Reuters TV interviewed Peter Crane and Debbie Cunningham in a story entitled, "Redemptions accelerate in money market funds." Also, Federated Investors released its 2nd Quarter 2011 earnings late yesterday and hosts a conference call at 9am Friday morning. The release says, "Federated Investors, Inc., one of the nation's largest investment managers, today reported earnings per diluted share (EPS) of $0.41 for the quarter ended June 30, 2011 compared to $0.46 for the same quarter last year. Net income was $42.4 million for Q2 2011 compared to $47.7 million for Q2 2010.... Money market assets in both funds and separate accounts were $265.7 billion at June 30, 2011, up $5.2 billion or 2 percent from $260.5 billion at June 30, 2010 and down $5.4 billion or 2 percent from $271.1 billion at March 31, 2011. Money market mutual fund assets were $236.1 billion at June 30, 2011, up $4.9 billion or 2 percent from $231.2 billion at June 30, 2010 and down $2.9 billion or 1 percent from $239.0 billion at March 31, 2011.... Compared to the prior quarter, revenue decreased by $13.1 million or 5 percent. The decrease in revenue primarily related to the aforementioned increase in fee waivers and lower average money market assets."
Investment News writes "The buck stops fear? Treasury-wary advisers should consider cash". It says, "As the Washington debt limit spectacle grinds on, financial advisers might want to consider their options with regard to cash management if for no other reason than peace of mind. Granted, in the event of a full-blown default by the U.S. Treasury, "we are all in a world of hurt," according to Eric Lansky, director at StoneCastle Partners LLC, a cash management firm. However, with a full-scale default seen as a remote scenario, Mr. Lansky said investors could be protected from a more plausible short-term default or downgrade of U.S. debt by seeking the shelter of Federal Deposit Insurance Corp.-backed cash investments." The article also quotes Peter Crane, president and chief executive of Crane Data LLC, "Default [by the U.S. government] is a threat to money funds and the entire banking system.... Without the backing of the U.S. Treasury [in the event of a full scale default], the FDIC insurance fund would last about 45 minutes. FDIC insurance calms people's nerves because they assume there's a government guarantee behind it, but I don't think anyone would get all warm and fuzzy about FDIC if it weren't backed by the Treasury." See also yesterday's Wall Street Journal piece "Money Funds Dial Down Risk".
The Sunday Los Angeles Times writes "Money market funds stand out for their meager returns". It says, "The debt crisis in Greece has stoked worries about money funds' safety, but the lack of a decent return is the biggest problem for most investors. Money market mutual funds long have been the utility players of the investment world -- reliable but boring, and usually garnering attention only when they drop the ball. Lately, money funds have been making the blooper reels a lot. In an era of low-yielding investments, money funds stand out for their meager returns. The average fund currently yields 0.04% annually, or a paltry $4 a year on a $10,000 investment." The piece quotes Peter Crane, head of money fund researcher Crane Data in Westboro, Mass., "Money funds would have no problem whatsoever from a Greek default. The thought that there was ever any threat to money market mutual funds was, quite frankly, ridiculous." The article adds, "Even so, the SEC, federal lawmakers and the fund industry are debating the need for additional measures. One idea is to let fund values "float" above or below $1 depending on the value of the underlying securities. Proponents say that could limit the risk of a run on the bank, but opponents say it could raise unnecessary fears." Crane adds, "The only two things we know for certain is that there will be additional changes, and no one knows what those changes will be."