Northern Institutional Funds filed to liquidate its $1.7 billion Northern Prime Obligations Portfolio earlier this week, we learned from Bloomberg. The filing says, "The Board of Trustees (the 'Board') of Northern Institutional Funds (the 'Trust') has determined, after consideration of a number of factors, that it is in the best interests of the Prime Obligations Portfolio (the 'Portfolio') and its shareholders that the Portfolio be liquidated and terminated on or about July 10, 2020 (the 'Liquidation Date') pursuant to a plan of liquidation approved by the Board. The Liquidation Date may be changed at the discretion of the Trust's officers. The pending liquidation of the Portfolio may be terminated and/or abandoned at any time before the Liquidation Date by action of the Board of the Trust. As of the date of this supplement, Williams Capital Shares of the Portfolio have not commenced operations and are not offered for purchase." (The fund's assets are down from $3.8 billion on Feb. 28, 2020.)
The Bloomberg piece, "Northern Trust to Shutter Money-Market Fund After Redemptions," tells us, "Northern Trust Corp. is shutting down a money-market mutual fund after volatility in March spurred redemptions that sent it below a regulatory threshold for maintaining liquidity. The $1.7 billion Northern Institutional Prime Obligations Portfolio will stop accepting new investments next month and start selling its holdings under a liquidation plan set for July 10, according to a filing."
Reuters, in a March 23 article,"Fed's Money Market Move Lifts Northern Trust Fund Above Key Threshhold," wrote, "Liquidity at a $2.2 billion prime money-market fund run by Northern Trust Corp fell below the key 30% U.S. regulatory threshold twice last week, but rebounded above that level after the U.S. Federal Reserve shored up the industry. As the coronavirus roils the global economy and squeezes Wall Street for cash, money-market reforms put in place after the 2007-2009 financial crisis are weathering a major test."
They explained, "Several institutional prime funds, whose investors include large corporations, were at risk of falling below the 30% threshold before the Fed took extraordinary steps reminiscent of the last financial crisis to backstop the money-market industry." The Northern Prime Obligations Portfolio disclosed that its weekly liquidity level fell to 27% of assets twice last week, according to the fund's website -- reducing its buffer for quickly converting assets into cash to meet investors' redemptions. However, Chicago-based Northern Trust, a bank and wealth manager, said on Monday the latest weekly liquidity level for the fund was nearly 41%."
In other news, The Federal Reserve Bank of New York published an update on the "The Primary Dealer Credit Facility" via its Liberty Street Economics blog. They write, "On March 17, 2020, the Federal Reserve announced that it would re-establish the Primary Dealer Credit Facility (PDCF) to allow primary dealers to support smooth market functioning and facilitate the availability of credit to businesses and households. The PDCF started offering overnight and term funding with maturities of up to ninety days on March 20. It will be in place for at least six months and may be extended as conditions warrant. In this post, we provide an overview of the PDCF and its usage to date."
The NY Fed writes, "Lending rose quickly after the PDCF's launch, and the weekly average of outstanding loans peaked at over $35 billion for the week ending April 15.... Outstanding loans remained in the $30-35 billion range for a few weeks, before decreasing recently, as market conditions improved. The vast majority of value-weighted PDCF loans have a maturity longer than overnight.... The bulk of the assets financed in the PDCF to date have been corporate and municipal debt, as well as asset-backed securities and commercial paper. These are asset classes that were experiencing considerable volatility and pressure in early March. Market conditions have improved markedly since the introduction of a variety of Fed interventions, including the PDCF."
They explain, "The Federal Reserve initially established the PDCF in March of 2008, following severe strains in the tri-party repo market, associated in part with Bear Stearns' troubles.... Following its inception in March 2008, usage of the original PDCF increased to approximately $40 billion, before decreasing to zero by mid-2008.... This $40 billion level is roughly comparable to the peak usage of today's PDCF. Usage of the original PDCF increased to over $140 billion in September 2008, following the bankruptcy of Lehman Brothers. This peak is much higher than the current use of today's PDCF. However, the range of collateral eligible for the PDCF post-Lehman was much broader than the range of eligible collateral at the PDCF today, making comparisons difficult."
