Crane Data released its October Money Fund Portfolio Holdings Friday, and our most recent collection, with data as of September 30, 2020, shows a decrease in every category except VRDNs last month. Money market securities held by Taxable U.S. money funds (tracked by Crane Data) decreased by $94.3 billion to $4.772 trillion last month, after decreasing $12.7 billion in August, $83.1 billion in July and $159.1 billion in June. Money market securities increased $31.6 billion in May, and a staggering $529.4 billion in April and $725.6 billion in March. Treasury securities remained the largest portfolio segment, followed by Repo, then Agencies. CP remained fourth, ahead of CDs, Other/Time Deposits and VRDNs. Below, we review our latest Money Fund Portfolio Holdings statistics. (Visit our Content center to download the latest files, or contact us to see our latest Portfolio Holdings reports.)
Among taxable money funds, Treasury securities decreased by $6.3 billion (-0.25%) to $2.461 trillion, or 51.6% of holdings, after increasing $3.1 billion in August, decreasing $79.9 billion in July and increasing $60.8 billion in June. Repurchase Agreements (repo) decreased by $6.7 billion (-64%) to $1.041 trillion, or 21.8% of holdings, after increasing $60.8 billion in August, increasing $40.0 billion in July, and decreasing $124.3 billion in June. Government Agency Debt decreased by $28.1 billion (-3.5%) to $768.4 billion, or 16.1% of holdings, after decreasing $37.6 billion in August, $45.1 billion in July and $65.2 billion in June. Repo, Treasuries and Agencies totaled $4.271 trillion, representing a massive 89.5% of all taxable holdings.
Money funds' holdings of CP, CDs and Other (mainly Time Deposits) fell in September, breaking below the $500 billion level for the first time since December 2018, while VDRNs saw assets increase. Commercial Paper (CP) decreased $11.6 billion (-4.8%) to $231.9 billion, or 4.9% of holdings, after decreasing $32.5 billion in August, $10.7 billion in July and $6.5 billion in June. Certificates of Deposit (CDs) fell by $20.8 billion (-11.8%) to $156.1 billion, or 3.3% of taxable assets, after decreasing $19.0 billion in August, $12.3 billion in July and $9.1 billion in June. Other holdings, primarily Time Deposits, decreased $21.0 billion (-18.2%) to $94.6 billion, or 2.0% of holdings, after increasing $15.3 billion in August, $22.3 billion in July and decreasing by $13.7 billion in June. VRDNs increased to $94.6 billion, or 0.4% of assets, from $19.1 billion the previous month. (Note: This total is VRDNs for taxable funds only. We will publish Tax Exempt MMF holdings separately late Tuesday.)
Prime money fund assets tracked by Crane Data dropped $149.0 billion to $987.0 billion, or 20.7% of taxable money funds' $4.772 trillion total. Among Prime money funds, CDs represent 15.8% (up from 15.6% a month ago), while Commercial Paper accounted for 23.5% (up from 21.4%). The CP totals are comprised of: Financial Company CP, which makes up 14.3% of total holdings, Asset-Backed CP, which accounts for 5.3%, and Non-Financial Company CP, which makes up 3.9%. Prime funds also hold 6.4% in US Govt Agency Debt, 27.5% in US Treasury Debt, 5.0% in US Treasury Repo, 0.6% in Other Instruments, 5.6% in Non-Negotiable Time Deposits, 4.9% in Other Repo, 6.4% in US Government Agency Repo and 1.0% in VRDNs.
Government money fund portfolios totaled $2.616 trillion (54.8% of all MMF assets), up $111.0 billion from $2.505 trillion in August, while Treasury money fund assets totaled another $1.170 trillion (24.5%), down from $1.226 trillion the prior month. Government money fund portfolios were made up of 27.0% US Govt Agency Debt, 11.7% US Government Agency Repo, 46.1% US Treasury debt, 14.9% in US Treasury Repo, 0.2% in VRDNs and 0.1% in Investment Company . Treasury money funds were comprised of 84.1% US Treasury Debt and 15.8% in US Treasury Repo. Government and Treasury funds combined now total $3.786 trillion, or 79.3% of all taxable money fund assets.
