying very, very conservative. The yields not spectacular, we all know that, but it'​s better than zero, just leaving the cash in an operating bank account. Of course, there'​s an element of ECR. At a minimum, we want to make sure that we'​re offsetting that. Then we think of any excess cash beyond that, '​What can be ladder out?' Even if it'​s, you know, 90 days, 30 days."

Thakur also tells us, "That'​s where an interesting strategy of using tier-​2 banks comes in. It'​s the relatively smaller or regional banks that are interested in deposits in this environment and are willing to partner with us. In some cases, [​you get] yields ranging in this environment 15 to 30 bps ... with an MMDA, a money market deposit account. You can agree, getting 30 bps right now is something that would make your CFO smile. So we'​re doing those types [​of things]. Now there'​s an element of counterparty credit risk.... But if yield optimization is top of mind and you want to diversify your counterparty credit risk, it'​s a good option to start looking at those as well."

Scott then comments, "At Fastly, our philosophy around cash is really centered around capital preservation, liquidity and yield, in that order.... That'​s been a constant. In this environment, we haven'​t felt pressured to overextend for yield or credit quality. We haven'​t looked to use duration to try to chase yield. Our duration is really informed by our liquidity profile, and cash segmentation is really an important framework for us as well. In this low interest rate environment ... the opportunity cost for keeping a liquidity buffer is just that much lower."

He explains, "So we'​ve been more conservative by keeping more operating cash kind of within that zero to 3-, zero to 6-​month bucket. That follows two main goals, similar to what Kim and Garima talked about. Number one is working with our primary operating banks around the earnings credit, so we maximize that to offset our fees. Then any excess is going into stable net asset value, government money market funds."

Finally, Scott adds, "Then for our reserve or longer-​term strategic cash, we'​re a small team at Fastly, so we utilize separately managed accounts. We really view those managers as an extended part of our team, getting that expertise research and professional portfolio management there. Within that portfolio, ESG is really critical for us. That'​s an important part of our selection criteria as we think about our investment holdings."

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Crane Data'​s November Money Fund Portfolio Holdings, with data as of Oct. 31, 2021, show Treasuries jumping after 6 straight months of declines and Repo falling after 8 months of increases. Money market securities held by Taxable U.​S. money funds (​tracked by Crane Data) jumped by $​72.​4 billion to $​4.​925 trillion in October, after decreasing $​26.​0 billion in Sept., increasing $​47.​4 billion in August and decreasing $​89.​1 billion in July. Assets also rose $​1.​5 billion in June, $​30.​2 billion in May and $​29.​1 billion in April. Repo remained the largest portfolio segment, but Treasuries gained back some ground in the No. 2 spot. MMF holdings of Fed repo dipped to $​1.​34 trillion. Agencies were the third largest segment, CP remained fourth, ahead of CDs, Other/​Time Deposits and VRDNs. Below, we review our latest Money Fund Portfolio Holdings statistics. (Note: Thanks to those who visited us at this week'​s AFP Treasury Conference in Washington. We hope you had a good show!)

Among taxable money funds, Treasury securities jumped $​158.​2 billion (​9.​4%) to $​1.​839 trillion, or 37.​3% of holdings, after falling $​262.​4 billion in Sept., $​113.​8 billion in August, $​200.​6 billion in July, $​134.​5 billion in June and $​135.​0 billion in May. Repurchase Agreements (​repo) declined $​107.​9 billion (-​4.​8%) to $​2.​140 trillion, or 46.​3% of holdings, after rising $​299.​8 billion in Sept., $​169.​6 billion in August, $​62.​9 billion in July, $​251.​0 billion in June and $​200.​9 billion in May. Government Agency Debt was down $​27.​3 billion, or -​5.​9% to $​433.​6 billion, or 8.​8% of holdings, after decreasing $​31.​3 billion in Sept., $​8.​1 billion in August, rising $​3.​8 billion in July, and decreasing $​26.​7 billion in June. Repo, Treasuries and Agency holdings totaled $​4.​413 trillion, representing a massive 89.​6% of all taxable holdings.

Money funds' holdings of CP, CDs and Other (​mainly Time Deposits) were higher in October as Prime MMF holdings of CP, CDs and Other/​TDs moved higher. Commercial Paper (​CP) increased $​8.​2 billion (​3.​4%) to $​249.​7 billion, or 5.​1% of holdings, after increasing $​3.​1 billion in Sept., $​3.​2 billion in August and $​8.​2 billion in July. Other holdings, primarily Time Deposits, declined by $​32.​7 billion (-​27.​2%) to $​87.​4 billion, or 1.​8% of holdings, after declining $​32.​7 billion in Sept. and $​4.​7 billion in August, but jumping $​39.​9 billion in July. Certificates of Deposit (​CDs) rose by $​7.​4 billion (​6.​2%) to $​127.​6 billion, or 2.​6% of taxable assets, after falling $​3.​8 billion in Sept., rising $​1.​9 billion in August and dropping $​1.​5 billion in July. VRDNs increased to $​13.​8 billion, or 0.​3% of assets. (​Note: This total is VRDNs for taxable funds only. We will post our Tax Exempt MMF holdings separately late Wednesday.)

Prime money fund assets tracked by Crane Data fell to $​844 billion, or 17.​1% of taxable money funds' $​4.​925 trillion total. Among Prime money funds, CDs represent 15.​1% (​up from 14.​1% a month ago), while Commercial Paper accounted for 29.​6% (​up from 28.​4% in Sept.). The CP totals are comprised of: Financial Company CP, which makes up 20.​6% of total holdings, Asset-​Backed CP, which accounts for 4.​2%, and Non-​Financial Company CP, which makes up 4.​8%. Prime funds also hold 3.​3% in US Govt Agency Debt, 8.​8% in US Treasury Debt, 19.​9% in US Treasury Repo, 2.​2% in Other Instruments, 11.​3% in Non-​Negotiable Time Deposits, 6.​0% in Other Repo, 3.​3% in US Government Agency Repo and 0.​7% in VRDNs.

Government money fund portfolios totaled $​2.​846 trillion (​57.​8% of all MMF assets), up from $​2.​784 trillion in Sept., while Treasury money fund assets totaled another $​1.​236 trillion (​25.​1%), up from $​1.​218 trillion the prior month. Government money fund portfolios were made up of 14.​2% US Govt Agency Debt, 10.​7% US Government Agency Repo, 31.​8% US Treasury Debt, 43.​0% in US Treasury Repo, 0.​3% in Other Instruments. Treasury money funds were comprised of 69.​6% US Treasury Debt and 30.​3% in US Treasury Repo. Government and Treasury funds combined now total $​4.​082 trillion, or 82.​9% of all taxable money fund assets.

European-​affiliated holdings (​including repo) rose by $​49.​5 billion in Oct. to $​541.​9 billion; their share of holdings rose to 11.​0% from last month'​s 10.​2%. Eurozone-​affiliated holdings increased to $​403.​5 billion from last month'​s $​354.​8 billion; they account for 8.​2% of overall taxable money fund holdings. Asia & Pacific related holdings increased to $​219.​8 billion (​4.​5% of the total) from last month'​s $​212.​2 billion. Americas related holdings rose to $​4.​159 trillion from last month'​s $​4.​144 trillion, and now represent 84.​4% of holdings.

The overall taxable fund Repo totals were made up of: US Treasury Repurchase Agreements (​down $​97.​7 billion, or -​5.​2%, to $​1.​767 trillion, or 35.​9% of assets); US Government Agency Repurchase Agreements (​down $​10.​4 billion, or -​3.​1%, to $​322.​2 billion, or 6.​5% of total holdings), and Other Repurchase Agreements (​up $​0.​3 billion, or 0.​7%, from last month to $​50.​5 billion, or 1.​0% of holdings). The Commercial Paper totals were comprised of Financial Company Commercial Paper (​up $​3.​1 billion to $​174.​0 billion, or 3.​5% of assets), Asset Backed Commercial Paper (​up $​0.​4 billion to $​35.​2 billion, or 0.​7%), and Non-​Financial Company Commercial Paper (​up $​4.​7 billion to $​40.​6 billion, or 0.​8%).