The piece adds, "The PDCF is one of many facilities introduced by the Federal Reserve to support the U.S. economy in the face of the coronavirus pandemic. The PDCF helps primary dealers support smooth market functioning and facilitate the availability of credit to businesses and households in their capacity as market makers for corporate, consumer, and municipal obligations." For more, see these previous Liberty Street Economics blogs: "The Money Market Mutual Fund Liquidity Facility" and "The Commercial Paper Funding Facility."
Finally, Crane Data published its latest Weekly Money Fund Portfolio Holdings statistics Tuesday, which track a shifting subset of our monthly Portfolio Holdings collection. The most recent cut (with data as of May 15) includes Holdings information from 80 money funds (up two from two weeks ago), which represent $2.664 trillion (up from $2.568 trillion) of the $5.123 trillion (52.0%) in total money fund assets tracked by Crane Data. (Note that our Weekly MFPH are e-mail only and aren't available on the website. For our latest monthly Holdings, see our May 12 News, "May MF Portfolio Holdings: Treasuries Skyrocket, Repo Plunges in April.)
Our latest Weekly MFPH Composition summary again shows Government assets dominating the holdings list with Treasury totaling $1.344 trillion (up from $1.209 trillion two weeks ago), or 50.4%, Repurchase Agreements (Repo) totaling $635.7 billion (down from $706.4 billion two weeks ago), or 23.9% and Government Agency securities totaling $470.7 billion (up from $470.4 billion), or 17.7%. Certificates of Deposit (CDs) totaled $70.7 billion (up from $48.7 billion), or 2.7% and Commercial Paper (CP) totaled $59.2 billion (up from $58.7 billion), or 2.2%. A total of $46.9 billion or 1.8%, was listed in the Other category (primarily Time Deposits), and VRDNs accounted for $37.6 billion, or 1.4%.
The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $1.344 trillion (50.4% of total holdings), Federal Home Loan Bank with $289.3B (10.9%), Fixed Income Clearing Co with $99.9B (3.7%), Federal Farm Credit Bank with $69.9B (2.6%), BNP Paribas with $69.5B (2.6%), Federal National Mortgage Association with $57.5B (2.2%), Federal Home Loan Mortgage Corp with $51.3B (1.9%), JP Morgan with $49.5B (1.9%), RBC with $46.8B (1.8%) and Mitsubishi UFJ Financial Group Inc with $30.0B (1.1%).
The Ten Largest Funds tracked in our latest Weekly include: JP Morgan US Govt ($228.4B), Goldman Sachs FS Govt ($217.0B), Fidelity Inv MM: Govt Port ($194.3B), BlackRock Lq FedFund ($175.5B), JPMorgan 100% US Treas MMkt ($142.3B), Wells Fargo Govt MM ($138.6B), Goldman Sachs FS Treas Instruments ($133.3B), Morgan Stanley Inst Liq Govt ($109.3B), State Street Inst US Govt ($105.4B) and BlackRock Lq T-Fund ($86.4B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary, or our Bond Fund Portfolio Holdings data series.)
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As we make final preparations for our virtual European Money Fund Symposium, which will take place this Thursday (10/21) from 9:30am-12:00pm EDT, Crane Data is also making plans for our next live event, Money Fund University. The 12th annual MFU, our "basic training" conference, will take place at the Hyatt Regency in Boston, Mass., January 20-21, 2022. Crane's Money Fund University is designed for those new to the money market fund industry or those in need of a concentrated refresher on the basics. The event also focuses on hot topics like money market fund regulations, money fund alternatives, offshore markets, and other recent industry trends. Our educational conference features a faculty of the money fund industry's top lawyers, strategists, and portfolio managers, and the Boston show will include an extended free training session (and lunch) for Crane Data clients. We review the MFU agenda, and also the upcoming AFP conference in Washington, below. (We hope to see many of you at AFP in November -- come visit us at booth #1136!)
