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Crane'​s 2nd Annual Money Fund University, which will be held on January 19-​20 at the Hyatt Regency Boston, is preparing to publish its preliminary agenda. We'​re still looking for speakers, though. Any interested and qualifed parties should e-​mail Pete for more details. This year'​s event will have a stronger focus on regulatory and Rule 2a-​7 content. Also, we'​re soliciting proposals for next year'​s Crane'​s Money Fund Symposium, which will be in Pittsburgh June 20-​22 (​note a slight date change from earlier notices). See www.​moneyfunduniversity.​com and www.​moneyfundsymposium.​com for more details and for future updates.

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The Wall Street Journal writes "​Low Rates Hit Money-​Market Funds". It says, "Money-​market mutual funds, those havens of safety for investors during tumultuous times, are facing their own pressures as interest rates continue to decline. The funds, which historically aimed to provide higher yields than bank deposits without risk of losses, are waiving fees and consolidating -- or closing their doors altogether. The drop Thursday on the 10-​year Treasury to below 2% in intraday trading provided fresh bad news for the funds. Money-​market funds once were profit machines, collecting $​13 billion in fees at their peak in 2008. But they have seen their revenues shrivel by 65% over the past three years as short-​term interest rates have fallen to near zero. The Federal Reserve'​s announcement last week that it would likely leave rates untouched for the next two years erased hopes for improvement anytime soon, say analysts. Despite the continued interest-​rate pressures, money-​market funds have seen a surge of inflows recently as investors increasingly seek the safety of cash amid the market turmoil. Some $​60 billion has gone into money funds this month, according to money-​fund tracker Crane Data LLC. Also, a recent announcement by Bank of New York Mellon Corp. that it might start charging customers with $​50 million or more in their accounts to hold their cash could force others into money funds. Still, any big inflows into money funds could be temporary, depending on the length of the market chaos, and with interest rates remaining low, would offer little relief for the industry, analysts say." See also, ICI'​s weekly "​Money Market Mutual Fund Assets", which says, "Total money market mutual fund assets increased by $​10.​21 billion to $​2.​631 trillion for the week ended Wednesday, August 17, the Investment Company Institute reported today."

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Dow Jones writes "​Money Market Funds Struggle As Fed Keeps Rates Near Zero", The article says, "Money market funds, their pre-​recession glory days well behind them, have a new cloud over their future: how to stay in business another two years when their investors know there'​s no hope for profits. The funds lost any chance of making money before 2013 when the Federal Reserve said last week it would keep interest rates -- which fuel returns on the low-​risk assets the funds must purchase -- near zero for at least another two years. Many small funds have already exhausted emergency measures like waiving management fees just to survive since the Fed all-​but eliminated interest rates in 2009. Those funds that are out of options will likely fold, though larger funds should still be able to draw investors looking to hold nearly risk-​free assets, analysts tracking the money market sector say. The number of money funds in operation has already dropped to 652 at the end of 2010 from 805 at the end of 2007, according to data from the Investment Company Institute, a national association of U.​S. investment companies." The article [​mis]​quotes Peter Crane, president of Crane Data, a research firm that tracks money market funds, "It was [​may be] the last straw for smaller players." The piece adds, "The one card the funds have left is that they'​re safe. Even funds that won'​t return a penny until at least 2013 can all-​but guarantee that investors won'​t lose anything more than management fees. That'​s enough to lure investors worried about the risk posed by the stock market or currencies, which have proven volatile this year amid an uncertain economic outlook."

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We were startled by the huge media interest in a two-​page draft memo from Bank of New York Mellon indicating that the bank will begin charging fees on "​sudden, significant" increases in deposits. Why banks charging fees or passing through negative yields would be big news was confusing to us, but we'​re happy to take any good news for money funds we can get. (​Though it'​s mixed news -- money funds should benefit from corporate and institutional money shifting towards funds, but they'​ll also lose their own "​safe harbor".) Money funds already appear to be benefitting from this news as assets surged by $​24.​9 billion yesterday, according to our Money Fund Intelligence Daily. We quote some of the coverage below, and look for more news in our August Money Fund Intelligence which e-​mails to subscribers later this morning.

The Wall Street Journal appeared to be the first to cover the BNY Mellon charge, writing, "BNY Mellon to Charge for Deposits Above $​50 Million." It says, Bank of New York Mellon Corp. is preparing to charge some large depositors to hold their cash, in the latest sign of the worries roiling global markets. The biggest U.​S. custodial bank said this week in a note to clients that it will begin slapping a fee next week on customers that have vastly increased their deposit balances over the past month. The bank cited the massive dollar deposits it has received over recent weeks, as investors and corporations retreat from financial markets amid Europe'​s debt crisis and the recent debate over U.​S. government borrowing."

The Journal adds, "Over the past two weeks, money-​market funds, corporate treasurers and investment houses have pulled money out of securities that mature in more than one day in favor of stashing their cash in accounts at Bank of New York and other custody banks like J.​P. Morgan Chase & Co. These accounts earn no interest, but are insured by the Federal Deposit Insurance Corp. Bank of New York said that it will charge 0.​13%, plus an additional fee if the one-​month Treasury yield falls below zero on depositors that have accounts with an average monthly balance of $​50 million "​per client relationship," according to a letter reviewed by The Wall Street Journal."

Bloomberg, in "​BNY Mellon to Charge for Large Deposits", says, "Bank of New York Mellon Corp. (​BK), the world'​s largest custody bank, will charge institutional clients a fee for "​extraordinarily high" cash deposits to stem a flight of capital into the safety of bank deposits.... The rising deposits at custody banks represent mostly '​hot money' and some banks have begun to pass on the burden of insuring it to their large, institutional investors, Joseph Abate, money-​market strategist at Barclays Plc in New York, wrote in a note to clients."

The article quotes, "If other banks follow BNY Mellon'​s example, investors may shift some of their cash into money-​market mutual funds, said Peter Crane, president of money-​fund research firm Crane Data LLC in Westborough, Massachusetts. The funds have faced a challenge in past months in finding enough securities they are eligible to buy and without lowering their yield."

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The LA Times writes "​Money market funds see $​103-​billion outflow amid debt drama". It says, "Big investors' fears over the federal debt-​ceiling drama triggered a near-​record outflow of cash from money market mutual funds over the last week. Apparently worried that some money funds could suffer losses if the Treasury defaulted on some of its debts, investors yanked a net $​103.​2 billion from the funds in the seven days ended Tuesday, data tracker iMoneyNet Inc. said. That was close to the record $​120.​4 billion that exited the funds in the week ended Sept. 23, 2008, amid the financial system collapse. On a percentage basis, this week'​s decline was larger -- amounting to 3.​9% of total fund assets of $​2.​63 trillion. The 2008 outflow was 3.​5% of assets at the time." The article quotes Pete Crane, head of money-​fund research firm Crane Data in Westborough, Mass., "It was a direct result of the debt ceiling debate and fear of default." The Times adds, "​But with the debt ceiling lifted after an 11th-​hour compromise in Congress, cash began to flow back into money funds on Tuesday, Crane said. Where did the money go when it left the funds? "​Banks no doubt were the main beneficiaries," Crane said. Because banks can offer unlimited federal deposit insurance on non-​interest-​paying business accounts, institutional investors could easily park cash in those accounts with no risk of principal loss."

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