The 20 largest Issuers to taxable money market funds as of Oct. 31, 2021, include: the US Treasury ($​1.​839 trillion, or 37.​3%), Federal Reserve Bank of New York ($​1.​340T, 27.​2%), Federal Home Loan Bank ($​252.​6B, 5.​1%), BNP Paribas ($​111.​6B, 2.​3%), RBC ($​108.​5B, 2.​2%), Federal Farm Credit Bank ($​87.​5B, 1.​8%), Fixed Income Clearing Corp ($​69.​8B, 1.​4%), Sumitomo Mitsui Banking Co ($​57.​9B, 1.​2%), JP Morgan ($​56.​9B, 1.​2%), Federal National Mortgage Association ($​52.​7B, 1.​1%), Credit Agricole ($​52.​3B, 1.​1%), Bank of America ($​48.​2B, 1.​0%), Societe Generale ($​41.​3B, 0.​8%), Mitsubishi UFJ Financial Group Inc ($​40.​7B, 0.​8%), Citi ($​38.​1B, 0.​8%), Bank of Montreal ($​37.​8B, 0.​8%), Federal Home Loan Mortgage Corp ($​37.​6B, 0.​8%), Barclays ($​33.​0B, 0.​7%), Toronto-​Dominion Bank ($​32.​4B, 0.​7%) and Canadian Imperial Bank of Commerce ($​30.​7B, 0.​6%).

In the repo space, the 10 largest Repo counterparties (​dealers) with the amount of repo outstanding and market share (​among the money funds we track) include: Federal Reserve Bank of New York ($​1.​340T, 62.​6%), BNP Paribas ($​99.​9B, or 4.​7%), RBC ($​89.​4B, or 4.​2%), Fixed Income Clearing Corp ($​69.​8B, or 3.​3%), JP Morgan ($​51.​7B, or 2.​4%), Sumitomo Mitsui Banking Corp ($​45.​0B, or 2.​1%), Bank of America ($​44.​1B, or 2.​1%), Citi ($​33.​2B, or 1.​6%), Mitsubishi UFJ Financial Group Inc ($​31.​7B, or 1.​5%) and Societe Generale ($​31.​6B, or 1.​5%). The largest users of the $​1.​340 trillion in Fed RRP included: JPMorgan US Govt MM ($​108.​1B), Fidelity Govt Money Market ($​79.​9B), Vanguard Federal Money Mkt Fund ($​71.​5B), Fidelity Govt Cash Reserves ($​70.​7B), Morgan Stanley Inst Liq Govt ($​67.​3B), BlackRock Lq FedFund ($​64.​0B), BlackRock Lq T-​Fund ($​54.​8B), Federated Hermes Govt Obl ($​54.​5B), Wells Fargo Govt MM ($​50.​9B) and Fidelity Inv MM: Govt Port ($​47.​1B).

The 10 largest issuers of "​credit" -- CDs, CP and Other securities (​including Time Deposits and Notes) combined -- include: Credit Agricole ($​22.​9B or 5.​4%), Mizuho Corporate Bank Ltd ($​19.​4B or 4.​5%), RBC ($​19.​1B or 4.​5%), Toronto-​Dominion Bank ($​18.​4B or 4.​3%), Bank of Montreal ($​17.​3B or 4.​0%), Barclays PLC ($​16.​7B or 3.​9%), Sumitomo Mitsui Trust Bank ($​13.​5B or 3.​1%), Canadian Imperial Bank of Commerce ($​13.​4B or 3.​1%), Sumitomo Mitsui Banking Corp ($​12.​9B or 3.​0%) and DNB ASA ($​12.​2B or 2.​8%).

The 10 largest CD issuers include: Bank of Montreal ($​12.​2B or 9.​6%), Sumitomo Mitsui Banking Corp $​10.​6B or 8.​3%), Landesbank Baden-​Wurttemberg ($​7.​6B or 5.​9%), Canadian Imperial Bank of Commerce ($​7.​6B or 5.​9%), Toronto-​Dominion Bank ($​7.​2B or 5.​7%), Mizuho Corporate Bank Ltd ($​6.​0B or 4.​7%), Mitsubishi UFJ Financial Group Inc ($​5.​7B or 4.​5%), Natixis ($​4.​8B or 3.​8%) and Svenska Handelsbanken ($​4.​6B or 3.​6%).

The 10 largest CP issuers (​we include affiliated ABCP programs) include: RBC ($​13.​3B or 6.​3%), Toronto-​Dominion Bank ($​10.​7B or 5.​1%), BNP Paribas ($​9.​3B or 4.​4%), Societe Generale ($​9.​3B or 4.​4%), Sumitomo Mitsui Trust Bank ($​6.​9B or 3.​3%), Barclays PLC ($​6.​5B or 3.​1%), BPCE SA ($​6.​5B or 3.​1%), National Australia Bank Ltd ($​6.​1B or 2.​9%), Skandinaviska Enskilda Banken ($​5.​6B or 2.​7%) and Mizuho Corporate Bank Ltd ($​5.​4B or 2.​6%).

The largest increases among Issuers include: US Treasury (​up $​158.​2B to $​1.​839T), Credit Agricole (​up $​21.​3B to $​52.​3B), RBC (​up $​13.​0B to $​108.​5B), BNP Paribas (​up $​6.​5B to $​111.​6B), KBC Group NV (​up $​5.​9B to $​6.​4B), DNB ASA (​up $​5.​3B to $​13.​4B), Landesbank Hessen-​Thueringen Girozentrale (​up $​4.​4B to $​6.​8B), Mizuho Corporate Bank Ltd (​up $​4.​2B to $​27.​0B), Bank of America (​up $​3.​6B to $​48.​2B) and Societe Generale (​up $​3.​5B to $​41.​3B).

The largest decreases among Issuers of money market securities (​including Repo) in October were shown by: Federal Reserve Bank of New York (​down $​94.​1B to 1.​340T), Fixed Income Clearing Corp (​down $​21.​1B to $​69.​8B), Federal National Mortgage Association (​down $​16.​6B to $​52.​7B), JP Morgan (​down $​10.​4B to $​56.​9B), Federal Home Loan Bank (​down $​6.​5B to $​252.​6B), Federal Home Loan Mortgage Corp (​down $​5.​5B to $​37.​6B), Nomura (​down $​4.​9B to $​21.​9B), Rabobank (​down $​3.​6B to $​11.​4B), Canadian Imperial Bank of Commerce (​down $​2.​5B to $​30.​7B) and Toronto-​Dominion Bank (​down $​2.​4B to $​32.​4B).

The United States remained the largest segment of country-​affiliations; it represents 79.​6% of holdings, or $​3.​921 trillion. France (​5.​1%, $​251.​5B) moved up to second place, while Canada (​4.​8%, $​237.​4B) fell to No. 3. Japan (​4.​1%, $​200.​2B) occupied fourth place. The United Kingdom (​1.​5%, $​75.​0B) remained in fifth place. The Netherlands (​1.​1%, $​52.​3B) was in sixth place, followed by Germany (​1.​1%, $​54.​2B). Sweden (​0.​7%, $​32.​3B), Australia (​0.​6%, $​30.​3B) and Switzerland (​0.​3%, $​16.​1B). (​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 Oct. 31, 2021, Taxable money funds held 51.​4% (​down from 54.​5%) of their assets in securities maturing Overnight, and another 9.​3% maturing in 2-​7 days (​up from 8.​7%). Thus, 60.​6% in total matures in 1-​7 days. Another 11.​0% matures in 8-​30 days, while 8.​7% matures in 31-​60 days. Note that over three-​quarters, or 80.​3% of securities, mature in 60 days or less, the dividing line for use of amortized cost accounting under SEC regulations. The next bucket, 61-​90 days, holds 5.​9% of taxable securities, while 10.​0% matures in 91-​180 days, and just 4.​0% matures beyond 181 days. (​Visit our Content center to download, or contact us to request our latest Portfolio Holdings reports.)

