Charles Schwab Investment Management sent out a letter to clients and shareholders Friday morning announcing changes to its money market fund lineup. The big change is that Schwab, which has mostly retail assets to begin with, will convert its Institutional shares to retail so that it's offering are entirely retail; it will also convert one of its small Prime funds, Money Market Portfolio, to Government. Schwab is the 7th largest money fund manager in the US with $160.1 billion in assets. The three funds that are changing -- Schwab Value Advantage Money Fund, Institutional Shares; Schwab Value Advantage Money Fund, Institutional Prime Shares; and Schwab Municipal Money Fund, Institutional Shares -- represent about $3.2 billion. (See also the press release, "Charles Schwab Investment Management Changes Money Market Fund Line-up," and see our previous News, "Schwab Shifting MMF Sweeps to Bank.")
Treasury Strategies hosted its Quarterly Corporate Cash Briefing yesterday, where the discussion among panelists Roger Merritt, Managing Director, Fitch Ratings; Debbie Cunningham, CIO, Global Money Markets, Federated Investors; and Peter Matza, Engagement Director, Association of Corporate Treasurers, focused on liquidity -- or lack thereof -- in the marketplace, as well as the impact of Fed policy. The webinar was moderated by Tony Carfang, Partner, Treasury Strategies, and also featured Kevin Ruiz, Principal, Treasury Strategies. We also cover the release of the Minutes from the September meeting of the Federal Reserve's Federal Open Market Committee, where, despite much speculation to the contrary, the Fed did not raise interest rates. (Note: Charles Schwab just announced changes to its money funds this morning. Watch for a full update shortly.)
Crane Data's latest Money Fund Intelligence Family & Global Rankings, which rank the market share of managers of money market mutual funds in the U.S. and globally, will be sent out to shareholders on Thursday. The October edition, with data as of Sept. 30, 2015, shows asset decreases for the majority of US money fund complexes in the latest month, but increases over the past 3 months. Assets decreased by $22.9 billion overall, or 0.9%, in September; over the last 3 months, assets are up $34.3 billion, or 1.4%. For the past 12 months through September 30, total assets are up $36.8 billion, or 1.5%. Below, we review the latest market share changes and figures. (Note: Crane Data's October Money Fund Intelligence was released yesterday, and our latest Money Fund Portfolio Holdings will be released Friday.)
The October issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Wednesday morning, features the articles: "Year to Go for Fund Changes; A Look at Floating NAV MMFs," which summarizes which large funds will have floating NAVs in October 2016; "Morgan Stanley Talks Growth, New Products," where we profile the money fund team at MS Investment Management; and "SEC Finalizes Ratings Removal from Rules," which recaps the recent SEC ruling on the removal of credit ratings from money funds. We have also updated our Money Fund Wisdom database query system with Sept. 30, 2015, performance statistics, and sent out our MFI XLS spreadsheet earlier. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our October Money Fund Portfolio Holdings are scheduled to ship Friday, October 9, and our October Bond Fund Intelligence is scheduled to go out Thursday, Oct. 15.
Usage of the Fed's reverse repo "RRP" program broke a record last week on the Sept. 30 quarter-end with $450 billion in combined usage. In the weekly "Short-Term Market Outlook and Strategy, J.P. Morgan Securities' Alex Roever writes, "It was all about quarter-end in the money markets last Wednesday. For the most part, what transpired met our expectations. As a result of typical dealer pullbacks in the short-term wholesale funding markets and dealers having to adhere to the final G-SIB reporting date, usage of the Fed reverse repo facility surged on 9/30. The overnight RRP drew $200bn in demand, while both term RRP operations were oversubscribed and totaled $250bn in usage." (Note: Watch for our Sept. 30 Money Fund Portfolio Holdings on Friday, and commentary on money fund holdings in RRP next Monday.)
It's been a month since we've seen any major announcements from money market fund managers on reform-related changes, but there have been a flurry of smaller moves, including liquidations, name changes, share class launches, and changes in investment guidelines. While there have been a couple of minor announcements -- see our Sept. 10 News, "More Consolidation: Federated Buys Huntington; Am Century Goes Govt -- the last big news we saw was Sept. 1, "Franklin Goes Government; $200 Billion To-Date to Convert from Prime." Among the latest set of tweaks: PNC merged two government funds, Dreyfus initiated a number of name changes, and Fidelity provided an update on some of its already announced money market fund mergers. Also, as expected (see our July 29 News, "American Funds Leans Government"), American Funds filed to convert its American Funds Money Market Fund to a Government money fund.