European-affiliated holdings (including repo) decreased by $33.5 billion in September to $626.4 billion; their share of holdings fell to 13.1% from last month's 13.6%. Eurozone-affiliated holdings fell to $430.0 billion from last month's $456.7 billion; they account for 9.0% of overall taxable money fund holdings. Asia & Pacific related holdings decreased $21.1 billion to $227.0 billion (4.8% of the total). Americas related holdings fell $37.0 billion to $3.915 trillion and now represent 82.0% of holdings.
The overall taxable fund Repo totals were made up of: US Treasury Repurchase Agreements (up $29.9 billion, or 5.0%, to $623.4 billion, or 13.1% of assets); US Government Agency Repurchase Agreements (down $22,9 billion, or -5.8%, to $369.4 billion, or 7.7% of total holdings), and Other Repurchase Agreements (down $13.7 billion, or -22.2%, from last month to $48.0 billion, or 1.0% of holdings). The Commercial Paper totals were comprised of Financial Company Commercial Paper (down $2.0 billion to $141.5 billion, or 3.0% of assets), Asset Backed Commercial Paper (down $3.2 billion to $52.3 billion, or 1.1%), and Non-Financial Company Commercial Paper (down $6.4 billion to $38.2 billion, or 0.8%).
The 20 largest Issuers to taxable money market funds as of Sept. 30, 2020, include: the US Treasury ($2,477.9 billion, or 51.9%), Federal Home Loan Bank ($460.7B, 9.7%), Fixed Income Clearing Co ($144.9B, 3.0%), BNP Paribas ($132.9B, 2.8%), Federal National Mortgage Association ($113.7B, 2.4%), Federal Farm Credit Bank ($98.3B, 2.1%), RBC ($96.7B, 2.0%), JP Morgan ($92.7B, 1.9%), Federal Home Loan Mortgage Co ($74.7B, 1.6%), Barclays ($64.0B, 1.3%), Mitsubishi UFJ Financial Group Inc ($62.3B, 1.3%), Credit Agricole ($50.5B, 1.1%), Citi ($47.9B, 1.0%), Sumitomo Mitsui Banking Co ($47.0B, 1.0%), Societe Generale ($42.3B, 0.9%), Toronto-Dominion Bank ($39.5B, 0.8%), Bank of Montreal ($37.5B, 0.8%), Bank of America ($37.5B, 0.8%), HSBC ($31.9B, 0.7%) and Canadian Imperial Bank of Commerce ($28.5B, 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: Fixed Income Clearing Co ($144.8B, 13.9%), BNP Paribas ($120.8B, 11.6%), JP Morgan ($83.1B, 8.0%), RBC ($78.8B, 7.6%), Barclays ($46.6B, 4.5%), Credit Agricole ($42.6B, 4.1%), Mitsubishi UFJ Financial Group ($42.4B, 4.1%), Citi ($39.4B, 3.8%), Bank of America ($35.5B, 3.4%) and Societe Generale ($32.9B, 3.2%).
The 10 largest issuers of "credit" -- CDs, CP and Other securities (including Time Deposits and Notes) combined -- include: Toronto-Dominion Bank ($23.7B, 5.6%), Mitsubishi UFJ Financial Group ($19.9B, 4.7%), RBC ($17.9B, 4.2%), Barclays ($17.4B, 4.1%), Mizuho Corporate Bank Ltd ($17.3B, 4.1%), Sumitomo Mitsui Trust Bank ($16.3B, 3.9%), Credit Suisse ($12.2B, 2.9%), Canadian Imperial Bank of Commerce ($12.0B, 2.8%) and BNP Paribas ($12.0B, 2.8%).
The 10 largest CD issuers include: Sumitomo Mitsui Banking Co ($14.2B, 9.1%), Mitsubishi UFJ Financial Group Inc ($14.1B, 9.0%), Sumitomo Mitsui Trust Bank ($10.2B, 6.6%), Bank of Montreal ($10.2B, 6.5%), Mizuho Corporate Bank Ltd ($9.5B, 6.1%), Canadian Imperial Bank of Commerce ($7.7B, 4.9%), Toronto-Dominion Bank ($7.2B, 4.6%), Credit Suisse ($7.1B, 4.5%), Svenska Handelsbanken ($5.9B, 3.7%) and Credit Mutuel ($5.2B, 3.3%).