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Crane Data'​s latest monthly Money Fund Portfolio Holdings statistics will be sent out Tuesday, and we'​ll be writing our regular monthly update on the October 31 data for Wednesday'​s News. But we also uploaded a separate and broader Portfolio Holdings data set based on the SEC'​s Form N-​MFP filings on Monday. (​We continue to merge the two series, and the N-​MFP version is now available via Holding file listings to Money Fund Wisdom subscribers.) Our new N-​MFP summary, with data as of Oct. 31, 2021 includes holdings information from 1,​021 money funds (​up 11 funds from last month), representing assets of $​5.​063 trillion (​up from $​5.​000 trillion). Prime MMFs now total $​857.​7 billion, or 16.​9% of the total. We review the new N-​MFP data below, and we also look at our revised MMF expense data.

Our latest Form N-​MFP Summary for All Funds (​taxable and tax-​exempt) shows Treasury holdings totaled $​1.​847 trillion (​up from $​1.​699 trillion), or a massive 36.​5% of all holdings. Repurchase Agreement (​Repo) holdings in money market funds fell to to $​2.​156 trillion (​down from $​2.​264 trillion), or 42.​6% of all assets, and Government Agency securities totaled $​447.​1 billion (​down from $​474.​0 billion), or 8.​8%. Holdings of Treasuries, Government agencies and Repo (​almost all of which is backed by Treasuries and agencies) combined total $​4.​450 trillion, or a stunning 87.​9% of all holdings.

Commercial paper (​CP) totals $​257.​8 billion (​up from $​248.​6 billion), or 5.​1% of all holdings, and the Other category (​primarily Time Deposits) totals $​159.​7 billion (​up from $​126.​3 billion), or 3.​2%. Certificates of Deposit (​CDs) total $​127.​6 billion (​up from $​120.​2 billion), 2.​5%, and VRDNs account for $​68.​3 billion (​down from $​68.​4 billion last month), or 1.​3% of money fund securities.

Broken out into the SEC'​s more detailed categories, the CP totals were comprised of: $​175.​7 billion, or 3.​5%, in Financial Company Commercial Paper; $​35.​3 billion or 0.​7%, in Asset Backed Commercial Paper; and, $​46.​8 billion, or 0.​9%, in Non-​Financial Company Commercial Paper. The Repo totals were made up of: U.​S. Treasury Repo ($​1.​776 trillion, or 35.​1%), U.​S. Govt Agency Repo ($​329.​2B, or 6.​5%) and Other Repo ($​50.​7B, or 1.​0%).

The N-​MFP Holdings summary for the Prime Money Market Funds shows: CP holdings of $​254.​0 billion (​up from $​244.​5 billion), or 29.​6%; Repo holdings of $​239.​4 billion (​down from $​304.​9 billion), or 27.​9%; Treasury holdings of $​79.​2 billion (​up from $​77.​7 billion), or 9.​2%; CD holdings of $​127.​6 billion (​up from $​120.​2 billion), or 14.​9%; Other (​primarily Time Deposits) holdings of $​120.​1 billion (​up from $​86.​2 billion), or 14.​0%; Government Agency holdings of $​30.​1 billion (​up from $​22.​9 billion), or 3.​5% and VRDN holdings of $​6.​8 billion (​down from $​7.​2 billion), or 0.​8%.

The SEC'​s more detailed categories show CP in Prime MMFs made up of: $​175.​7 billion (​up from $​172.​6 billion), or 20.​5%, in Financial Company Commercial Paper; $​35.​3 billion (​up from $​34.​9 billion), or 4.​1%, in Asset Backed Commercial Paper; and $​42.​9 billion (​up from $​37.​0 billion), or 5.​0%, in Non-​Financial Company Commercial Paper. The Repo totals include: U.​S. Treasury Repo ($​171.​2 billion, or 20.​0%), U.​S. Govt Agency Repo ($​17.​8 billion, or 2.​1%), and Other Repo ($​50.​5 billion, or 5.​9%).

In other news, money fund charged expense ratios were flat again in November after hitting a record low of 0.​06% in May and inching higher in June. Our Crane 100 Money Fund Index and Crane Money Fund Average were both were 0.​07% as of Oct. 31, 2021. Crane Data revises its monthly expense data and gross yield information after the SEC updates its latest Form N-​MFP data the morning of the 6th business day of the new month. (​They posted this info Monday morning, so we revised our monthly MFI XLS spreadsheet and historical craneindexes.​xlsx averages file to reflect the latest expenses, gross yields, portfolio composition and maturity breakout yesterday.) Visit our "Content" page for the latest files, and see below for the review of the latest N-​MFP Portfolio Holdings data.

Our Crane 100 Money Fund Index, a simple average of the 100 largest taxable money funds, shows an average charged expense ratio (Exp%) of 0.​07%, the same as last month'​s level (​and one bps higher than May'​s record low 0.​06%). The average is down from 0.​27% on Dec. 31, 2019, so we estimate that funds are waiving 20 bps, or 74% of normally charged expenses. The Crane Money Fund Average, a simple average of all taxable MMFs, also showed a charged expense ratio of 0.​07% as of Oct. 31, 2021, the same as the month prior but down from 0.​40% at year-​end 2019.

Prime Inst MFs expense ratios (​annualized) average 0.​10% (​the same level as last month), Government Inst MFs expenses average 0.​05% (​unchanged), Treasury Inst MFs expenses average 0.​05% (​unch). Treasury Retail MFs expenses currently sit at 0.​05%, (​unch), Government Retail MFs expenses yield 0.​05% (​the same as in August). Prime Retail MF expenses averaged 0.​13% (​up one bps). Tax-​exempt expenses were up one basis point over the month to 0.​08% on average.

Gross 7-​day yields were unchanged on average for the month ended Oct. 31, 2021. The Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (​currently 733), shows a 7-​day gross yield of 0.​08%, the same as the prior month. The Crane Money Fund Average is down 1.​64% from 1.​72% at the end of 2019. Our Crane 100'​s 7-​day gross yield was up one bps, ending the month at 0.​09%, but down 1.​66% from year-​end 2019.

According to our revised MFI XLS and Crane Index numbers, we now estimate that annualized revenue for all money funds is approximately $​3.​475 billion (​as of 10/​31/​21). Our estimated annualized revenue totals increased from $​3.​374 last month and are higher than the record low of $​2.​927 in May. MMF revenues fell from $​6.​028 trillion at the start of 2020 and $​10.​642 trillion at the start of 2019. Charged expenses and gross yields are driven by a number of variables, and the Fed'​s 0.​05% floor on its RRP repo appears to have helped stabilize rates above zero. Nonetheless, severe fee waivers and heavy fee pressure should continue as long as the Fed keeps yields pinned close to the zero floor.

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Crane Data'​s latest Money Fund Market Share rankings show assets were mostly mixed or slightly higher across the largest U.​S. money fund complexes in October. Money market fund assets increased $​20.​5 billion, or 0.​4%, last month to $​5.​004 trillion. Assets increased by $​65.​5 billion, or 1.​3%, over the past 3 months, they'​ve increased by $​191.​0 billion, or 4.​0%, over the past 12 months through Oct. 31, 2021. The largest increases among the 25 largest managers last month were seen by Dreyfus, Fidelity, SSGA, Northern and Invesco, which grew assets by $​10.​3 billion, $​9.​5B, $​5.​2B, $​5.​1B and $​3.​6B, respectively. The largest declines in October were seen by BlackRock, Goldman Sachs, First American and DWS, which decreased by $​13.​0 billion, $​4.​5B, $​3.​1B and $​2.​4B, respectively. Our domestic U.​S. "Family" rankings are available in our MFI XLS product, our global rankings are available in our MFI International product. The combined "​Family & Global Rankings" are available to Money Fund Wisdom subscribers. We review the latest market share totals, and look at money fund yields in October, below.