According to an article in RIA Biz, a publication for investment advisors, "Schwab Advisor Services alerted its 7,000 RIAs that it will liquidate the money market holdings in their client accounts by Dec. 1 and put the money in Schwab Bank." The article, entitled, "Schwab Alerts its RIAs that it Will Liquidate Client Money Market Holdings by Dec. 1," and subtitled, "The San Francisco-based broker is shipping all cash in sub-$500K accounts to its bank," explains, "The cash-sweeping to Charles Schwab Bank applies to households with accounts totaling less than $500,000 and apply to accounts that were opened prior to Oct. 1, 2014." In other news, we also report on the latest in a legal fight between Double Rock, Reserve Funds' former FDIC insured deposit "amalgamation" unit, and Reich & Tang.
The Investment Company Institute's latest "Trends in Mutual Fund Investing" shows that total money fund assets increased by $8.1 billion in August. However, looking at the numbers for September, it appears that the 4-month winning streak may be in jeopardy as assets appear to be down slightly month-to-date. We review recent flows and ICI's latest Trends, as well as their "Month-End Portfolio Holdings of Taxable Money Funds" below. The latter verifies our previously reported increase in money fund holdings in Agencies and Time Deposits (the latter which ICI categorizes within CDs). (See Crane Data's Sept. 11 News, "Portfolio Holdings Show Jump in Agencies; Prime to Govt Shift Starts.")
The Federal Reserve released its latest quarterly Z.1 "Financial Accounts of the United States for the Second Quarter, 2015" statistical survey (formerly the "Flow of Funds") last week. The four tables it includes on money market mutual funds show that the Household sector remains the largest investor segment, though this segment declined below the $1 trillion level in the Second Quarter for the first time in a decade. Only State and Local Governments, Nonfinancial Noncorporate Businesses, and State and Local Government Retirement Funds gained slightly. Table L.206 shows the Household sector with $985.4 billion -- or 38.2% of the $2.580 trillion held in Money Market Mutual Fund Shares (down 1.1%) as of Q2 2015. Household shares decreased by $19.4 billion in the 2nd quarter (after dropping $71.2 billion in Q1), and these assets remain well below their record level of $1.581 trillion at year-end 2008.
The Securities and Exchange Commission released its latest "Money Market Fund Statistics" report, which shows assets and yields up for the month ended August 31, 2015. 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. Also, law firm Ropes & Gray released an alert entitled, "SEC Removes Credit-Rating References and Amends Issuer Diversification Requirements in Money Fund Rules."
As the US money market fund industry braces for Floating or Variable NAV funds, it can look to fourth largest money market fund country in the world, France, for some insights into VNAV funds. France, with $329 billion in MMF assets, is almost entirely made up of VNAV funds, so it has a track record that the US, and the rest of Europe, can learn from. At Crane's European Money Fund Symposium earlier this month in Dublin, a panel of French money fund experts discussed this market in a session called, "French Money Market Funds and VNAV." The segment featured Charlotte Quiniou of Fitch Ratings; Vanessa Robert of Moody's Investors Service; Thierry Darmon of Amundi; and, Yann Marhic of Credit Agricole-CIB. In her presentation, Robert summed up how the attitude toward French money funds is changing. Ten years ago she was at a meeting with an American who told her if it's not a CNAV fund, it's not a money fund. "Here we are 10 years later, with the US about to adopt, if not the French model, at least part of it, and I must say that for me, it is a small taste of revenge."
Fitch Ratings has released a new report that examines trends in a number of emerging money market fund markets, including Korea, Mexico, Brazil, and India, among others. The report, "Paths Diverge for "Second Tier" Money Fund Domiciles," shows that money market funds play a major role in some of these smaller markets. We also report on a session from last week's European Money Fund Symposium called, "MMFs in Asia and Emerging Markets," that takes a closer look at some of these markets, as well as the hottest money market fund market in the world, China. (See also our previous story on our Dublin conference, "European Money Fund Symposium: Kooy, Lardner Push Viable Solutions," and see our August 10 News, "China Surpasses France as 3rd Largest Money Fund Market: ICI World.")Archives »