Crane Data's Peter Crane will be featured on a Webinar hosted by StoneCastle Cash Management on Tuesday, February 28 from 4-5pm. (To register, go here.) StoneCastle's description says, "In response to the many questions related to recent money fund headlines and decline in earned credit yields, StoneCastle Cash Management is hosting the webcast, Cash Management Today: Beyond the Headlines, with special guests Peter Crane, President of Crane Data.... The call is scheduled for Tuesday, February 28th at 4pm. This call is geared for the treasury professional." In other news, ICI reported its latest weekly "Money Market Mutual Fund Assets" Thursday. It says, "Total money market mutual fund assets increased by $6.22 billion to $2.665 trillion for the week ended Wednesday, February 22, the Investment Company Institute reported today. Taxable government funds decreased by $9.86 billion, taxable non-government funds increased by $16.02 billion, and tax-exempt funds increased by $60 million." The numbers show a shift from Government to Prime funds, saying, "Assets of institutional money market funds increased by $4.25 billion to $1.743 trillion. Among institutional funds, taxable government money market fund assets decreased by $10.07 billion to $713.02 billion, taxable non-government money market fund assets increased by $14.99 billion to $934.30 billion, and tax-exempt fund assets decreased by $670 million to $95.26 billion."
The Wall Street Journal writes "Money-Fund Plan Gets Cold Shoulder". It says, "Regulators' latest plan to shore up the $2.7 trillion money-market mutual fund industry is getting an icy reception from some individual investors. As part of a proposal being floated by the Securities and Exchange Commission, investors who wish to sell all their holdings in a money-market fund would only be allowed to receive 95% to 97% of their cash back immediately. The remaining money would be returned to them after 30 days, according to the SEC. That isn't sitting well with investors like Robert "Willie" Williamson, a 66-year-old retired Navy rear admiral who lives in Annapolis, Md.... The goal of the SEC's proposal, expected to be announced as soon as the end of March, is to make sure the funds, which are designed to be safe, have enough cash on hand to pay back all investors during a market storm. It also would require money funds to boost their capital cushions, an idea that is meeting stiff resistance from the fund industry. The SEC proposal is presenting a rare instance where money-management firms and some customers are united." The Journal adds, "Industry experts warn that funds still are struggling under the weight of the 2010 rules, which have forced some funds to hold lower-yielding securities -- at a time when interest rates are at multidecade lows. The yield on the Crane 100, an index of the 100 largest money funds, sunk to 0.06% at the end of January from 4.98% in January 2007, according to Crane Data LLC, a Massachusetts-based money-fund tracker. Assets in retail money funds have fallen to $939 billion at the end of last year from a 14-year-peak of $1.2 trillion in 2007, according to Crane Data. Peter Crane of Crane Data says low returns are the main reason investors are fleeing. "Retail investors have not blinked when it comes to safety issues in money-market funds," says Mr. Crane. "It's all about yield.""
St. Louis Post-Dispatch writes "Money market funds mix low yields with high controversy". It says, "Money-market funds aren't making much money for anybody right now, but they're becoming a hot issue in Washington. The Securities and Exchange Commission is about to propose rules designed to bolster confidence in the funds. Its goal is to prevent a repeat of 2008, when one fund's losses caused a run on other funds, forcing the government to implement a temporary insurance program. The SEC hasn't made a formal proposal yet, but the mutual fund industry is already accusing the agency of regulatory overkill. The industry worries that drastic changes could cause investors to pull out much of the $2.7 trillion they hold in money market funds. Certainly no one invests in money funds today for the yields, which average just 0.03 percent.... The SEC reportedly is considering three types of new rules: A floating share price, a 30-day hold on part of each investor's account, and higher capital requirements.... The fund industry is gearing up to fight the proposed rules. Paul Schott Stevens, president of the Investment Company Institute, a trade group, posted a commentary last week saying that the proposals would "drive fund sponsors out of the industry ... and leave the remaining sponsors with a product that few investors or their financial advisers will use." The piece quotes, "Peter Crane, founder of fund-tracking firm Crane Data, thinks none of the ideas will be implemented. SEC Chairman Mary Schapiro wants tighter regulations, but it's not clear whether she has enough votes on the commission, or whether the rules could withstand a legal challenge." Crane says, "The thought that the SEC is going to harm 30 million investors is ridiculous. It's one of the most powerful voting blocs in the country: people with money."
