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Three papers released last week address three of the biggest questions in the money markets of late -- cash investor concerns, demand for Prime MMFs, and, a surprise new arrival (or revival), negative yields. Fitch Ratings' published, "Yields, Counterparty Risk Fuel Angst for Treasurers," which surveys corporate treasurers on their biggest cash investing challenges. Moody's Investors Service wrote, "Higher Yields and Rising Investor Anxiety Support Demand for Large US Prime MMFs," which looks at the possibility of Prime outflows. And, finally, BofA Merrill Lynch released commentary on "Negative Rates in the US." We excerpt from and summarize the three reports below.

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The February issue of our flagship Money Fund Intelligence newsletter, which was sent to subscribers Friday morning, features the articles: "MMF Yields Higher & Spread Returns; Outflows Ahead?," which looks at how the increases in yields and spreads could affect fund flows; "MF University Experts on Supply & Demand in '16," where we recap the hot topics from last month's MFU conference; and "Worst Over for Fee Waivers; Earnings Up," which discusses how money fund managers are reducing fee waivers. We have also updated our Money Fund Wisdom database query system with Jan. 31, 2016, performance statistics, and sent out our MFI XLS spreadsheet Friday morning. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our January Money Fund Portfolio Holdings are scheduled to ship Tuesday, February 9, and our February Bond Fund Intelligence is scheduled to go out Friday, February 12.

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"One of the hottest questions we've been getting recently, other than who is switching to government, is about the space beyond money market funds -- what's developing there, who is launching products, and what are the different options there," said Crane Data President Pete Crane, speaking at our recent Money Fund University in Boston. Crane and BofA Global Capital Management's Jonathan Carlson presented at a session called "Offshore MMFs, SMAs, and Ultra-Short Bonds." Crane discussed the burgeoning "Conservative Ultra-Short Bond Fund" sector, while Carlson focused on Separately Managed Accounts. We briefly excerpt from this session below (look for more in our upcoming February Bond Fund Intelligence), and we also review the U.S. Treasury's latest "Quarterly Refunding Statement," which indicates increasing Treasury Bill issuance in coming months.

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How much cash will shift out of Prime money funds into Government money funds? The question has been asked ever since Money Market Fund Reforms were passed in July 2014. While it was pure speculation last year, the reclassification of more than $264 billion in Prime funds to Government funds in late 2015 and early 2016 ($172 billion has moved to date) has already partially answered the question. Now the approach of the October floating NAV and gates and fees deadline are bringing the question of investor behavior to the fore. The fund conversions were the first wave of money market reform-driven flows; the second wave will come from investors potentially moving assets. The big question we're getting now is: How much will investors move out of Prime and into Government funds, or other vehicles, in 2016? The answer, of course, is that no one knows for sure. But we'll examine the question, recap some of the estimates out there, and give you our own best guess below.

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Standard & Poor's Ratings Services published an updated "Principal Stability Fund Rating Methodology," which includes "new portfolio diversification metrics for investment in banks rated in our highest short-term category ('A-1+'), changes to cure periods for withdrawn and downgraded securities, further differentiation of the methodology at each PSFR level and expansion of credit quality metrics for collateralized repurchase agreements (repo)," according to a spokeswoman. The press release says, "Standard & Poor's Ratings Services has published its updated methodology for its principal stability fund rating (PSFR) criteria in an article titled "Principal Stability Fund Rating Methodology." The criteria apply globally and fully supersede the prior global criteria as well as any region-specific PSFR criteria. The criteria publication follows a request for comment (published March 30, 2015), and the changes from the request for comment are summarized in a separate article, titled "Standard & Poor's Summarizes The Request For Comment Process For The Principal Stability Fund Rating Criteria."

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Federated Investors' fourth quarter earnings call with analysts Friday morning was dominated by talk of money market funds, specifically, the lessening impact of fee waivers, industry consolidation, reform-related fund flows, and Federated's soon-to-be-released Private money market fund. The Pittsburgh manager's latest earnings press release says, "Federated's money market assets were $256.4 billion at Dec. 31, 2015, down $2.4 billion or 1 percent from $258.8 billion at Dec. 31, 2014 and up $9.5 billion or 4 percent from $246.9 billion at Sept. 30, 2015. Money market mutual fund assets were $221.6 billion at Dec. 31, 2015, down $3.9 billion or 2 percent from $225.5 billion at Dec. 31, 2014 and up $5.3 billion or 2 percent from $216.3 billion at Sept. 30, 2015." Federated's share of the money market fund business in the U.S. was 8.0% at year-end, according to our Money Fund Intelligence XLS product. You can hear the replay of the earnings call on www.federatedinvestors.com or find the call transcript on Seekingalpha.com.