The 10 largest CP issuers (we include affiliated ABCP programs) include: Toronto-Dominion Bank ($16.2B, 8.0%), RBC ($10.3B, 5.1%), JP Morgan ($9.6B, 4.8%), Societe Generale ($8.3B, 4.1%), Citi ($7.6B, 3.8%), BNP Paribas ($7.5B, 3.7%), BPCE SA ($7.0B, 3.5%), NRW.Bank ($6.6B, 3.3%), Sumitomo Mitsui Trust Bank ($6.1B, 3.0%) and Toyota ($5.3B, 2.6%).
The largest increases among Issuers include: Fixed Income Clearing Corp (up $31.7B to $144.9B), US Treasury (up $10.4B to $2,477.9B), Barclays PLC (up $4.3B to $64.0B), BNP Paribas (up $3.7B to $132.9B), HSBC (up $3.4B to $31.9B), ABN Amro Bank (up $2.9B to $17.4B), Deutsche Bank AG (up $1.7B to $19.0B), JP Morgan (up $1.5B to $92.7B), Rabobank (up $1.4B to $9.8B) and Natixis (up $1.0B to $25.5B).
The largest decreases among Issuers of money market securities (including Repo) in September were shown by: the Federal Home Loan Bank (down $30.7B to $460.7B), Credit Agricole (down $22.5B to $50.5B), Federal Home Loan Mortgage Corp (down $9.6B to $74.7B), Mizuho Corporate Bank Ltd (down $8.2B to $26.7B), DNB ASA (down $7.9B to $8.1B), Bank of Nova Scotia (down $6.4B to $20.2B), Citi (down $5.9B to $47.9B), RBC (down $5.8B to $96.7B), Mitsubishi UFJ Financial Group Inc (down $5.6B to $62.3B) and Canadian Imperial Bank of Commerce (down $4.2B to $28.5B).
The United States remained the largest segment of country-affiliations; it represents 77.1% of holdings, or $3.679 trillion. France (5.8%, $276.0B) was number two, and Canada (4.9%, $235.3B) was third. Japan (4.5%, $216.3B) occupied fourth place. The United Kingdom (2.6%, $125.5B) remained in fifth place. The Netherlands (1.3%, $59.7B) was in sixth place, followed by Germany (1.2%, $58.1B), Sweden (0.7%, $31.1B), Switzerland (0.6%, $30.0B) and Australia (0.6%, $26.2B). (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 September 30, 2020, Taxable money funds held 35.7% (down from 36.0%) of their assets in securities maturing Overnight, and another 9.5% maturing in 2-7 days (up from 6.9% last month). Thus, 45.2% in total matures in 1-7 days. Another 14.3% matures in 8-30 days, while 13.0% matures in 31-60 days. Note that close to three-quarters, or 72.5% of securities, mature in 60 days or less (down slightly from last month), the dividing line for use of amortized cost accounting under SEC regulations. The next bucket, 61-90 days, holds 9.6% of taxable securities, while 15.8% matures in 91-180 days, and just 2.2% matures beyond 181 days.
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The April issue of our flagship Money Fund Intelligence newsletter, which was sent to subscribers Thursday morning, features the articles: "Ultra-Short Buckets Ready: Bond Fund Symposium '21," which highlights comments from our recent online event; "BNY Mellon Liquidity Direct's George Maganas on Portals," which profiles one of the largest and oldest online money fund trading portals; and, "Worldwide MFs Rise in Q4'20 Led by China, Ireland, France," which reviews global MMF asset flows. We also sent out our MFI XLS spreadsheet Thursday a.m. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our April Money Fund Portfolio Holdings are scheduled to ship on Monday, April 12, and our April Bond Fund Intelligence is scheduled to go out Thursday, April 15.
MFI's lead article says, "We recently hosted Crane's Bond Fund Symposium, an online event focusing on the ultra-short bond fund space. Given the zero rate environment and the potential for more regulations in cash, interest in the sector remains high as ultra-shorts are once again seen as a possible alternative to Prime MMFs. We quote from some of the highlights below. (Attendees and Subscribers may access the recordings and materials via our Bond Fund Symposium 2021 Download Center.)"