Saturday's Wall Street Journal featured an article titled, "Time to Leave Your Money Market Fund", which says, "Short-term savings yields won't make anyone rich these days. But investors can pick up some extra cash -- and get a little added safety -- by switching from money-market funds offered by investment companies to money-market accounts held at banks. There are some trade-offs, however, and the maneuver won't make sense for everyone. "Money market" can refer to two entirely different financial products. One is a mutual fund that invests in safe, short-term securities and passes the income along to investors. The other is a bank account where the rate is set by the lender. Both offer safety and easy access. The average money-market fund yields just 0.06% as of Wednesday, according to Peter Crane, president of Crane Data, which tracks the funds."
The Journal piece, by Jack Hough, continues, "Why is the difference between money funds and money-market accounts so vast? New restrictions on what money funds can buy have "put managers in a smaller box and made yields more similar," says Deborah Cunningham, chief investment officer at Federated Funds, one of the largest money-fund companies. A big money fund called Reserve Primary "broke the buck" after the 2008 collapse of Lehman Brothers, meaning its share price slipped below the $1 a share that such funds seek to maintain. A judge ordered the fund to liquidate and investors got back about 99% of their money."
It explains, "Such losses have been rare, and new rules that took effect in 2010 have made money funds as safe as they have ever been, say Peter Rizzo, director of the fund research group at Standard & Poor's, and Roger Merritt, head of the fund group at Fitch Ratings. The Securities and Exchange Commission announced a plan this week that could make funds even safer, but fund-industry executives say it could squeeze yields even more."
The Journal adds, "Bank money-market accounts have some big advantages. While money funds pay a market rate based on securities yields, banks can pay "artificial rates based on funding needs and competitive factors," says Robert Deutsch, managing director at JP Morgan Asset Management, the largest U.S. money-fund manager. In the past, some banks have offered significantly higher yields because they were in trouble and needed to attract deposits."
This week's Barron's also writes "Regulation Worries Roil Money-Market Industry". It says, "As we explained in our Jan. 9 cover story, "Broken Forever?" the Securities and Exchange Commission has floated some fairly significant -- and, to most in the industry, highly alarming -- proposals for money-fund regulation. On the table, in brief: Ditching the steady $1-per-share convention in favor of a floating net asset value, mandating a capital reserve for each fund, and creating a "hold-back" that would mean you'd have to wait 30 days to receive a portion of your withdrawal."
This article adds, "The SEC hasn't announced anything publicly, but in informal talks with the Investment Company Institute and others, the agency has indicated that its timeline for releasing these new rules has moved up from "sometime in the first half of the year" to "could be March." This, of course, could change again. But the behind-the-scenes discussions we reported on a month ago are now much more public."
Crane Data' Peter Crane and State Street Global Advisors' Jeff St. Peters are scheduled to speak at The Treasury Management Association of New England's (TMANE's) 27th Annual "Sources of Education" Conference to be held May 16-18, 2012 at the Boston Marriott-Copley Place. Crane is President & Publisher of Crane Data LLC and St. Peters is a Managing Director of State Street Global Advisors and a Senior Portfolio manager within the Global Cash Management division. Their session, "The New Look of Money Funds and Cash Markets," is scheduled on 5/17/2012 from 3:45-5:00. The talk's description says, "Following many months of regulatory changes and market turmoil, money market mutual funds and investors continue to adapt to the new realities of the cash investment marketplace. Hear from money fund expert Peter Crane and portfolio manager Jeff St. Peters on how the money markets have changed, and what investors should be looking for in analyzing their money funds and cash investments. The two will review recent trends, regulations, and concerns in the money markets."