Over the past year through Oct. 31, 2021, BlackRock (​up $​95.​1B, or 21.​5%), Morgan Stanley (​up $​87.​2B, or 41.​9%), Goldman Sachs (​up $​56.​3B, or 19.​3%), Dreyfus (​up $​33.​0B, or 17.​0%) and J.​P. Morgan (​up $​23.​0B, or 5.​6%) were the largest gainers. Fidelity, Goldman Sachs, Morgan Stanley, Northern, and Vanguard had the largest asset increases over the past 3 months, rising by $​20.​3B, $​14.​6B, $​11.​3B, $​10.​0B and $​8.​5B, respectively. The largest decliners over 12 months were seen by: Charles Schwab (​down $​42.​7B), Federated Hermes (​down $​35.​2B), Wells Fargo (​down $​27.​7B), Vanguard (​down $​23.​8B), and UBS (​down $​22.​1B). The largest decliners over 3 months included: BlackRock (​down $​14.​9B), Wells Fargo (​down $​8.​7B), Federated Hermes (​down $​3.​4B), Schwab (​down $​2.​0B) and Columbia (​down $​2.​0B).

Our latest domestic U.​S. Money Fund Family Rankings show that Fidelity Investments remains the largest money fund manager with $​908.​4 billion, or 18.​2% of all assets. Fidelity was up $​9.​5B in October, up $​20.​3 billion over 3 mos., and up $​3.​3B over 12 months. BlackRock ranked second with $​514.​5 billion, or 10.​3% market share (​down $​13.​0B, down $​14.​9B and up $​95.​0B for the past 1-​month, 3-​mos. and 12-​mos., respectively). Vanguard ranked third with $​465.​8 billion, or 9.​3% market share (​down $​2M, up $​8.​5B and down $​23.​8B). JPMorgan was the fourth largest MMF manager with $​460.​3 billion, or 9.​2% of assets (​up $​1.​6B, up $​126M and down $​23.​0B for the past 1-​month, 3-​mos. and 12-​mos.), while Goldman Sachs remained in fifth place with $​363.​7 billion, or 7.​3% of assets (​down $​4.​5B, up $​14.​6B and up $​56.​3B).

Federated Hermes was in sixth place with $​327.​9 billion, or 6.​6% of assets (​up $​944M, down $​3.​4B and down $​35.​2B), while Morgan Stanley was in seventh place with $​286.​6 billion, or 5.​7% (​down $​1.​2B, up $​11.​3B and up $​87.​2B). Dreyfus ($​241.​8B, or 4.​8%) was in eighth place (​up $​10.​3B, up $​7.​1B and up $​33.​0B), followed by Wells Fargo ($​192.​4B, or 3.​8%; down $​2.​4B, down $​8.​7B and down $​27.​7B). Northern was in 10th place ($​188.​8B, or 3.​8%; up $​5.​1B, up $​10.​0B and up $​2.​2B).

The 11th through 20th-​largest U.​S. money fund managers (​in order) include: SSGA ($​146.​8B, or 2.​9%), Schwab ($​144.​9B, or 2.​9%), American Funds ($​137.​4B, or 2.​7%), First American ($​123.​3B, or 2.​5%), Invesco ($​92.​2B, or 1.​8%), T. Rowe Price ($​54.​1B, or 1.​1%), UBS ($​48.​4B, or 1.​0%), HSBC ($​38.​3B, or 0.​8%), DWS ($​35.​8B, or 0.​7%) and Western ($​32.​9B, or 0.​7%). Crane Data currently tracks 64 U.​S. MMF managers, the same number as last month.

When European and "​offshore" money fund assets -- those domiciled in places like Ireland, Luxembourg and the Cayman Islands -- are included, the top 10 managers are the same as the domestic list, except JPMorgan and Goldman move ahead of Vanguard to the No. 3 and No. 4 spots, Morgan Stanley moves ahead of Federated to the No. 6 spot, and Northern moves ahead of Wells for the No. 9 spot. Global Money Fund Manager Rankings include the combined market share assets of our MFI XLS (​domestic U.​S.) and our MFI International ("​offshore") products.

The largest Global money market fund families include: Fidelity ($​920.​8 billion), BlackRock ($​715.​4B), JP Morgan ($​673.​4B), Goldman Sachs ($​482.​8B) and Vanguard ($​465.​8B). Morgan Stanley ($​341.​0B) was sixth, Federated Hermes ($​337.​1B) was in seventh, followed by Dreyfus/​BNY Mellon ($​264.​8B), Northern ($​220.​7B) and Wells Fargo ($​192.​4B), which round out the top 10. These totals include "​offshore" U.​S. Dollar money funds, as well as Euro and Pound Sterling (​GBP) funds converted into U.​S. dollar totals.

The November issue of our Money Fund Intelligence and MFI XLS, with data as of 10/​31/​21, shows that yields were flat again in October for our Crane Money Fund Indexes. The Crane Money Fund Average, which includes all taxable funds covered by Crane Data (​currently 733), remained at 0.​02% for the 7-​Day Yield (​annualized, net) Average, the 30-​Day Yield also was flat at 0.​02%. The MFA'​s Gross 7-​Day Yield was flat at 0.​08%, and the Gross 30-​Day Yield was also flat at 0.​08%.

Our Crane 100 Money Fund Index shows an average 7-​Day (​Net) Yield of 0.​02% (​unchanged) and an average 30-​Day Yield (​also unchanged) at 0.​02%. The Crane 100 shows a Gross 7-​Day Yield of 0.​08% (​unch), and a Gross 30-​Day Yield of 0.​09% (​unch). Our Prime Institutional MF Index (​7-​day) yielded 0.​03% (​unch) as of Oct. 31. The Crane Govt Inst Index remained at 0.​02% and the Treasury Inst Index was unchanged at 0.​01%. Thus, the spread between Prime funds and Treasury funds remains at two basis points, and the spread between Prime funds and Govt funds is one basis point. The Crane Prime Retail Index yielded 0.​01% (​unch), while the Govt Retail Index was 0.​01% (​unch), the Treasury Retail Index was also 0.​01% (​unchanged from the month prior). The Crane Tax Exempt MF Index yielded 0.​01% (​unch) as of Oct. 31.

Gross 7-​Day Yields for these indexes to end October were: Prime Inst 0.​14% (​unch), Govt Inst 0.​07% (​unch), Treasury Inst 0.​06% (​unch), Prime Retail 0.​13% (​unch), Govt Retail 0.​06% (​unch) and Treasury Retail 0.​06% (​unch). The Crane Tax Exempt Index remained at 0.​08%. The Crane 100 MF Index returned on average 0.​00% over 1-​month, 0.​00% over 3-​months, 0.​01% YTD, 0.​02% over the past 1-​year, 0.​98% over 3-​years (​annualized), 0.​98% over 5-​years, and 0.​52% over 10-​years.

The total number of funds, including taxable and tax-​exempt, rose by one in October to 885. There are currently 733 taxable funds, one more than the previous month, and 152 tax-​exempt money funds (​unchanged from last month). (Contact us if you'​d like to see our latest MFI XLS, Crane Indexes or Market Share report.

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The November issue of our flagship Money Fund Intelligence newsletter, which was sent to subscribers Friday morning, features the articles: "BMO Latest to Exit MMF Space; Wells Now Allspring," which discusses the latest mergers and changes in the money fund business; "IMMFA'​s Iommi, Senior PMs Talks Regs at European MFS," which reviews the highlights from our most recent webinar; and, "FSB Issues Final Report on Money Market Proposals," which examines the latest on the regulatory front. We also sent out our MFI XLS spreadsheet Friday a.​m., and have updated our Money Fund Wisdom database query system with 10/​31/​21 data. (Note: Wisdom is down temporarily but should be back up next week. MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our November Money Fund Portfolio Holdings are scheduled to ship on Tuesday, Nov. 9, and our November Bond Fund Intelligence is scheduled to go out on Monday, Nov. 15.

