Crane Data recently sent a notice to attendees, speakers and sponsors of its July Money Fund Symposium conference seeking speaking proposals for next year's 2011 Money Fund Symposium and for our new Money Fund University. The notice said, "We've set the date for our next Money Fund Symposium, which will be held in Philadelphia June 22-24, 2011. We're also launching a spin-off 'basic training' event, Crane's Money Fund University, January 13-14, 2011, in Jersey City, NJ. We're currently preparing the agendas for these programs, and we're looking for speakers for both events. Please let us know if you'd like to be considered, or if you have a topic suggestion. (Send your request to speak, along with a brief topic description and bio, to: email@example.com. We'll be posting the preliminary agendas, hotel information and signup info on the websites www.moneyfundsymposium.com and www.moneyfunduniversity.com in coming weeks, so watch for more details soon.
Bankrate.com writes "Money market funds safer with new rules". The article says, "Though they aren't FDIC-insured, money market mutual funds are supposed to be the safest investment this side of a CD account, and they usually are. But like most investments, money market funds, or MMFs, got dragged into the financial crisis of 2008, and the regulatory chickens are still coming home to roost. New rules by the Securities and Exchange Commission, or SEC, went into effect in May restricting how money market funds can invest in an attempt to prevent future runs on MMFs.... The new SEC rules are designed primarily to make MMFs safer for investors, especially during times of economic stress, by shortening maturities and improving the credit quality of money-market fund investments, says Sean Collins, senior director of industry and financial analysis with the Investment Company Institute in Washington, D.C." Bankrate writes, "[O]ver time, when you add all these rules together, there will be a measurable cost in yield for the increased safety provided by the new rules, says Peter Crane, president of Crane Data in Westborough, Mass.... Estimates range from 3 (basis points) to 20 basis points, Crane says. However, Crane agrees that most investors probably won't notice because, 'even in a spread-out environment, the cost in yield would be dwarfed by a single move by the Fed,' he says.... 'Would (these changes) have stopped a spontaneous run? Maybe,' Crane says. But regulators are still discussing stronger steps such as an emergency liquidity bank or some formalization of the type of government backing for MMFs that came into play in 2008, he says."
MarketWatch columnist Chuck Jaffe named Money Market Funds his "Stupid investment of the week" once again. The article, entitled, "Money funds offer no returns and no insurance," says, "As the anniversary of this money-market scare passed this week, investors could rest easy about what was being held in their money funds, because the entire genre of funds is currently returning so little that it’s practically irrelevant, and the Stupid Investment of the Week.... According to Crane Data, which tracks money-fund returns, nearly one in four taxable money funds has a current yield of 0.00%. More than 55% of that universe of taxable money funds -- 461 out of 818 issues -- has a yield under 0.01%. Of course, even if you do your homework and go for the highest-yielding money funds instead of one of those no-return stinkers, your 'extra' return on a $10,000 investment would be $33 a year. In short, from top to bottom, money funds are a bad idea." Jaffe also writes "Six investing lessons from Lehman's fall," which says, "The Wall Street community is not anxious to celebrate the second anniversary of the collapse of Lehman Brothers, other than to signify that a significant amount of time has passed since one of its darkest hours. It wishes the news media, and the public, would forget the excesses that led to the near-collapse of the financial world. But investors can't afford to forget, because there are too many lessons that came to light in the crisis, and which are more easily seen and remembered today." In other news, see "SEC Proposes Measures to Enhance Short-Term Borrowing Disclosure to Investors."
Investment News writes "Huntington won't waver on fee waivers for money funds". It says, "Despite low yields on money market funds, Huntington Asset Advisors Inc. plans to continue waiving the management and shareholder fees on its four money market funds indefinitely. Huntington began waiving the 40-basis-point management fee and 25-basis-point shareholder administration fee on its four money market funds in late 2008 and will continue to do so until yields rise, according to Randy Bateman, the firm's president and chief investment officer." Bateman says, "Huntington has chosen to forgo profitability on its money fund complex.... While there is a temptation to take more risk to increase yields, we aren't going to do that." The piece adds, "Money fund yields have been close to zero for several months, but most firms, like Huntington, are bearing down and waiting for better times, said Pete Crane, president and chief executive of Crane Data LLC." It quotes Crane, "Banks make more on bond funds than they do on money funds." IN adds, "And there isn't much opportunity for money funds to take on additional risk, Mr. Crane said. The Securities and Exchange Commission passed rules this year that restrict money funds' holdings of lower-quality securities and require them to keep at least 30% of assets in securities that mature within seven days." "Money funds are basically glorified index funds," Mr. Crane said. "You take what the Fed gives you."
WSJ.com writes "Moody's Gets Mixed Grades on Money-Fund Plan". It says, "Investment ratings agency Moody's Corp. plans to replace its AAA ratings for money-market mutual funds with a more-detailed grading system, but some in the fund industry give the idea low marks. Officials at several leading funds sponsors expressed some discomfort with proposals to create a new ratings scale ranging from MF1 to MF4, in part because it goes against industry practice and changes what investors are used to -- they say that many investment mandates, for example, require that an investment has to be rated AAA. But Moody's said the change is intended to highlight the risks of money-market funds more clearly. Under the new system, Moody's would give greater importance to factors such as the capacity of the fund to meet unexpected redemptions and the ability and willingness of the parent company to bail out a fund should that become necessary." The article quotes Peter Crane, "These proposals are going down [among fund companies] like a lead zeppelin. Tweaking the ratings criteria is one thing, but moving away from AAA-ratings is sacrilege.... It will take years or decades to condition people to this new system."
SunGard will host a webinar entitled "Trends in Short-Term Cash Investment" this Wednesday, September 15 at 10:30am (Eastern) featuring Peter Crane, founder of Crane Data LLC and Vince Tolve, vice president of SunGard Wealth Management. The description says, "Increased regulatory presence, concerns around counterparty, interest and credit risk, as well as the constant challenge to stay within your investment policy are just a few of the challenges facing cash managers today. Corporations can compare and contrast various money market yields to better manage their cash holdings across the organization.... You will also learn how corporate treasurers can more effectively manage short-term cash investments by connecting to SunGard's SGN Short-Term Cash Management portal to research, analyze, trade and report on more than 300 money market funds."
WSJ.com writes "Reserve Fund's Manager Says It Wasn't Only One to 'Break the Buck'", which says, "Reserve Management Co. has told a federal judge that its Reserve Primary Fund wasn't the only money-market fund for which the net asset value dipped below $1 per share, known as 'breaking the buck,' in the wake of Lehman Brothers' 2008 bankruptcy. Reserve's attorneys make the statement in court papers dated and filed Friday with the U.S. District Court for the Southern District of New York. The document was filed in support of Reserve's motion to dismiss a shareholders' class-action suit over the 2008 collapse of the once-$62 billion Reserve Primary Fund. Under the judge's bundling rule, the document was released Friday along with some other older documents, including Reserve Management's motion to dismiss the suit." It adds, "Peter Crane, president of Crane Data, said he finds the claim by Reserve's attorneys 'baffling'. Although a number of U.S. money-market mutual funds were on the cusp of breaking the buck in the wake of the Lehman bankruptcy, none—other than the Reserve Primary Fund—actually did, Mr. Crane said." WSJ quotes Crane, "No U.S. money-market fund other than the Reserve Primary Fund transacted under $1. The advisers to other troubled funds stepped in long before the NAV rounded down.... Historically, you're either a dollar or you're dead."