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A press release entitled, "UBS Asset Management Announces Changes to Its Money Market Fund Platform" tell us, "UBS Asset Management (Americas) Inc. ("UBS AM") and its affiliates/predecessors have managed money market funds for more than 35 years and offer client-focused solutions throughout the world. In an effort to best address its clients' needs in an era of evolving regulatory reform and industry changes, UBS AM today announced changes to its money market fund platform, including the launch of new products." We review the changes from the 17th largest MMF manager, and we also discuss ICI's latest "Money Market Fund Assets" and monthly "Trends in Mutual Fund Investing" reports below.

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State Street Global Advisors hosted a webinar last week entitled, "Cash Solutions for the New Reality," where a panel of experts discussed a range of money fund related issues, including fund flows, the path of the interest rates, repo, ratings, and yield spreads. The session was moderated by Yeng Butler, Head of US Cash Business at SSGA, and featured commentary from Pia McCusker, Global Head Cash Investments, and William Goldthwait, Sales Strategist. We review the webinar below, and we also discuss this week's FOMC Meeting, the Federal Reserve's first since their December 2015 meeting, when they raised rates for the first time in almost a decade.

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At last week's 6th annual Crane's Money Fund University in Boston, the state of money market supply was a theme woven through several of the sessions. While the industry has been dealing with a supply-demand imbalance in recent years, the outlook for supply in 2016 is optimistic, according to the experts. Barclays' Director of Fixed Income Strategy Joseph Abate and J.P. Morgan Securities' Executive Director `Teresa Ho shared their perspectives on why in two separate sessions. We also heard from portfolio managers, including SSgA's Todd Bean, who talked about the fundamental objectives of cash management. For a broad overview of MFU, see our Jan. 25 News, "American Beacon Goes Govt; Crane's Money Fund University Sets Record," and visit our "Content Center" and our "Crane's Money Fund University 2016 Downloads" page to access the MFU Binder and Powerpoints (available to attendees and Crane subscribers only).

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The SEC released its latest "Money Market Fund Statistics" report, which confirmed our earlier reports that yields jumped in December and assets rose slightly, showing a big shift from Prime to Government MMFs. The $6.0 billion increase in December results in assets being up a total $4.7 billion in 2015. It also shows that net and gross yields jumped in December while expense ratios only inched higher. The report, produced by the SEC's Division of Investment Management, summarizes monthly Form N-MFP data and includes totals on assets, yields, liquidity, WAM, WAL, holdings, and other money market fund trends. We also review the Investment Company Institute's latest "Money Market Fund Holdings" summary (with data as of Dec. 31, 2015) below.

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American Beacon, the 55th largest money fund manager (out of 65 tracked by Crane Data), is "going government," liquidating its $165 million "prime" American Beacon Money Market Select Fund while continuing to offer its $242 million American Beacon U. S. Government Money Market Select Fund. The Jan. 20 Prospectus Supplement for American Beacon Money Market Select Fund says, "On January 11, 2016, the Board of Trustees (the "Board") of American Beacon Select Funds approved a plan to liquidate and terminate the American Beacon Money Market Select Fund (the "Fund"), upon the recommendation of American Beacon Advisors, Inc. ("Manager"), the Fund's investment manager." We also review last week's Money Fund University, Crane Data's "basic training" event, which set a record for attendance last week in Boston, below. (Note: The Conference Binder and Powerpoints are now available to Attendees and Crane Data Subscribers via our "Content Center".)

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The January issue of our flagship Money Fund Intelligence newsletter features a profile of the liquidity management team at RBC Global Asset Management in the U.S., including Brandon Swensen, Senior Portfolio Manager and Co-Head of U.S. Fixed Income; John Donohue, Head of Liquidity Management; and, Matthew Appelstein, Head of U.S. Sales and Distribution. They discuss RBC's decision to no longer offer the RBC Prime Money Market Fund, the firm's growth in the U.S., and the opportunities that exist in the new liquidity management landscape. Below, we reprint the Q&A from our January issue. (Note: Thanks too for all those attending our Money Fund University in Boston, which concludes at noon on Friday. We hope you had a great show, and safe travels home!)

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