In the June issue of our flagship Money Fund Intelligence newsletter, we profile Joe Lynagh, Fixed Income Portfolio Manager and Head of the Cash Management team at T. Rowe Price, in charge of all the firm's money market and ultra short funds. Lynagh discusses the changes that T. Rowe Price has made to its money fund lineup as the firm prepares for reforms, based on the mandate of "do no harm to existing shareholders." T. Rowe Price plans to offer a range of options, including a Prime Institutional fund. Lynagh also talks about why retail investors will stay with Prime funds, why Ultra-Short Bond funds will grow in popularity, and why differentiation will return to the market. A reprint of the Q&A that appeared in MFI follows. (Note: Thanks to those who attended Crane's Money Fund Symposium this week in Philadelphia! Safe travels home and watch for coverage of the conference next week and in the July issue of MFI.)
Standard & Poor's Global Ratings published, "How Liquidity Risk Factors Into Money Market Fund Ratings," and a "Credit FAQ: Will SEC Rule Changes Affect Our Ratings On Money Market Funds?" The first paper says, "Liquidity is an integral component of all ratings S&P Global Ratings assigns (see "Liquidity Plays A Multifaceted Role In Credit Quality," published June 1, 2016). Our detailed reviews of funds' liquidity have helped inform our ratings on funds as they navigated through periods of illiquidity that have frequently occurred in conjunction with a trough in the credit cycle, marked by rising defaults, deteriorating credit quality, and investors seeking more creditworthy assets." (Note: Thanks to those participating in Crane's Money Fund Symposium, which started yesterday in Philadelphia! We hope you enjoyed Day 1 and look forward to a full day of sessions for Day 2.)
BlackRock issued a client update yesterday related to expense limitations on its Government money market funds. It also recently announced a money fund liquidation, and a share class closure for one of its institutional funds. (Note: BlackRock Vice Chair Barbara Novick will keynote Crane's Money Fund Symposium, which begins Wednesday at the Philadelphia Marriott. Watch for news from Symposium later this week and next week.) Also, we review an update from Invesco on the implementation dates for its CNAV and FNAV funds and one on strike times for its Liquid Assets Portfolio.
Below, we review two recent articles on US MMF reforms. The first, by Treasury & Risk magazine, is entitled, "Bracing for New Money Fund Rules," while the second, from The Treasurer, is entitled, "All stocked up and nowhere to invest." Also, we excerpt from a statement by the London-based Institutional Money Market Fund Association, entitled, "IMMFA Reacts to European Council's Money Market Fund Regulation." (See our June 16 News, "European Money Fund Reform Deal Poised to Pass; CNAVs to Be LVNAVs.")
A webinar hosted recently by Fitch Ratings and online money fund trading "portal" Treasury Partners called, "Changing Cash Management: Are You Ready?" looked at how the process of managing cash is evolving due to money market reform and other changes. Panelists Ian Rasmussen, a Senior Director at Fitch Ratings; Jerry Klein, a Managing Director at Treasury Partners; and Ben Montes, Client Services Team Lead at Clearwater Analytics, discussed a range of topics related to MMFs, including the development of new products, low or negative yields, liquidity, spreads, and Prime to Government flows. Said Fitch's Rasmussen, "Money fund regulation is pushing investors to reconsider what they want to invest in, which is pushing managers to develop new options, so there is a whole slew of new products coming to market." (Note: Safe travels to those heading to this week's Crane's Money Fund Symposium, which is June 22-24 at the Philadelphia Marriott. The Conference Binder will be sent to the record 540 Attendees this morning, and it's also now available to registered Attendees and Subscribers at the bottom our "Content" page. We look forward to seeing many of you in Philly later this week!)
Bank of America Merrill Lynch released, "Money Fund Investor Survey: Reform Expectations," which finds that respondents expect "a sizable reallocation from prime funds," mostly into Government funds, ahead of the October floating NAV implementation date. We review this, as well as a "Reform Update" from JP Morgan Asset Management, which includes strike times for its Floating NAV fund. Finally, we also look at the latest "Money Market Fund Statistics" report from the Securities & Exchange Commission, which shows assets and trends for April. (Note: Crane Data has recently started publishing "beta" reports on Form N-MPF data, so look for more on this once we've begun releasing the summary data.)