It explains, "Our Bond Fund Intelligence shows Ultra-Short Bond Funds up 20.3% (vs. 7.4% for all bond funds) in the year through 2/28/21, the fastest growth of any bond fund category. While Ultra-Short and our tighter Conservative Ultra-Short Bond Fund group together still only account for $201.4 billion of the $3.22 trillion of assets tracked by Crane Data, they should continue to grow briskly. (Short-Term is another $359.0 billion.)"
Our latest "Profile" reads, "This month, MFI interviews BNY Mellon Managing Director and Head of Liquidity Services, George Maganas, who is in charge of the firm's money market fund trading 'portal,' Liquidity Direct. Maganas reviews the history of one of the industry's largest and oldest portals, and BNY's main priorities and biggest challenges going forward. He also discusses the current portal marketplace and how they're working to make 'clients' workflow more efficient.' Our Q&A follows."
MFI says, "Give us a little history about the platform and about yourself." Maganas tells us, "Liquidity Direct was established as an innovator in the money market fund space over 20 years ago. From the start, our focus was on providing efficiencies for our clients, and for their liquidity management and investment processes. We continue to innovate and provide superior performance for our clients globally."
He continues, "Beyond Liquidity Direct, BNY Mellon's affiliate Dreyfus has been in the money fund manufacturing and distribution business for over 50 years, and we really believe that depth and breadth of experience is evident in our product offering. When you combine the manufacturing, asset servicing and distribution capabilities across our investment management business, the Bank platform and Pershing, you can really see that BNYM is a significant participant that plays a critical role in the money fund industry."
Maganus adds, "Personally, I've been involved with Liquidity Direct for the past three years, leading our business development activities. Prior to that, I've been in global markets for over 25 years in various roles, from running electronic trading to operating other platform businesses, such as leading an FCM. Prior to this role, my experience with money market funds has been primarily as an end user at an FCM."
The "Worldwide" article tells readers, "The Investment Company Institute published, 'Worldwide Regulated Open-Fund Assets and Flows, Fourth Quarter 2020,' which shows that money fund assets globally rose by $246.3 billion, or 3.1%, in Q4'20 to $8.314 trillion. The increase was driven by big jumps in Chinese, Irish and French money market fund assets, though U.S. MMFs declined. MMF assets worldwide increased by $1.689 trillion, or 25.5%, in the 12 months through 12/31/20, and money funds in the U.S. now represent 52.1% of worldwide assets."
ICI explains, "The growth rate … in US dollars was increased by US dollar depreciation over the fourth quarter of 2020.... Bond fund assets increased by 6.8% to $13.05 trillion in the fourth quarter.... Money market fund assets increased by 3.1% globally to $8.31 trillion.... Money market fund assets represented 13% of the worldwide total."
MFI also includes the News piece, "MMF Assets Surge Break $4.9T." It says, "Crane Data's MFI XLS shows MMFs up $151.0 billion to $4.934 trillion in March. ICI's latest weekly 'Money Market Fund Assets' series shows MMFs up in 7 of the past 8 weeks. (They fell hard on April 2 though.) MMFs are up $200 billion, or 4.7%, year-to-date in 2021."
An additional News brief, "Comments Hit SEC; Due April 14," tells us, "Comments continue to appear in response to the Securities & Exchange Commission's announcement, 'SEC Requests Comment on Potential Money Market Funds Reform Options Highlighted in President's Working Group Report.'"
Our April MFI XLS, with March 31 data, shows total assets jumped $151.0 billion in March to $4.934 trillion, after rising $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, $121.2 billion in September, $42.3 billion in August, $44.2 billion in July and $113.0 billion in June. Assets increased $31.6 billion in May and $417.9 billion in April. Our broad Crane Money Fund Average 7-Day Yield was unchanged at 0.02%, 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 stand at 0.12%. Charged Expenses averaged 0.10% for the Crane MFA and 0.10% for the Crane 100. (We'll revise expenses on Friday once we upload the SEC's Form N-MFP data for 3/31.) The average WAM (weighted average maturity) for the Crane MFA and Crane 100 was 42 (down one day from the previous month) and 44 days (down two days) respectively. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
The March issue of our Bond Fund Intelligence, which was sent to subscribers Friday morning, features the lead story, "ICI Says Bond Fund Outflows Measured; No Need for Regs," which quotes from a Viewpoints piece written by Chief Economist Sean Collins; and "BIS Examines Bond ETF Arbitrage; Pros and Cons," which highlights a bond ETF chapter in the Bank For International Settlements' recent Quarterly Review. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that bond fund returns and yields fell in February. We excerpt from the new issue below. (Contact us if you'd like to see our Bond Fund Intelligence and BFI XLS spreadsheet, or our Bond Fund Portfolio Holdings data, and see below for more on our upcoming Bond Fund Symposium Online, March 25-26.)