Money Fund University offers a 2-day crash course on money market mutual funds, educating attendees on the history of money funds, the Fed, interest rates, ratings, rankings, and money market instruments such as commercial paper, Treasury bills, CDs and repo. We also cover portfolio construction and credit analysis. Registrations are now being taken, and the latest agenda is available here. (E-mail us to request the latest brochure.)
The morning of Day One (1/20/21) of the 2022 MFU agenda includes: History & Current State of Money Market Mutual Funds with Peter Crane of Crane Data; The Federal Reserve & Money Markets with Mark Cabana of BofA Securities; Ratings, Monitoring & Performance with Greg Fayvilevich of Fitch Ratings and Guyna Johnson of S&P Global; and, Instruments of the Money Markets Intro with Teresa Ho of J.P. Morgan Securities.
Day One's afternoon agenda includes: Repurchase Agreements with Jake Kruk of J.P. Morgan Securities; Treasuries & Govt Agencies with Sue Hill of Federated hermes and Matt Lachance of TD Securities; Tax-Exempt Securities & VDRNs with John Vetter of Fidelity Investments; Commercial Paper & ABCP with Rob Crowe and Ryan Kesapyan of Citi Global Markets and CDs, TDs & Bank Debt with Vanessa McMichael of Wells Fargo Securities; and, Credit Analysis & Portfolio Management with Sean Lussier and Peter Hajjar of SSGA.
Day Two's (10/21/21) agenda includes: Money Fund Regulations: 2a-7 Basics & History with Brenden Carroll of Dechert LLP and Jamie Gershkow of Stradley Ronon; European MMF Reforms & Offshore Money Funds with Peter Crane of Crane Data, John Hunt of Sullivan & Worcester LLP and Barry Harbison of HSBC Global AM; Ultra-Short Bond Funds & SMAs with `James McNerny of J.P. Morgan A.M.; and, Money Fund Data & Wisdom Demo/Training with Peter Crane. The conference ends with its annual MFU "Graduation" ceremony (where diplomas are given to attendees).
New portfolio managers, analysts, investors, issuers, service providers, and anyone interested in expanding their knowledge of "cash" investing should benefit from our comprehensive program. Even experienced professionals may enjoy a refresher course and the opportunity to interact with peers in an informal setting. Attendee registration for Crane's Money Fund University is just $500, exhibit space is $2,000, and sponsorship opportunities are $3K (Bronze), $4K (Silver), and $5K (Gold). A block of rooms has been reserved at the Boston Hyatt Regency.
We'd like to thank our past and pending MFU sponsors -- Dreyfus/BNY Mellon CIS, J.P. Morgan Asset Management, Fitch Ratings, TD Securities, S&P Global Ratings, Dechert LLP, Fidelity Investments and Federated Investors -- for their support, and we look forward to seeing you in Boston in January. E-mail Pete Crane (email@example.com) for the latest brochure or visit www.moneyfunduniversity.com to register or for more details.
Crane Data is also preparing the preliminary agenda for our next Bond Fund Symposium, which will be held March 28-29, 2022, at the Hyatt Regency in Newport Beach, Calif. Our Bond Fund Symposium offers a concentrated and affordable educational experience, as well as an excellent and informal networking venue. Registration for Bond Fund Symposium is $750; exhibit space is $2,000 (includes 2 tickets); and sponsorship opportunities are $3K, $4K, $5K, and $6K. Our mission is to deliver the best possible conference content at a reasonable price to bond fund professionals and investors.
We'll also soon be making plans for our next "big show," Money Fund Symposium, which will be held June 20-22, 2022, at the Hyatt Regency in Minneapolis. (Let us know if you'd like details on speaking or sponsoring.) Also, mark your calendars for next year's European Money Fund Symposium, which will be held Sept. 27-28, 2022, in Paris, France. Watch for details on these shows in coming weeks and months.