MFI'​s lead article says, "While there haven'​t been a ton, we continue to see mergers, liquidations and changes in the money fund space. The most recent involves the BMO Funds, which announced a deal to merge their money funds into Goldman Sachs' MMFs. Their SEC filing tells us, '​On Oct. 18, 2021, the Board of Directors of BMO Funds ... approved an agreement ... providing for the reorganization of each of the BMO Government Money Market Fund, BMO Prime MMF and BMO Tax-​​Free MMF ... into a corresponding series of Goldman Sachs Trust. BMO Asset Management Corp., investment adviser to each of the BMO Money Market Funds, recommended that the Board approve the Reorganizations in connection with its decision to exit the mutual fund investment advisory business in the United States, including ceasing management of each BMO Money Market Fund."

It continues, "BAMC'​s decision to exit the mutual fund investment advisory business is connected to the decision by Bank of Montreal ... to sell the entities representing its EMEA asset management business to Ameriprise Financial. To ensure that shareholders of the BMO Money Market Funds have continued access to a large and stable mutual fund platform, BAMC has proposed reorganizing the BMO Money Market Funds into the corresponding Acquiring Funds. Goldman Sachs Asset Management, L.​​P. serves as investment adviser to each of the Acquiring Funds."

Our "European MFS" piece reads, "Crane Data'​s recent virtual European Money Fund Symposium featured a session on '​Regulatory, ESG & Ultra-​Short Issues,' which reviewed the latest on European MMFs and potential regulatory changes. Veronica Iommi, Secretary General of IMMFA, the Institutional Money Market Funds Association, spoke first during this segment. (​For those that missed EMFS, the recording is available here, and the materials here.)

Iommi explains, "Those of you who are not familiar with IMMFA, ... originally formed over 22 years ago, our core objective is to promote and support the development and integrity of the money market funds industry in Europe. We do this by engaging with policymakers, regulators, educating investors, providing regular data on various funds and overall, providing a centralized point of contact, information and expertise."

Our FSB Update explains, "​In mid-​October, the Financial Stability Board, a group of global regulators, published its '`​Policy Proposals to Enhance Money Market Fund Resilience - Final Report.' See their press release, 'Policy proposals to enhance money market fund resilience: Overview of the responses to the consultation,' and the FSB'​s statement, 'Policy proposals to enhance money market fund resilience: Final report.' The summary document, 'Policy proposals to enhance money market fund resilience - Overview of the responses to the consultation,' states, 'The consultation report with policy proposals to enhance MMF resilience was published on 30 June 2021 and the comment period closed on 16 August. The FSB received responses from various stakeholders, the large majority of which came from fund managers and their trade associations (​mainly in the US and Europe). The remaining responses came from banks or banking associations, and from other trade associations and think tanks. All non-​confidential responses have been published on the FSB'​s website."

It explains, "In general, the FSB'​s view is that substantial changes are not needed to the report in response to consultation feedback, as it did not introduce major new elements to the analysis. Respondents from outside the asset management industry were generally in favor of further MMF reforms. By contrast, responses from the industry were generally against MMF reforms other than the removal of ties between regulatory liquidity thresholds and the ability to impose fees and gates, although many industry respondents expressed agreement with the use of mechanisms to allocate liquidity costs to redeeming investors (​and especially anti-​​dilution levies), and to a lesser extent with the removal of stable net asset value (​NAV) MMFs. Most respondents also expressed support for work to enhance the functioning of short-​​term funding markets (​STFMs). This document summarizes the comments raised in the public consultation and sets out the main changes made to the final report in order to address them."

MFI also includes the News brief, "Money Fund Assets Retake $​5 Trillion." It says, "Crane Data'​s MFI XLS shows assets up $​20.​5 billion in October to $​5.​005 trillion. It'​s the third straight month of modest inflows and the highest asset level since May 2021."

Another News brief, "Oct. MF Portfolio Holdings: Repos Surpass Treasuries," comments, "Crane Data'​s October Money Fund Portfolio Holdings, with data as of Sept. 30, 2021, show Repo jumping for the 8th month in a row and Treasury holdings plunging for the 6th straight month."

Our November MFI XLS, with Oct. 31 data, shows total assets increased $​20.​5 billion to $​5.​005 trillion, after decreasing $​878 million in September and increasing $​27.​9 billion in August. Assets decreased $​12.​4 billion in July and $​73.​0 billion in June. They also increased $​74.​0 billion in May and $​62.​2 billion in April. Assets rose $​151.​0 billion in March, $​30.​8 billion in February and $​5.​6 billion in January. Assets decreased $​6.​7 billion in December and $​11.​7 billion in November. Our broad Crane Money Fund Average 7-​Day Yield was flat at 0.​02%, and our Crane 100 Money Fund Index (​the 100 largest taxable funds) also remained flat at 0.​02%.

On a Gross Yield Basis (​7-​Day) (​before expenses are taken out), the Crane MFA and the Crane 100 both stood at 0.​08%. Charged Expenses averaged 0.​07% for the Crane MFA and the Crane 100. (​We'​ll revise expenses Monday once we upload the SEC'​s Form N-​MFP data for 10/​31.) The average WAM (​weighted average maturity) for the Crane MFA was 37 days (​up 2 days) while the Crane 100 WAM rose three days to 38 days). (​See our Crane Index or craneindexes.​xlsx history file for more on our averages.)

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Federated Hermes writes about the Fed'​s latest "​taper" in "A familiar course," its latest monthly commentary. Money Market CIO Deborah Cunningham comments, "The success of the Fed'​s first taper gives us confidence it will work well again. 2013 seems so long ago.... But many are recalling it now that it'​s soon likely to happen again -- potentially following this week'​s Federal Open Market Committee meeting. For his part, Chair Jerome Powell said on Oct. 22 that, 'I do think it'​s time to taper.' It'​s helpful to recall 2013 because the process went smoothly (​the taper tantrum happened earlier in the year). We expect the same outcome this time. And we anticipate the deliberate, orderly process will benefit the money markets at a similar pace."

She explains, "While the Treasury market probably won'​t budge from its low levels for some time -- Powell also said, '​I don'​t think it'​s time to raise rates' -- spreads in the prime space have been widening. (​This is being seen in the Bloomberg Short-​Term Bank Yield Index, or BSBY -- the industry replacement for the London interbank offered rate.) We believe the steepening at the short end is due to how prime money funds and the like continue to show resilience in the face of uncertain market conditions. We think BSBY yields will continue in that positive direction."

Cunningham adds, "Even regulations on the money market fund front seem to be taking a good turn. The case for delinking liquidity thresholds and fees/​gates has gained support by the majority of industry participants and we think also by some regulators. That the ultimate authority on this, the SEC, has put reform on the back burner, behind issues like responsible investing disclosures, indicates it may be considering more modest measures. We still argue for an industry-​wide standing facility or something similar, rather than regulation targeting money funds, because the crisis in 2020 affected the broad liquidity market."

In related news, yesterday'​s "FOMC statement" says, "The Federal Reserve is committed to using its full range of tools to support the U.​S. economy in this challenging time, thereby promoting its maximum employment and price stability goals. With progress on vaccinations and strong policy support, indicators of economic activity and employment have continued to strengthen. The sectors most adversely affected by the pandemic have improved in recent months, but the summer'​s rise in COVID-​19 cases has slowed their recovery. Inflation is elevated, largely reflecting factors that are expected to be transitory. Supply and demand imbalances related to the pandemic and the reopening of the economy have contributed to sizable price increases in some sectors. Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.​S. households and businesses."

It tells us, "The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With inflation having run persistently below this longer-​run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer term inflation expectations remain well anchored at 2 percent. The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved."