BFI's "ICI: Bond Funds" piece reads, "ICI tackles the topic of runs on bond mutual funds in a new paper, 'Bond Mutual Fund Outflows: A Measured Investor Response to a Massive Shock.' Written by Chief Economist Sean Collins, the piece explains, 'In recent months, we have seen many high-profile analyses arguing that bond mutual funds amplified stresses in financial markets during the start of the COVID-19 pandemic in March 2020. These analyses conclude that bond mutual funds therefore may require structural regulatory reforms. But as the information in this ICI Viewpoints and others to follow indicates, policymakers should not jump to that hasty conclusion.'"
BFI quotes ICI, "In a series of posts, we will demonstrate that the evidence about what happened to financial markets in March 2020 is still far too mixed and preliminary to conclude that new regulation is appropriate for bond mutual funds. Given the importance of bond mutual funds to retail investors and to the US and global economies, it is critical that we have all the data and insights—measured and applied correctly—before regulators start considering policy recommendations to reform these funds."
Our BIS Bond ETF article explains, "The Bank For International Settlements' latest BIS Quarterly Review includes a chapter on 'The anatomy of bond ETF arbitrage,' which discusses the differences between bond and stock ETFs and the challenges and risks involved. BIS summarizes, 'Exchange-traded funds (ETFs) allow a wide range of investors to gain exposure to a variety of asset classes. They rely on authorised participants (APs) to perform arbitrage, ie align ETFs’ share prices with the value of the underlying asset holdings. For bond ETFs, prominent albeit understudied features of the arbitrage mechanism are systematic differences between the baskets of bonds used to create and redeem ETF shares, and a low overlap between these baskets and actual asset holdings. These features could reflect the illiquid nature of bond trading, ETFs’ portfolio management and APs' incentives. The decoupling of baskets from holdings weakens arbitrage forces but allows ETFs to absorb shocks on the bond market.'"
The BIS explains, "Recent trends and market developments call for a closer analysis of bond ETFs. First, bond ETFs have been growing steadily over the past few years and now manage more than $1.2 trillion of assets across the globe.... Second, the Federal Reserve's corporate bond purchase programme launched in 2020 involves interventions in the bond market through ETFs. Third, the difference between ETF share prices and [NAVs] of the underlying holdings ... fluctuated more strongly for bond than for equity ETFs during March-April 2020. This highlighted that features specific to the bond market can have an impact on the pricing of bond ETFs."
A News brief, "Returns and Yields Fall in February," tells readers, "Bond fund yields were mostly lower and returns were down last month. Our BFI Total Index fell 0.65% over 1-month but increased 2.74% over 12 months. The BFI 100 fell 0.75% in Feb. but rose 3.16% over 1 year. Our BFI Conservative Ultra-Short Index returned 0.04% over 1-mo and 1.01% over 1-yr; Ultra-Shorts averaged 0.05% in Feb. and 1.20% over 12 mos. Short-Term returned 0.01% and 2.86%, and Intm-Term plunged 1.07% last month but rose 3.06% over 1-year. BFI's Long-Term Index returned -1.66% in Feb. and 3.06% over 1-year. Our High Yield Index gained 0.38% in Feb. and 6.65% over 1-yr."
Another News brief quotes Investment News', "Vanguard's first active bond ETF has 'disruption' written all over it." They tell us, "The upcoming launch of the Vanguard Ultra-Short Bond ETF ... represents a disruptive new competitor in the area of cash-alternative ETFs. The new fund, which is expected to be available within the next four months, is an ETF version of the $16.8 billion Vanguard Ultra-Short-Term Bond Admiral mutual fund (VUSFX), which launched in 2015."
