At our annual Crane's Money Fund Symposium in Minneapolis in late June, we presented the views of some of the leading money market strategists in the business to get their thoughts on everything from the Fed Reverse Repo Program to fund flows; repo and T-Bill supply to interest rates. Here we report on two of those sessions. The first, "Repo Review and Money Market Observations," featured Joseph Abate from Barclays, and Lou Crandall from Wrightson ICAP. The second, "Strategists Speak: Rates and Higher Rates," included commentary from Brian Smedley of Bank of America Merrill Lynch; Michael Cloherty of RBC Capital Markets; and William Marshall of Credit Suisse. (See last week's "Crane Data News" articles below to read more coverage of Symposium, or watch for our July Money Fund Intelligence publication on Wednesday a.m. Subscribers and Attendees may also see the recordings and Powerpoints at our "Money Fund Symposium 2015 Download Center.") In the first session, Abate talked about the decline of liquidity in the market. "It's ... hard to define liquidity ... but [paraphrasing a Chief Justice on another topic], 'I know it when I see it.' How I would describe liquidity is 'You know it when it's not there.' At the end of the day liquidity is something that its absence is what defines it."
Day 3 of Crane's Money Fund Symposium last week featured two sessions on Money Market Fund Reforms, including one with Sarah ten Siethoff, Senior Special Counsel at the Securities & Exchange Commission, who answered some questions on the SEC's "Frequently Asked Questions" release. She sat on a panel along with attorneys Stephen Keen, Senior Counsel, Perkins Coie; and Jack Murphy, Partner, Dechert, in a session called "Money Fund Rules: Questions on the Rule." The other reform-related session on the final day of the conference, called "More on MMF Reforms: Adoption Issues," featured Joan Swirsky, Counsel, Stradley Ronon Stevens & Young; and Robert Plaze, Counsel, Stroock & Stroock & Levan.
Today, we recap more from Crane's Money Fund Symposium, the world's largest gathering of money fund and cash investing professionals, which took place last week in Minneapolis. (Next year's event is scheduled for June 22-24 in Philadelphia.) We cover two of the "heavy-hitter" sessions below; the first is entitled, "Major Money Fund Issues 2015," which closed Wednesday afternoon's agenda, and the second, "Senior Portfolio Managers Perspectives," which took place Thursday morning. The former featured Rick Holland of Charles Schwab as moderator, with Nancy Prior of Fidelity Investments, Esther Chance of Invesco, and Matt Jones of BlackRock. The "Major Issues" panel discussed a range of topics, but it focused much of its discussion on how fund managers are adapting to money market reforms.
Crane's 7th Annual Money Fund Symposium in Minneapolis is now in the books. We had a record number of attendees (501) come to Minneapolis, where the host city earned praise, and we also had what many have called our best program ever. Over the next several days, we will summarize highlights from each of the three days. Today, we cover the first half Day 1, which began with a welcome address and Q&A featuring Karla Rabusch, the President of Wells Fargo Advantage Funds and also featured a session on the "State of the Money Fund Industry." (Conference Attendees and Crane Data Subscribers may access the full Binder, Powerpoints and Recordings via the "Money Fund Symposium 2015 Download Center" or our "Content Center.")
Thank you to all who attended and supported Crane's Money Fund Symposium last week in Minneapolis! (We had a record 502 attendees.) The conference binder, recordings and Powerpoints are now available to attendees and to Crane Data Subscribers at the bottom of our "Content" page. Watch for excerpts and coverage of the sessions in coming days on www.cranedata.com and in the July issue of our Money Fund Intelligence newsletter. Our next event is European Money Fund Symposium, Sept 17-18 in Dublin, our next "basic training" Money Fund University is Jan. 19-20 in Boston. Next year's Money Fund Symposium will be in Philadelphia, June 22-24, 2016. Also, in today's "News," we excerpt from our latest Bond Fund Intelligence, Crane Data's new publication focusing on the bond fund and conservative ultra-short bond fund marketplace. (Contact us to see the latest issue and our BFI XLS "complement" or to subscribe. BFI is $500 a year, or $1K including BFI XLS.)
Below is the second half of our interview with Peter Yi, Head of Short Duration Fixed Income Strategies at Northern Trust Asset Management. We ran part I of our article, "Northern Trust's Peter Yi on Reforms; More Than MMFs," which originally appeared in the June issue of our Money Fund Intelligence newsletter, yesterday. Below Yi talks about developing the next generation of cash products, regulations in Europe, ultrashort bond funds, and the future of money market funds. (Note: Thank you to those who attended our 7th annual Crane's Money Fund Symposium, which concludes this morning, in Minneapolis! See you next year, June 22-24, 2016, in Philadelphia!)