In other news, money market mutual fund distributors and cash managers will be travelling to Washington, DC for AFP 2021, the Association for Financial Professionals' big annual gathering of corporate treasurers, which takes place November 7-9. AFP is the largest gathering of corporate investors in the country, (normally) attracting over 5,000 treasury management professionals, as well as a host of large banks and institutional money fund managers. (It should be about half as big this year.)
At AFP, sessions involving money funds and/or cash investing include: "Inclusion In The Capital Markets Is Spelled MWVBE," with Southern Company's Meredith Bromley and MFR Securities' James Gilligan; "Are Zero Interest Rates Really Different This Time?" with State Street Global Advisors' William Goldthwait, Snowflake Computing's Vaibhav Natu, Fastly's Michael Scott and Creative Artists Agency's Garima Thakur; "The Blockchain Revolution: How A Decentralized Ledger May Disrupt The $5 Trillion Money Market Fund Industry" with Western Asset Management's Jason Straker and Franklin Templeton's Chris Franta; "Deeply Connected: Integrating Cash & Investments For Optimal Efficiency," with ICD Portal's Sebastian Ramos, Summit Utilities' Andrea Guntren and The Coca-Cola Company's Aidan Monahan; "Seeking Yield For A Euro Portfolio In A Negative Rate Environment," with Salesforce.com's Cameron Bowen, Neuberger Berman's Patrick Barbe, Bridgebay Financial's Nicholas Zaiko and Celonis' Ivan Troufanov; and, finally, "Why Corporate Treasurers May Consider Bitcoin," with Fidelity Investments' Tom Jessop.
Finally, thank you once again to those who supported last month's Money Fund Symposium, which took place Sept. 21-23 in Philadelphia! The recordings and materials are available to Crane Data subscribers at the bottom of our "Content" page. Let us know if you'd like more details on any of our (or other "cash") events, and we hope to see you in Boston in January, Newport Beach in March, Minneapolis in June or Paris in September in 2022!
The October issue of our flagship Money Fund Intelligence newsletter, which was sent to subscribers Thursday morning, features the articles: "ESG & Social Trend Reaches Frenzy as Funds Go All-In," which discusses the latest news and moves by managers to burnish their sustainability or diversity credentials; "Money Fund Symposium Flies in Philly; Regulations Focus," which reviews the highlights from our return to conferences; and, "Worldwide MF Assets Higher in Q2'21 Led by China, U.S.," which examines the latest global MMF market rankings. We also sent out our MFI XLS spreadsheet Thursday a.m., and have updated our Money Fund Wisdom database query system with 9/30/21 data. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our October Money Fund Portfolio Holdings are scheduled to ship on Tuesday, Oct. 12, and our October Bond Fund Intelligence is scheduled to go out next Friday, Oct. 15.
MFI's lead article says, "Dreyfus is the latest money market fund manager to integrate ESG criteria into its overall portfolio management credit analysis, joining Federated Hermes, Goldman Sachs, J.P. Morgan and others. A spokesperson for BNY Mellon Investment Management says, 'Dreyfus Cash Investment Strategies has announced the formal integration of environmental, social, and governance (ESG) considerations into its credit analysis process. We define ESG integration as the explicit inclusion of ESG factors in our credit evaluation where available and, ultimately, investment decisions. There is no change to our core investment process and many of the factors embedded within ESG are part of our credit analysis already."
It continues, "CIO John Tobin comments, "We believe the integration of ESG into our fundamental credit process where available makes us better investors and supports our mission of protecting our clients' future financial wellbeing. In our view, issuers that are environmentally aware, socially responsible, and well governed are often better positioned to manage risks and capitalize on opportunities."
Our "MFS" piece reads, "Crane Data hosted its latest Money Fund Symposium conference in Philadelphia recently, and the 250+ attendees gathered for our big show for first time since June 2019 in Boston. We excerpt from some of the sessions, below. (Note: Thanks to those who supported MFS! The recording and materials are available here for Attendees and Crane Data subscribers.)