In a third News update, the WSJ writes, "Treasury Rout Pushes Bond Funds Into Risker Assets." They comment, "Optimism about economic recovery has triggered a selloff in U.S. Treasurys that is pushing fixed-income investors to run for cover in some unlikely havens. Fund managers are bulking up on junk bonds, corporate loans, equity-linked bonds and even stocks ... while selling assets that trade more in line with government debt."
Finally, BFI says in a sidebar, "Fidelity Launches Two New Active Bond ETFs." It begins, "Fidelity Expands Active ETF Lineup with Launch of Two Active Bond ETFs,' says a press release. The announcement explains, 'Fidelity Investments today announced the launch of two new active bond exchange-traded funds (ETFs) -- Fidelity Investment Grade Bond ETF (FIGB) and Fidelity Investment Grade Securitized ETF (FSEC). Both funds are available commission-free for individual investors and financial advisors through Fidelity’s online brokerage platforms. The new actively-managed bond ETFs are competitively priced with total expense ratios of 0.36%. With this launch, Fidelity now manages 39 ETFs with more than $25 billion in assets.'"
As a reminder, please join us for Crane's Bond Fund Symposium 2021 (Online), which will be hosted virtually the afternoons of March 25-26, 2021. Bond Fund Symposium offers a concentrated and affordable educational experience for bond fund and fixed-income professionals with a focus on the ultra-short sector of the market. Registrations are $250 and "comp" and sponsor tickets are also available. (Ask us if you'd like more information.)
See the latest agenda and details here. 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. E-mail us for the brochure and more details. Also, mark your calendars for our "big show," Money Fund Symposium, which has been pushed back to Sept. 21-23, 2021, in Philadelphia.
The March issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Friday morning, features the articles: "Liquidations, Changes Slowly Reshape Manager Landscape," which discusses the flurry of recent fund moves; "Ameriprise's Chris Melin on Brokerage Sweeps, Cash," which profiles the Director of Cash Products; and, "Deposits, Cash Soar in '20, Pause in '21; Banks vs. MMFs," which explores money fund vs. bank deposit growth. We also sent out our MFI XLS spreadsheet Friday a.m. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our March Money Fund Portfolio Holdings are scheduled to ship on Tuesday, March 9, and our March Bond Fund Intelligence is scheduled to go out Friday, March 12.
MFI's lead article says, "While the money market fund industry remains surprisingly robust given the myriad challenges it faces, small-scale liquidations and changes continue to gradually remake the space and increase concentration. Over the past month, a number of funds announced or completed liquidations, Wells Fargo announced the sale of its asset management unit, and Dreyfus took additional steps to streamline its fund lineup. In February, Crane Data removed 22 funds from MFI, including over a dozen State Municipal funds. Below, we review the latest batch of changes.
It continues, "SunAmerica is the latest asset manager to exit the money market fund space, which will bring the total of U.S. MMF managers down to 64. A Prospectus Supplement for its AIG Government Money Market Fund explains, 'SunAmerica Asset Management, the Fund's investment adviser, and Touchstone Advisors, announced that they have entered into a definitive agreement for Touchstone to acquire certain assets related to SunAmerica's retail mutual fund management business.... Certain AIG Funds not covered by the agreement, including the Fund, will be liquidated.'"
Our latest "Profile" reads, "This month, MFI interviews Ameriprise Director of Cash Products, Chris Melin. He details the history of the company in cash, comments on the brokerage sweep marketplace and discusses major challenges, including record low rates. Melin also comments on Ameriprise’s outlook. Our Q&A follows."
MFI says, "Give us a little background," and Melin tells us, "The company was founded back in 1894 with a cash product, a 'face-amount certificate'. Through the Ameriprise Certificate Company, we're still issuing Certificates, which are unique investment products that our advisors can offer to help clients manage their cash. Certificates are guaranteed by the Ameriprise Certificate Company."
He continues, "In a more traditional sense, we've been offering money market funds and cash management accounts for decades. In 2003 we started offering sweep options with brokerage accounts -- offering money market funds, a free credit balance option and a single bank deposit program. It stayed that way until 2007, when we decided to add a multi-bank program. As part of Money Fund Reform in 2016, we elected to change our sweep options to government funds-- not wanting to put clients at risk with institutional and retail funds where there was potential for withdrawal gates and fees. We currently offer a multi-bank sweep deposit program, a single bank sweep deposit program, two US government money funds as sweep options and a free credit balance option."