The June issue of our flagship Money Fund Intelligence newsletter features an interview with Peter Yi, Head of Short Duration Fixed Income at Northern Trust Asset Management. Yi discussed a range of topics, including how his firm is responding to money market reforms, the growing interest in ultrashort bond funds, the biggest challenges, the top priorities, and other topics in the money markets. The first half of our article follows. (Note: Yi will also moderated the "Dealer Panel: Supply Update and Outlook" at Day 2 of Crane's Money Fund Symposium, which started yesterday and which runs through Friday in Minneapolis.)
The Investment Company Institute sent a letter recently to William Wilkins, Chief Counsel for the Internal Revenue Service on "Money Market Fund Reform -- Adviser Contributions." The letter, penned by ICI's Karen Lau Gibian, Associate General Counsel – Tax Law, seeks additional guidance on the new rules for money market funds that could help prevent runs. She writes, "The requested guidance is necessary to, among other things, prevent redemptions from money market funds as they are required to transition from a stable net asset value ("NAV") fund to a floating NAV fund. As mentioned in our earlier submission and discussed below, we understand that some investment advisers may decide to make contributions of cash to existing money market funds to bring the shadow NAV of a fund up to $1.0000 before the compliance date for the SEC Rule. Although for book purposes this contribution would be treated as additional paid-in capital, with no resulting gain or income to the fund, the tax treatment by the fund is uncertain. Existing authorities suggest two possible approaches for analyzing these payments. As discussed below, however, neither approach fully resolves the issues raised by a contribution for this purpose." (Note: Welcome to those readers and subscribers attending Crane's Money Fund Symposium, which takes place Wednesday through Friday in Minneapolis. We hope you enjoy the show! Watch for highlights in coming days and in the July issue of our Money Fund Intelligence.)
A trio of researchers from NERA Consulting published a white paper entitled, "Money Market Mutual Funds: Stress Testing and the New Regulatory Requirements," which analyzes how money market funds will react in stress scenarios under the new rules. The authors -- Jeremy Berkowitz, Patrick Conroy, and Jordan Milev -- reveal some interesting results. They write, "In the coming months, as money market funds gear toward meeting these requirements, it is increasingly important to be aware of the types of scenarios that the enhanced, SEC-mandated stress tests include and the appropriate econometric and data simulation framework that these funds would need to adopt -- with board oversight -- in order to meet SEC's requirements.... In this article, we demonstrate this framework and evaluate the results from running prescribed stress scenarios for a stylized money market fund to assist funds, their managers, and boards in preparing to implement the rule. The enhanced stress testing requirements may increase demands on money market fund boards to evaluate the comprehensiveness and implementation of the stress testing methodology."
Morgan Stanley provided some insight into its views of life after money market reforms in a recent commentary entitled, "Perspective on Recent Money Market Fund Regulatory Change Announcements." The announcement, addressed to clients, says "Recognizing that you are eager for more clarity about the future of MMFs, especially institutional prime funds, we want to provide some perspective on current events and to update you on our product development agenda." The 9th largest money fund manager, with $116.7 billion in MMF assets, discusses recent moves made by other managers, how it views 60-day funds, and its approach to new regulations. In summary, Morgan Stanley anticipates meeting the new requirements for its current MMFs, it won't impose fees and gates on its government funds, and it will be looking to develop new products to meet the needs of clients. Also, following this week's announcement by Vanguard (see our June 17 News, "Vanguard Sticks with Prime, Goes Pure Retail, Reopens Federal MMF), the Independent Adviser for Vanguard Investors had some additional insights on Vanguard's MMF changes.
State Street Global Advisors released a white paper called "Strategic Cash: The Case for Short Duration Portfolios," which analyzes the cash investing landscape in light of the new money market reforms. It looks at how money market funds will be impacted and suggests a bucketing approach to cash investing in which short-term bond funds should be considered to capture additional return. (Note: Watch for more on ultra-short bond funds next week when we reprint from our latest Bond Fund Intelligence "profile." Note also that next week's Money Fund Symposium, June 24-26 in Minneapolis, will also feature a session on "MMF Alternatives: Ultra Short, Private, SMAs.")
A new report by Moody's examines how the impact of money market fund reforms will vary in the US and Europe. Specifically, the report, entitled "Money Market Fund Reform in US, EU: Similar Rules, Different Effects," says reforms in the U.S. will likely spur the growth of government money funds, while the European market will become more heterogeneous post-reforms. Also, the Federal Reserve's Federal Open Market Committee meeting adjourned yesterday with no movement on interest rates, as most expected. However, in a press conference Wednesday, Fed Chair Janet Yellen reaffirmed that the first rate hike will likely come later this year. She also provided new projections for the "dot plot."Archives »