The FOMC update continues, "The Committee decided to keep the target range for the federal funds rate at 0 to 1/​4 percent and expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee'​s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time. In light of the substantial further progress the economy has made toward the Committee'​s goals since last December, the Committee decided to begin reducing the monthly pace of its net asset purchases by $​10 billion for Treasury securities and $​5 billion for agency mortgage-​backed securities."

They state, "Beginning later this month, the Committee will increase its holdings of Treasury securities by at least $​70 billion per month and of agency mortgage backed securities by at least $​35 billion per month. Beginning in December, the Committee will increase its holdings of Treasury securities by at least $​60 billion per month and of agency mortgage-​backed securities by at least $​30 billion per month. The Committee judges that similar reductions in the pace of net asset purchases will likely be appropriate each month, but it is prepared to adjust the pace of purchases if warranted by changes in the economic outlook. The Federal Reserve'​s ongoing purchases and holdings of securities will continue to foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses."

The statement adds, "​In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee'​s goals. The Committee'​s assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments."

In other news, a press release entitled, "Fitch Ratings Updates Global Money Market Fund Rating Criteria; Ratings Unaffected," tells us, "Fitch Ratings has published an updated version of its '​Money Market Fund Rating Criteria.' This criteria updates Fitch'​s criteria of the same title published on 23 April 2020. The changes to the criteria are limited, reflecting certain market developments and clarifying some aspects of criteria application. No rating changes are expected. This global criteria report primarily focuses on the key rating considerations when assessing the capacity of money market funds (​MMFs), or other liquidity- or cash-​management products, to preserve principal and provide liquidity."

It states, "The criteria'​s emphasis is on managers' ability to avoid losses through limiting credit, market and liquidity risks rather than the particular accounting convention used to calculate net asset value (​NAV), and therefore the criteria is applicable to constant, variable and floating NAV funds, as well as European low-​volatility NAV funds. The criteria is also applicable to other liquidity- or cash-​management products such as local government investment pools (​LGIPs), separately managed accounts, private funds, or other similar vehicles that have comparable investment objectives and operating frameworks to MMFs."

Fitch'​s changes to its criteria include: "Added consideration of deposit programs sponsored by certain U.​S. states, which some LGIPs invest in. The programs' credit quality will be assessed based on the terms of the specific program. In the case of joint and several guarantees, Fitch will impute a rating for the program based on the ratings of the two highest-​rated banks participating in the program. Credit afforded to such deposit programs is limited to 25% of a fund'​s assets; Increased the direct exposure limit for repurchase agreements (​repo) conducted through the Fixed Income Clearing Corporation to 75% from 25%; and, Clarified that the credit treatment of FDIC insured deposits with unrated or low rated banks will be consistent with the U.​S. government'​s rating. In terms of Fitch'​s liquidity assessment, Fitch will count these deposits towards weekly liquidity if they are redeemable within a week, while for daily liquidity Fitch will only count a portion of these deposits if they are redeemable daily."

Additional changes to criteria include: "Clarified that Fitch'​s credit stress tests performed for MMFs during the rating process include ongoing market or issuer-​specific developments, forecasts from Fitch'​s Economics Group and/​or additional scenarios promulgated by Fitch'​s Credit Policy Group. Alternatively, Fitch may assume securities or issuers on Rating Watch Negative or Rating Outlook Negative experience downgrades or develop assumed downgrade scenarios based on an individual issuer exposure. Fitch will then re-​calculate the portfolio'​s minimum and average credit quality (​PCF), taking into consideration these assumed downgrades; and, Clarified that Fitch'​s normal liquidity criteria will be adjusted lower for certain funds that exhibit structurally stable investor bases and historical flows. To qualify for this lower liquidity requirement, Fitch will assess a fund'​s track record, portfolio profile, diversification and stability of its investor base, predictability of capital flows and historically observed outflows. Fitch will determine liquidity levels based on the historical worst outflows of the fund."

Lastly, the release states, "​A number of regulators across the world have put forth reform proposals for MMFs following the market volatility experienced in 2020. Depending on the impact of the final reforms on MMF features, or short-​term markets more broadly, Fitch may further update its MMF rating criteria to reflect these changes." For more, see these Crane Data News pieces: "Fitch Updates MMF Ratings Criteria; Treasury Xpress Partners with FXD" (​5/​17/​19), "Fitch Updates MMF Rating Criteria" (​5/​1/​17), "Standard Poor'​s Updates Criteria for AAAm Rated MMFs; Relaxes on Repo" (​2/​2/​16), "Fed'​s Z.​1: Corps, Sec Lenders Rise; Fitch Updates Ratings Criteria" (​12/​14/​15) and "Rating Agencies Discuss Trends, Concerns, Criteria at Crane Symposium" (​7/​23/​15) and "Standard & Poor'​s Reviews Fund Ratings Criteria" (​9/​17/​14).

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We wrote extensively last week about our recent European Money Fund Symposium, an online event which focused on "​offshore" USD, EUR and GBP money funds domiciled in Ireland and Luxembourg. Today, we quote from the opening session, "European MMF Update: Ireland, France and Lux." It featured Alastair Sewell of Fitch Ratings, Vanessa Robert of Moody'​s Investors Service and Emelyne Uchiyama of S&​P Global Ratings. (Note. The replay of our European MFS recording is available here and the Powerpoints and materials are available here.)

Sewell tells us, "Assets under management in Europe are quite large at about 1.​4 trillion euros in total, that'​s roughly $​1.​63 trillion U.​S. dollars. So quite large but also quite stable. If you look back to March 2020 ... the assets were remarkably resilient. In terms of structure of the market, LVNAVs are the largest fund types in Europe and have been a significant part of time, followed by the standard VNAV, which Vanessa will talk about."

He continues, "​The other point I would make [​is about] the number of active money market funds in Europe. As you can see there it'​s around about 600.... There must be a significant long tail of small and relatively inefficient funds, which I think is a material issue for Europe.... We'​ve been tracking the number of new launches of money market funds in Europe, and ... despite assets being really quite stable over recent years, new funds are being launched."

Sewell comments, "There are money market funds ... domiciled in almost every country in Europe. This is something you actually find in virtually every market around the world. You can go to almost any market and some of the frontier markets, and you will find money market funds. This is because money market funds have a central role in developmental economics in terms of being one of the first vehicles that could use sophisticated instruments like repos to engage with patchy or erratic government bond issuance and make an uninvestable asset class investable in the broad universe."

He tells us, "So they'​re everywhere, and they'​re almost everywhere in Europe, which I think is a critical problem for regulators as they think about money market funds in Europe. And that is because Europe is diverse. Europe has many different needs, has many different requirements. It has many different levels of credit quality.... [​A] domestic fund with a domestic risk appetite is likely to be significantly riskier than a fund in another jurisdiction... So therefore it is incumbent upon European regulators to be able to regulate holistically, to be able to come up with a framework which enables these funds in in diverse markets, and yet recognizes and controls appropriately on the risks of funds in these different markets. That'​s a very significant challenge."

Sewell says, "​This, of course, is not the entirety of the picture. One of the great success stories of Europe has been the UCITS, the undertaking for collective investment in transferable securities, or the mutual fund regulations.... UCITS funds can be sold into many, many jurisdictions around the world [​and] money market funds are indeed sold into different jurisdictions around the world.... Regulation of money market funds not only have to accommodate the internal challenges and complexities, but it will also have an extraterritorial impact on all of these other markets.... [This] means that what happens in Europe will have frankly profound implications for cash investors all around the world."

He adds, "I wanted to talk a little bit about the structure of investment managers in Europe.... When you take into consideration the Standard money funds ... you get a rather different ranking.... Some of the domestic [​French] European managers actually become rather more significant in terms of the asset mix.... So when thinking about Europe again ... you have layers of complexity. We have the international complexity, we have the internal complexity, and then we have the complexity of the needs, requirements of providers."