The "Deposits" article tells readers, "U.S. money fund assets grew by 19.1% in 2020, following a 20.8% gain in 2019. Meanwhile, bank deposits surged by 28.3% last year, following seven years of anemic growth. This is according to the Federal Reserve's H.6 data series. Money funds added $627.5 billion (to $3.933 trillion) and Deposits gained $2.779 trillion (to $12.640 trillion) in 2020, according to the Fed, while Small Time Deposits, or bank CDs, plunged by $324.2 billion to a mere $217.9 billion."
It explains, "Assets of Deposits jumped in 2020 after slowing to a crawl in 2018 and 2019. Meanwhile, money fund assets also jumped in 2020 after a scorching 2019 (when they rose $565.5 billion). Money funds and deposits together rose $1.1 trillion in 2019, and an incredible $3.1 trillion in 2020."
MFI also includes the News piece, "Comments to SEC on PWG Report." It says, "The first letters have appeared following the SEC's request for comment on the PWG Report. See the first real posting here."
An additional News brief, "Morgan Stanley Govt Goes Social," tells us, "A filing for the $9.9 billion Morgan Stanley Institutional Liquidity Funds Government Securities Portfolio (MUIXX) tells us, 'The Adviser will generally seek to place purchase orders for the Fund with broker-dealers that are owned by minorities, women, disabled persons, veterans and members of other recognized diversity and inclusion groups and will place the majority of the aggregate dollar volume of the Fund’s purchase orders for government agency securities obtained via auction or window through such broker-dealers, subject in each case to the Adviser’s duty to seek best execution for the Fund’s orders.'"
Our March MFI XLS, with February 28 data, shows total assets rose by $30.8 billion in February to $4.781 trillion, after rising $5.6 billion in January, decreasing $6.7 billion in December, $11.7 billion in November, $46.8 billion in October, $121.2 billion in September, $42.3 billion in August, $44.2 billion in July and $113.0 billion in June. Assets increased $31.6 billion in May and $417.9 billion in April. Our broad Crane Money Fund Average 7-Day Yield was unchanged at 0.02%, 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 sat at 0.13% while the Crane 100 sat at 0.14%. Charged Expenses averaged 0.12% for the Crane MFA and 0.11% for the Crane 100. (We'll revise expenses on Monday once we upload the SEC's Form N-MFP data for 2/28.) The average WAM (weighted average maturity) for the Crane MFA and Crane 100 was 42 (unch.) and 45 days (down a day) respectively. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
The February issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Friday morning, features the articles: "Covid Changing Cash; Social, ESG MMFs Making Impact," which reviews the latest in environmental, social and governance MMFs; "Money Fund University 2021: A Look at History, Instruments," which highlights quotes from our recent basic training webinar; and, "Fee Waivers Bite: $3.1 Billion & Counting; Revenue $6 Tril.," which explores pressures on MMF expense ratios. We also sent out our MFI XLS spreadsheet Friday a.m. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our February Money Fund Portfolio Holdings are scheduled to ship on Tuesday, February 9, and our February Bond Fund Intelligence is scheduled to go out Friday, February 12. (Note: A press release entitled, "SEC Requests Comment on Potential Money Market Fund Reform Options Highlighted in President's Working Group Report" was posted yesterday. Watch for full coverage next week.)
MFI's lead article says, "As we move into 2021 and prepare to re-emerge from the coronavirus era, the world of cash investing continues to adapt to the ever-changing rate and regulatory environment, and it continues to be confused over the push towards 'ESG' and 'Social' MMFs. We list the latest group of ESG funds on page 5 (we expect more soon), and we briefly review the latest in the space below."
"SSGA published 'Transformed Overnight: How COVID-19 Changed Cash,' which talks about several major themes in the money markets last year, including one of the biggest, ESG. SSGA's Will Goldthwait writes, in a section entitled, 'The Quest for Yield: Lower for Much Longer,' 'Entrenched low interest rates are prompting concern that the corporate treasury department will revert from profit center to cost center. While safety and liquidity remain top priorities, cash managers 'have never before kept such a sharp eye on yield across their providers,' observed one relationship manager. 'Every basis point matters now.'"