The recap explains, "The opening session, 'Keynote: Adapting to Regulations, Tech & ESG,' featured BlackRock's Tom Callahan and Federated Hermes' Debbie Cunningham. Callahan comments, 'Here is what I believe the correct narrative for the cash management industry through the current crisis is: Our clients collectively, as everyone knows, are the largest and most sophisticated clients in the world, and they were thrust quite unexpectedly in March of 2020 into the most challenging operating environment that any of them had ever seen. In response, they did the logical thing. They raised liquidity. They raised a biblical amount of liquidity. And much of that, over $1.25 trillion, was invested in money funds in three weeks at the end of March 2020 and at the beginning of April.'"
The "Worldwide" article tells readers, "The Investment Company Institute published, 'Worldwide Regulated Open-Fund Assets and Flows, Second Quarter 2021,' which shows that money fund assets globally rose by $86.0 billion, or 1.0%, in Q2’21 to $8.565 trillion. The increase was driven by gains in Chinese and U.S. money market fund assets, but French and Australian MMF assets declined. MMF assets worldwide increased by $404.9 billion, or 5.0%, in the 12 months through 6/30/21, and money funds in the U.S. now represent 52.9% of worldwide assets."
ICI's release says, "At the end of the second quarter of 2021, 47% of worldwide regulated open-end fund assets were held in equity funds. The asset share of bond funds was 20% and the asset share of balanced/mixed funds was 12%. Money market fund assets represented 12% of the worldwide total.... Money market funds worldwide experienced an inflow of $79 billion in the second quarter of 2021 after registering an inflow of $263 billion in the first quarter of 2021."
MFI also includes the News brief, "Money Funds Celebrate 50 Years!" We write, "While we said one year ago that money market funds marked their 50th birthday, one could argue that 1971 was the actual launch date of Reserve Primary Fund, the first money fund. (It filed in October 1970 but went live in October 1971.) So Happy 50th Birthday, again!"
Another News brief, "Assets Flat in Sept.," explains, "MMFs decreased $878 million to $4.964 trillion in Sept. according to MFI XLS. ICI's weekly 'MMF Assets' report shows assets jumping for the second week in a row, following a tax-related drop on Sept. 15. ICI says, 'Total MMF assets increased by $29.11 billion to $4.54 trillion for the week ended Sept. 29.'"
Our October MFI XLS, with Sept. 30 data, shows total assets decreased $878 million to $4.964 trillion, after increasing $27.9 billion in August, but decreasing $12.4 billion in July and $73.0 billion in June. They 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, $11.7 billion in November and $46.8 billion in October. 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 0.09%. Charged Expenses averaged 0.07% for the Crane MFA and the Crane 100. (We'll revise expenses Friday once we upload the SEC's Form N-MFP data for 9/30.) The average WAM (weighted average maturity) for the Crane MFA was 35 days (down 2 days) while the Crane 100 WAM fell one day to 35 days). (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
The September issue of our flagship Money Fund Intelligence newsletter, which was sent to subscribers Wednesday morning, features the articles: "FSB Comment Letters Show Consensus on Reforms Close," which discusses the latest feedback on reforms; "BlackRock's Beccy Milchem Talks European MMF Issues," which profiles the new Head of EMEA Cash; and, "More D&I Share Classes on the Way, But ESG Takes Hit," which recaps the latest news on diversity MMFs. We also sent out our MFI XLS spreadsheet Wednesday a.m., and have updated our Money Fund Wisdom database query system with 8/31/21 data. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our September Money Fund Portfolio Holdings are scheduled to ship on Friday, Sept. 10, and our September Bond Fund Intelligence is scheduled to go out next Wednesday, Sept. 15.
MFI's lead article says, "Discussions continue to heat up and evolve over changing regulations governing money market funds, both in the U.S. and globally. The latest chapter in the saga is the posting of comment letters in response to the Financial Stability Board's 'Policy proposals to enhance money market fund resilience: Consultation Report.' Forty letters were posted in response and we've been quoting and summarizing from them since the August 12 deadline for comments passed. We review the latest highlights below."
