The changes in the money market fund world continue. Just last week, Reich & Tang, announced that they were liquidating their money market funds due to the "challenging landscape for money funds." A press release entitled, "Federated Investors, Inc. Announces Exclusive Arrangement with Reich & Tang Asset Management, LLC for Transition of Money Market Fund Shareholders informed us that Federated is in exclusive negotiations with Reich & Tang to allow Reich & Tang's MMF shareholders to transition into similar Federated MMFs. Reich & Tang is the 25th largest money market fund manager in the US with about $10.9 billion in assets. Federated is the fourth largest MMF manger in the US with about $258.8 billion in MMF assets. (For more, read our March 12 "Link of the Day," "Reich & Tang Announces Liquidation of Money Market Mutual Funds.")
The press release says, "Federated Investors, Inc., one of the nation's largest investment managers, today announced that it has entered into exclusive discussions with Reich & Tang Asset Management, LLC, to enable the shareholders of that firm's money market funds to transition into Federated money market funds with similar investment objectives."
Federated continues, "The exclusive arrangement, which resulted from ongoing discussions, is an initial step toward negotiating a final agreement for the transition of shareholders of Reich & Tang's money market funds into Federated's money market funds. The transition is being discussed to assist with the orderly liquidation of Reich & Tang's domestic and offshore money market funds. The final agreement remains subject to further discussions and negotiations between Federated and Reich & Tang. If a final agreement is reached, the transition of shareholders would be subject to various other contingencies, including obtaining certain shareholder, intermediary, regulatory and board consents, authorizations or approvals related to the liquidation and transition of the Reich & Tang money market funds. The announcement allows both companies to begin talking with clients and shareholders about a planned transition in advance of reaching a final agreement. Once a final agreement is executed, both companies would expect the transition to be completed in stages in late June through the end of July 2015."
The release adds, "The following Reich & Tang sponsored funds would be available to be transitioned: Daily Income Fund -- Money Market Portfolio; U.S. Government Portfolio; U.S. Treasury Portfolio; and Municipal Portfolio; California Daily Tax Free Income Fund, Inc.; and Daily Dollar International, Ltd., a Cayman Islands-domiciled money market fund open to non-U.S. investors. It is expected that the shareholders of these Reich & Tang money market funds would be transitioned into Federated money market funds with comparable investment objectives and strategies."
In other news, the Federal Reserve released the latest Z.1 "Financial Accounts of the United States" statistical release (formerly the "Flow of Funds") for the Fourth Quarter of 2014 was published last week. The four tables it includes on money market mutual funds show that the Household sector remains the largest investor segment, but Nonfinancial Corporate Businesses and Funding Corporations made the biggest jumps. Table L.206 shows the Household sector with $1.120 trillion -- or 41.7% of the $2.688 trillion held in Money Market Mutual Fund Shares as of Q4 2014. Household shares increased by $32 billion in the 4th quarter, but were down $10 billion year-to-date (after rising $21 billion in 2013). Household sector money fund assets remain well below their record level of $1.581 trillion at year-end 2008.
Nonfinancial corporate businesses were the second largest investor segment, according to the Fed's data series, with $556 billion, or 20.7% of the total. Nonfinancial corporate business assets in money funds increased $43 billion in the quarter and were up $35 billion YTD. In 2013, they increased by $40.5 billion. Funding corporations, which includes securities lenders, remained the third largest investor segment with $426 billion, or 15.8% of money fund shares. They increased by $40 billion in the latest quarter and have jumped $44 billion YTD. They dropped $58.8 billion in 2013. (Funding corporations held over $906 billion in money funds at the end of 2008.)
State and local governments held 6.2% of money fund assets ($166 billion). Private pension funds, which held $137 billion (5.1%), remained in 5th place. The Rest of the world category was the sixth largest segment in market share among investor segments with 4.4%, or $119 billion, while Nonfinancial noncorporate businesses held $84 billion (3.1%), State and local government retirement held $39 billion (1.5%), Property-casualty insurance held $22 billion (0.8%), and Life insurance companies held $21 billion (0.8%), according to the Fed's Z.1 breakout.
The Fed's "Flow of Funds" Table L.121 shows "Money Market Mutual Fund Assets" largely invested in Credit market instruments ($1.491 trillion, or 55.5%), which includes: Open market paper ($334 billion, or 12.4%; we assume this is CP), Treasury securities ($413 billion, or 15.4%), Agency and GSE backed securities ($385 billion, or 14.3%), Municipal securities ($282 billion, or 10.5%), and Corporate and foreign bonds ($78 billion, or 2.9%).
Other large holdings positions in the Fed's series include Security repurchase agreements ($645 billion, or 24.0%) and Time and savings deposits ($516 billion, or 19.2%). Money funds also hold minor positions in Foreign deposits ($24 billion, or 0.9%) and Miscellaneous assets ($17 billion, or 0.6%). Checkable deposits and currency went into negative territory with -$4 billion.
During Q4, Security Repos (up $69 billion), Agency and GSE Backed Securities (up $38 billion), Treasury securities (up $21 billion), Corporate and foreign bonds (up $7 billion), Municipal Securities (up $3 billion), Open Market Paper (up $2 billion), and Foreign Deposits (up $1 billion) showed increases. Time and Savings Deposits (down $16 billion), Misc. Assets (down $2 billion), and Checkable Deposits and Currency (down $1 billion) showed declines. (We're not aware of a detailed definition of the Fed's various categories, so aren't sure in some cases how to map some of these figures against other data sets.)