Our "MFU 2021" piece reads, "Crane Data recently hosted its annual 'basic training' event, Money Fund University, where speakers reviewed various segments and aspects of the money markets. But they also managed to sneak in some comments on current events. We briefly review and excerpt from some of the highlights below. (Note: Crane Data Subscribers and Money Fund University Attendees may access the MFU `Powerpoint and recordings via our 'Money Fund University 2021 Download Center.')"
It goes on, "During the 'History & Current State of Money Market Mutual Funds' introduction, our Peter Crane comments, "Money funds turned 50 years old in October ... so we're celebrating all year. It’s been a wonderful ride…. First let me give you some basics … Money funds are ... short-term bond funds, with quality, diversity, liquidity, and maturity guidelines around them. The stable $1.00 a share price was one of the key elements.... They use something called amortized cost, so the fluctuations were minimal, and they were always priced at $1.00.'"
Crane continues, "But, we've seen rounds of regulatory reforms, and the 2014 reforms that went into effect in 2016 allowed some money funds' NAVs to float.... So, the dollar feature of money funds is shifting somewhat from what it was historically.... Money funds were having a nice recovery, rates had been up over 2% again.... In 2019 and 2020, money fund assets grew by just under 20% each year.... You can see that super spike up from dash to cash coronavirus growth."
The "Fee Waivers" article tells readers, "Mutual fund news source ignites published the article, 'Sponsors Waived $3.1B in Money Fund Fees in 2020.' They write, 'Money market fund sponsors waived $3.1 billion in fees last year, according to Investment Company Institute data. An economic slowdown spurred by the coronavirus pandemic led the Federal Reserve to cut short-term interest rates twice last March, to zero, after about two years of keeping the benchmark rate above 1.5%. With those cuts, yields tumbled, and a growing number of money funds began waiving fees to avoid zero or negative yields.'"
Ignites explains, "As of December, 94% of all money fund share classes waived a portion of expenses, ICI data shows. That compares to 68% in January 2020.... The overall increase last year in money fund assets also pushed up the total amount of fees waived. Investors piled into money funds in March amid liquidity concerns, adding about $700 billion to the products that month, according to Crane Data."
The latest MFI also includes the News piece, "SEC Seeks Comments on Reforms." It says, "See the release, "SEC Requests Comment on Potential Money Market Fund Reform Options Highlighted in President's Working Group Report," and see our coverage inside on the PWG report." We also include the brief, "Money Fund Assets Flat in January," which explains, "ICI's weekly 'Money Market Fund Assets' report shows assets down in the latest week, after rising 3 out of 4 prior weeks. Crane Data shows assets up $5.6 billion to $4.730 trillion."
A third news brief entitled, "Federated Hermes Launches Conservative 'Microshort'," says, "The release, 'Federated Hermes, Inc. Launches Two New Microshort Funds,' tells us, 'Federated Hermes ... announced the launch of Federated Hermes Conservative Microshort Fund and Federated Hermes Conservative Municipal Microshort Fund. The actively managed funds offer an innovative approach to liquidity management by pursuing higher yields than money market strategies while simultaneously aiming to maintain lower NAV volatility by investing in securities with shorter maturities than traditional ultrashort products.'"
Our February MFI XLS, with January 31 data, shows total assets rose by $5.6 billion in January to $4.730 trillion, after decreasing $6.7 billion in December, $11.7 billion in November, $46.8 billion in October, $121.2 billion in September, $42.3 billion in August, $44.2 billion in July and $113.0 billion in June. Assets increased $31.6 billion in May, $417.9 billion in April and $688.1 billion in March. Our broad Crane Money Fund Average 7-Day Yield was unchanged at 0.02%, 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), both the Crane MFA and the Crane 100 sat at 0.15%. Charged Expenses averaged 0.13% for both the Crane MFA and Crane 100. (We'll revise expenses on Monday once we upload the SEC's Form N-MFP data for 1/31.) The average WAM (weighted average maturity) for the Crane MFA and Crane 100 was 42 (up a day) and 46 days (unch.) respectively. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)