It continues, "The Wall Street Journal discusses the pending money fund reforms in its article, 'Firms Wary as Money-Market Rule Changes Studied After Covid-19 Run.' They tell us, 'Investment managers are fighting for the future of money-market funds.... [F]inancial regulators are weighing rule changes designed to ensure that these funds fare better in the next crisis."
Our "BlackRock's Milchem" piece reads, "This month, MFI interviews Rebecca Milchem, BlackRock's new Head of Cash for EMEA. BlackRock is the 2nd largest manager of money funds worldwide and the largest manager of Euro and Sterling MMFs. We discuss the latest regulatory discussions, European vs. U.S. issues, and a number of other topics below in our Q&A."
MFI asks, "Give us a little bit of history. Milchem tells us, "Looking back at the BGI (Barclays) and BlackRock [merger] ... BGI always had the bigger Sterling book [and] BlackRock had a much bigger Dollar footprint when we put the businesses together back in 2009.... They were very complementary. I joined the business in 2008 ... so I had a bit of a baptism of fire.... I think we feel like we've been repeating history the last in the last year in terms of the experience from 2008.... But nothing brings a business together like going through some volatile market conditions and learning through and working with clients through those times."
The "D&I" article tells readers, "While it's been relatively quiet in the Social and ESG money fund space, there were a couple of developments over the past month. The good news was that BlackRock filed to launch several more D&I dealer affiliated share classes, while the bad news was that The Wall Street Journal took a shot at DWS and Deutsche Bank for overstating and struggling to define its ESG efforts."
It adds, "BlackRock's new Form N-1A Registration Statement filings include: Bancroft Capital Shares for BlackRock Liquid Federal Trust Fund, Cabrera Capital Markets Shares for TempFund and BlackRock Liquid Federal Trust Fund, Mischler Financial Group Shares for BlackRock Liquid Federal Trust Fund and Bancroft Capital Shares for the BlackRock Liquid Environmentally Aware Fund (LEAF). BlackRock already offers ESG MMFs BlackRock LEAF Direct (LEDXX) and LEAF Inst (LEFXX); BlackRock Wealth LEAF Inv (PINXX) and Inst (PNIXX); and BlackRock Liquidity FedFund Mischler (HUAXX)."
MFI also includes the News brief, "MFs Higher in August, Dip on Week," which says, "Money fund assets increased by $27.9 billion in August to $4.968 trillion, according to our MFI XLS. This follows declines of $38.5 billion in July and $84.8 billion in June. ICI's latest 'Money Market Fund Assets' report shows MMFs down $17.2 billion to $4.509 trillion in the latest week. Year-to-date, ICI shows MMFs up $212 billion, or 4.9%."
Another News brief, "August Portfolio Holdings: Treasuries Plunge Again; Repo, TDs Jump," comments, "Crane Data's latest Money Fund Portfolio Holdings, with data as of July 31, 2021, show another increase in Repo holdings, a jump in Other (Time Deposits) and another plunge in Treasuries. Treasury securities remained the largest portfolio segment, though Repo is closing in on the No. 1 spot. Agencies were the third largest segment, CP remained fourth, ahead of Other/Time Deposits, CDs and VRDNs."
Our September MFI XLS, with August 31 data, shows total assets increased $27.9 billion to $4.968 trillion, after decreasing $12.4 billion in July and $73.0 billion in June. They 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, $11.7 billion in November, $46.8 billion in October and $121.2 billion in September. 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 remained at 0.09%. Charged Expenses averaged 0.07% for the Crane MFA and the Crane 100. (We'll revise expenses Thursday once we upload the SEC's Form N-MFP data for 8/31.) The average WAM (weighted average maturity) for the Crane MFA was 37 days (unchanged) while the Crane 100 WAM fell one day to 36 days). (See our Crane Index or craneindexes.xlsx history file for more on our averages.)