Moody'​s Robert explains, "French money market funds' assets rose to 358 billion euro as of June 2021 after shrinking in 2018 and 2019. France has a 26% share of Europe'​s MMF market, behind Ireland (​42%) and Luxembourg (​28%). EU regulations introduced in 2018/​19 have increased compliance costs, triggering consolidation. France'​s large number of small MMF'​s, with assets as low as 200,​000 euros, suggests consolidation will continue. French MMFs have 34 providers as of 2021 with the total number of funds being 108, with an average fund size of 3.​3 billion euro."

She states, "​Also, in line with what Alastair was saying, the French market is not homogeneous. You have the big players and ... you have also very small players... So, there is room for further consolidation, and there is also room for a further decline in the number of money market funds in France.... Just one figure, the size of the smallest money market funds in France is less than two hundred and fifty thousand euros. So Alistair was talking about inefficiencies at the European level, it'​s also true at the French level."

Robert also says, "The French market remains pure VNAV, pure variable net asset value money market funds, and there are several explanations behind that. Historical reasons of course in the VNAV space; the French money market is largely dominated by Standard money market funds because of their yield advantage versus Short-​Term money market funds in France. And the other reason being that in France, even Standard money market funds benefit from cash and cash equivalents designation."

She comments, "​The currency ... is [​another] difference with Luxembourg or Irish money market funds. French money market funds are almost exclusively in the euro, and that'​s to do with their investor base. The investor base is largely domestic and insurance companies. French insurance companies and French corporates being the largest investors of French money market funds."

Finally, Robert adds, "Given what happened in March 2020, we would expect to see more regulation.... We all know that ESMA and the SEC published or launched consultations, and the FSB recently published its final report regarding policy to rectify the weaknesses in the money market fund sector.... French money market funds' ... risk profile will normalize and probably return to their pre-​crisis level as spending increases. But if there is a new round of regulation with potential higher regulatory requirements in terms of liquidity, we might see substantial changes."

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Wells Fargo Funds officially became the Allspring Funds yesterday. A release entitled, "Allspring Global Investments Commences Operations As An Independent Global Asset Manager," explains, "Allspring Global Investments today announced that the firm has officially commenced operations as an independent asset management firm. This marks the close of the previously announced acquisition of Wells Fargo Asset Management by GTCR LLC and Reverence Capital Partners, L.​P. The firm'​s new name, Allspring Global Investments (​Allspring), takes effect today." (​See our Oct. 14 Link of the Day, "Wells Fargo Funds Change to Allspring," and see the latest fund filing here.)

The release tells us, "Allspring Global Investments is a leading, pure play, independent asset manager with more than $​587 billion in assets under management and a full breadth of investment capabilities across diverse asset classes, serving the needs of its institutional and wealth management clients around the world. Allspring operates across 18 offices globally and plans to locate its headquarters in Charlotte, North Carolina." The new Allspring manages $​194.​7 billion in money market funds, making it the 9th largest MMF manager.

Joseph A. Sullivan, Executive Chair and CEO of Allspring, comments, "​We recognize that investor expectations in today'​s world go beyond simply delivering alpha. Our commitment will be a continued focus on providing exceptional value to clients by elevating our investment platform and operating model. With the strong support of our partners, GTCR and Reverence Capital, we are poised to capitalize on the many current opportunities before us and we see tremendous potential to expand our reach into new markets and capabilities."

Collin Roche, Co-​CEO and Managing Director of GTCR, and Milton Berlinski, Co-​Founder and Managing Partner of Reverence Capital, jointly state, "​This is a historic day for Allspring. Independence provides the organization with a unique opportunity to expand its leadership position in the asset management industry. We have great confidence in Joe Sullivan and the entire leadership team as they differentiate Allspring in the marketplace by ensuring that the firm is an essential partner to its private wealth and institutional clients. We will be investing significantly in the business to grow strategic areas, including the technology platform, the distribution network, and the firm'​s international footprint."

Sullivan adds, "​Today, we especially want to celebrate the more than 1,​400 incredibly talented people of Allspring. They are core to our collaborative culture, and Allspring'​s independence will be a catalyst to provide exceptional growth opportunities as we chart our path forward.... The entire organization is energized and confident about Allspring'​s future, and our teams are ready to deliver even more for our clients."

The release also says, "In addition to GTCR and Reverence Capital'​s majority ownership, Allspring'​s management, portfolio managers, and employees now hold a significant share of the company'​s equity interests, while Wells Fargo & Co. will own a passive 9.​9% equity interest and continue to serve as an important client and distribution partner to Allspring. Broadhaven Capital Partners and UBS Investment Bank served as financial advisors to the buyers relative to the transaction, with additional financial advice rendered by RBC Capital Markets and Perella Weinberg Partners. Kirkland & Ellis LLP provided legal counsel."

See also our July 27 News, "Wells Fargo Asset Mgmt. To Be Renamed Allspring Global Investments (​and their release) and see our Feb. 25 News, "Wells Fargo Sells Asset Management Unit; Morgan Stanley Gets Social," and the original press release, "Wells Fargo Enters Agreement with GTCR and Reverence Capital Partners to Sell Wells Fargo Asset Management."

In other news, Fitch Ratings published a brief, "U.​S. Debt Ceiling Uncertainty Disrupts MMF Portfolio Management." They write, "Money market funds (​MMFs) lowered exposures to U.​S. Treasury securities maturing around the initial Treasury debt ceiling '​X-​date' to reduce headline and liquidity risk from potential default. The date was predicted to be Oct. 18 by the U.​S. Treasury Secretary, and mid-​October to early-​November by market participants."

The piece explains, "The biggest net decrease was for Treasury securities maturing on Oct. 28, where 28 MMFs sold $​14 billion between Aug. 31 and Sept. 30, 2021. MMFs and other investors selling out of these securities caused the yield to spike to 0.​13% on Oct. 5 from 0.​049% on Sept. 27. Selling may have also been driven by funds' normal liquidity management, where short-​dated Treasuries are sold to meet redemptions."

Fitch tells us, "The extension of the debt ceiling deadline helped calm markets, but is challenging funds that attempted to de-​risk portfolios. The U.​S. Senate voted to raise the borrowing limit by $​480 billion on Oct. 7, which moved the expected X-​date to Dec. 3, 2021. After the announcement, yields for Treasury securities maturing on Dec. 7 jumped from 0.​038% to 0.​081%, and yields on sensitive October Treasuries fell.... MMFs that sold October Treasuries and bought December securities to reduce their debt ceiling-​related risk may have been adversely affected by the trade, and now find themselves in the same position as before the date was moved."

They say, "For example, between July and September 2021, one large Treasury-​only fund sold $​8 billion of Treasuries maturing in October and November, and bought $​8 billion in securities maturing on now-​sensitive dates in December. The political nature of the debt ceiling issue challenges funds' ability to immunize their portfolios from the associated risks."

Finally, Fitch comments, "A default by the U.​S. Treasury on any security held by MMFs could pose a liquidity risk for the funds. Fitch would not necessarily immediately downgrade an MMF holding a defaulted Treasury security, but our analysis would focus on the size of the exposure and on what other sources of liquidity a fund might have."

They add, "Treasury MMFs are generally considered the safest by investors, although these funds face the most risk in the case of the debt ceiling, since prime and government MMFs can invest in other instruments. Treasury-​only MMFs have very limited options, and tend to spread investments across Treasury maturities or leave cash with their custodians to ensure liquidity, as funds could face investor redemptions as the debt ceiling deadline approaches."

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Federated Hermes, the sixth largest manager of money market funds, reported third quarter 2021 earnings and hosted a conference call on Friday. (​See the Seeking Alpha earnings call transcript here.) The release says, "Federated Hermes, Inc. (​FHI), a global leader in active, responsible investing, today reported earnings per diluted share (​EPS) of $​0.​73 for Q3 2021, compared to $​0.​85 for the same quarter last year, on net income of $​71.​4 million for Q3 2021, compared to $​85.​8 million for Q3 2020. Federated Hermes reported YTD 2021 EPS of $​2.​04, compared to $​2.​29 for the same period in 2020, on YTD 2021 net income of $​201.​7 million, compared to $​231.​2 million for the same period in 2020. As reported for Q2 2021, Federated Hermes' YTD 2021 results include a $​14.​5 million, or $​0.​10 per diluted share, noncash U.​K. tax expense."