Money fund reforms in Europe took a giant step towards becoming a reality this week as the European Council of the EU agreed to a compromise proposal. The Council is expected to vote on the reform proposal Friday, then it goes to the EU Parliament for "trilogue" approval before becoming law. (See our May 10 Link of the Day, "Reuters on EU Reform Compromise.) The statement, "Money market funds: Council agrees its negotiating stance," was issued yesterday, as well as the release, "Commission welcomes EU Council's backing for a new regulatory framework of Money Market Funds." Reuters first reported the news in its story, "European Union states agree rules on money market funds."
We learned from JP Morgan Securities' latest "Short Term Market Outlook and Strategy" about a lobbying effort led by BlackRock to overturn the National Association of Insurance Commissioners' plans to remove its Class 1 classification for Prime money funds. (See our April 18 News, "NAIC Eliminates Class 1 Status for Prime Money Funds; American Update.") JPM writes, "A couple months ago the National Association of Insurance Commissioners (NAIC) Securities Valuation Office voted to amend the classification category of prime institutional MMFs on the balance sheets of insurance companies."
Western Asset Management is the latest manager to announce updates to its money market fund lineup. In a press release entitled, "Western Asset Update on Plan for Money Market Fund Offerings: SEC Reforms Drive Proposed Changes to Product Lines," the firm laid out its roster of US Treasury/Government, Retail, and Institutional funds (including a new Prime Retail fund) and set strike times for the latter. We review this, and we also excerpt from Wells Fargo MMFs' latest "Overview, Strategy, and Outlook."
Crane Data released its June Money Fund Portfolio Holdings Friday, and our latest collection of taxable money market securities, with data as of May 31, 2016, shows increases in Agencies, Repos, and VRDNs, and decreases in Time Deposits, CP, CDs, and Treasuries. Money market securities held by Taxable U.S. money funds overall (tracked by Crane Data) increased by $24.6 billion in May to $2.604 trillion. MMF holdings decreased by $21.0 billion in April, dropped by $75.5 billion in March, and increased by $64.2 billion in February. Repos remained the largest portfolio segment, followed by Treasuries and Agencies. CDs were in fourth place, followed by Commercial Paper, Time Deposits and VRDNs. Money funds' European-affiliated securities fell to 27.4% of holdings, down from the previous month's 28.6%. Below, we review our latest Money Fund Portfolio Holdings statistics. Note: we recently made a number of category changes to reflect the SEC's new disclosure mandates, which went live on April 14, and we now also offer a separate "beta" cut of fund info holdings from the SEC's Form N-MFP.
The Federal Reserve released its latest quarterly "Z.1 Financial Accounts of the United States" statistical survey (formerly the "Flow of Funds"). Among the 4 tables it includes on money market mutual funds, the First Quarter, 2016 edition shows that the Household Sector remains the largest investor segment, though these assets dipped slightly in Q1. Funding Corporations, State & Local Governments, Life Insurance Companies, and Private Pension Funds showed gains in the latest quarter, while Households, Nonfinancial Corporate Businesses, State & Local Governments, and Funding Corporations showed increases over the past 12 months. We review the latest Fed Z.1 numbers below, and we also review an article from Bloomberg on Treasury bill market volatility and money fund regulatory shifts. (Note: Crane Data's June Money Fund Portfolio Holdings were delayed slightly due to recent SEC category changes. Watch for our "Reports" later this morning and for our News on this on Monday. We've also begun posting Form N-MFP data on our Holdings page.)
Crane Data's latest Money Fund Market Share rankings show asset declines for roughly half of U.S. money fund complexes in May as money market fund assets decreased by $9.7 billion, or 0.04%. Overall assets have fallen by $71.3 billion, or 2.6%, over the past 3 months, but over the past 12 months through May 31, they are up $113.0 billion, or 4.5%. The biggest gainer in May was J.P. Morgan, whose MMFs rose by $6.3 billion, or 2.7%. Western, Invesco, UBS, Fidelity, and HSBC also saw assets increase, rising by $3.8 billion, $2.5 billion, $1.5 billion, $1.5 billion, and $1.4 billion, respectively. (Our domestic U.S. "Family" rankings are available in our MFI XLS product, our global rankings are available in our MFI International product, and the combined "Family & Global Rankings" are available to Money Fund Wisdom subscribers.) We review these below, and we also look at money fund yields the past month, which rose slightly.Archives »