President & CEO J. Christopher Donahue comments, "As clients continued to rely on our diversified investment options, Federated Hermes' fixed-​income assets reached a record high in the third quarter, which marked our sixth consecutive quarter with positive net flows in fixed-​income assets. Investors sought a range of Federated Hermes' fixed-​income strategies, including multisector, high-​yield and low-​duration offerings, which have offered a yield advantage in this low-​rate environment."

Federated tells us, "Fixed-​income assets were a record $​97.​2 billion at Sept. 30, 2021, up $​17.​7 billion or 22% from $​79.​5 billion at Sept. 30, 2020 and up $​6.​4 billion or 7% from $​90.​8 billion at June 30, 2021.... Money market assets were $​413.​7 billion at Sept. 30, 2021, down $​19.​3 billion or 4% from $​433.​0 billion at Sept. 30, 2020 and down $​16.​1 billion or 4% from $​429.​8 billion at June 30, 2021. Money market fund assets were $​292.​3 billion at Sept. 30, 2021, down $​33.​6 billion or 10% from $​325.​9 billion at Sept. 30, 2020 and down $​9.​7 billion or 3% from $​302.​0 billion at June 30, 2021."

The release says, "Revenue decreased $​37.​9 million or 10% primarily due to an increase in voluntary fee waivers related to certain money market funds in order for those funds to maintain positive or zero net yields (​voluntary yield-​related fee waivers) and lower average money market assets. For further information on the waivers, see 'Impact of voluntary yield-​related fee waivers' below. These decreases were partially offset by an increase in revenue due to higher average equity and fixed-​income assets. During Q3 2021, Federated Hermes derived 82% of its revenue from long-​term assets (​53% from equity, 19% from fixed income and 10% from alternative/​private markets and multi-​asset), 17% from money market assets, and 1% from sources other than managed assets."

It explains, "​Operating expenses decreased $​22.​9 million or 9% primarily due to decreased distribution expenses predominantly resulting from higher voluntary yield-​related fee waivers. During the three and nine months ended Sept. 30, 2021, voluntary yield-​related fee waivers totaled $​109.​2 million and $​310.​2 million, respectively. These fee waivers were partially offset by related reductions in distribution expenses of $​72.​3 million and $​204.​9 million, respectively, such that the net negative pre-​tax impact to Federated Hermes was $​36.​9 million and $​105.​3 million for the three and nine months ended Sept. 30, 2021, respectively."

The release continues, "Short-​term interest rates remained near historic lows during Q3 2021 as technical factors at the front end of the yield curve kept yields on short-​term government securities -- including repurchase agreements and Treasury bills -- just above zero. As a result, the net negative impact on pre-​tax income from voluntary yield-​related fee waivers on money market mutual funds and certain separate accounts may be approximately $​39 million during Q4 2021. The amount of voluntary yield-​related fee waivers can vary based on a number of factors, including, among others, interest rates, yields, asset levels, asset flows and the ability of distributors to share in waivers. Any change in these factors can impact the amount and level of voluntary yield-​related fee waivers, including in a material way."

On the earnings call, Donahue states, "Moving to money markets, assets were down about $​16 billion in Q3 with about $​10 billion from funds and $​6 billion from separate accounts. Our money market mutual fund market share, including sub-​advised funds was about 7.​2% at the end of Q3, down slightly from Q2 of 7.​4%. While the Fed raised the administered rates in mid-​June, the money fund yield curve remained flat and rates didn'​t change much in the third quarter. We believe that we will see higher short-​term rates in '​22. We continue to experience more waivers for competitive purposes.... Now taking a look at recent asset totals. Managed assets were approximately $​636 billion, including $​413 billion in money markets, $​99 billion in equities, $​98 billion in fixed income and $​22 billion in the alternative private markets and $​4 billion in multi-​asset. Money market mutual fund assets were $​290 billion."

During the Q&​A, they were asked about fee waivers. CFO Tom Donahue responds, "Our competitive environment remains. It has always remained. And ... as we expect rates to go up over time, we will remain competitive with the rest of the market. That'​s basically how we view it.... The minimum yield waivers are the waivers to maintain zero or just above zero in the rates, and that'​s how we do it. If we are going higher than that, then that'​s really the competitive nature and that depends on what'​s going on in the marketplace. And we can'​t really predict what'​s going to happen there."

Another analyst (Ken Worthington) follows up, "It looks like the yield on the Government Obligations Fund rose in August and rose in September to match yield levels by some other big government funds.... I assume that this is a matter of competitive fee waivers that we'​ve been talking about. Also, ... now that we'​re seeing more conviction around rate increases possibly coming next year, is there jockeying taking place to kind of try to win share through yield in a way that maybe you and the industry didn'​t see 6 to 12 months ago?"

Chris Donahue answers, "It'​s really hard to jump into the scan and the brain of the competitors as to whether they'​re trying to do something one way or the other.... So we just don'​t do that. We deal with the reality of the marketplace, what those yields are. I don'​t disagree with your observations about what was going on in the summer. And this game will continue. I'​ll let Debbie comment on some of the specifics of those -- of what was behind those rate moves."

Money Market CIO Debbie Cunningham responds, "​Looking at the various curves and what'​s available, the government funds which ... are generally the ones that are contributing to the highest amount in waivers, were constrained in the third quarter by what was going on from a debt ceiling limit. So that has unfortunately been kicked down the road a little bit and will be impacting us to a large degree in the fourth quarter as well. If you look though at other curves that are not being influenced by that debt ceiling constraints, you'​re looking at curves that in the money markets have generally risen anywhere from 4 to 10 basis points. And our expectation would be as soon as we start tapering and get some supply and the debt ceiling is behind us providing more supply, the government curve will follow in turn."

She continues, "Expectations, from a competitor standpoint, are that with expected increasing yields, there'​s less of a concern about what needs to be enhanced to various shareholders in the marketplace. And I think that'​s what we'​re basically hearing and seeing, that flip the calendar into 2022, get the debt ceiling behind us, get tapering underway, and the government curve starts to look like the prime curve, whether you'​re looking at LIBOR or BSBY or whatever the indices are, and that means increasing rates."

When asked about money fund substitutes, Cunningham comments, "Well, it seems as though deposits are always in the picture, unfortunately, as a money market competitive product. And even in today'​s low rate environment, where there are substantial amount of the deposits that are uninsured and that are noninterest-​bearing, that seems to be nonetheless a choice of many of our clients. As far as other types of products, I know lots have been mentioned as far as ETFs, cash like ETFs, cryptocurrencies, etc., we'​re not seeing that occur at this point. We have those on our landscape as something to watch. We'​re certainly understanding and involved in the market so that it doesn'​t creep up on us and become a distinctive competitor before we would recognize that but that'​s not necessarily anything we'​re seeing at this red hot moment in time."

Hanley adds, "Just to add to that, we are seeing, of course, clients, corporations putting cash to work, investing as we enter an up cycle and come out of the pandemic. So we will expect to continue to see uses of cash, whether that'​s stimulus money that'​s flowed through and flowed into money funds and eventually goes on to do its intended stimulus work as well as, as I mentioned, corporations beginning to invest and seeing opportunities where they were more hunkered down over the last 18 months."

Cunningham also says, "And one last thing, Ken, is that in the context of our Microshort, Ultrashort products, there have been clients that have -- over the course of the last two years with ultra low rates -- continue to bucket cash and go a little bit longer into those products. In addition, those that are concerned about a steeper yield curve and higher rates in the long end of the curve have also come into those products. But again, with a full lineup of funds that go from basically overnight out to 30 years, we'​re liking those flows."

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