In a letter to shareholders in their latest Semi-Annual Report, American Funds President Kristine Nishiyama updated clients on the status of the $15.0 billion American Funds Money Market Fund given the looming money market fund reforms. The fund, while not officially a "government" money fund, meets current requirements for a Government MMF (80% in Govt securities). But it wouldn't meet the new requirements when they kick in in October 2016. So, between now and then, the firm has a decision to make on whether they go Government or not. Fidelity Investments, meanwhile, is already making the shift toward government securities in its $112 billion Fidelity Cash Reserves Fund (which will become the Government Cash Reserves Fund in October 2016), according to Barclays' Strategist Joseph Abate in his "US Weekly Money Market Update." Also, Fidelity released commentary in its "Insights and Outlook" series on government supply called, "Market Participants Remain Skeptical of Federal Open Market Committee Rate Forecast."
SEI Investments is the latest fund family to consolidate its fund lineup and liquidate share classes, shifting all of its outstanding share classes into A shares, according to recent SEC filings." The July 6 Prospectus Supplement says that for each of the following funds, SEI Prime Obligations Fund, SEI Money Market Fund, SEI Government Fund, SEI Government II Fund, SEI Treasury Fund, and SEI Treasury II Fund, the B, C, and H shares will be converted into the A shares. Specifically, it says, "At a meeting held on June 22-23, 2015, the Board of Trustees of the Funds approved the conversion of each Fund's Class B Shares into Class A Shares." Additional filings say the same for the B, C, H and Sweep shares, merging them into A shares. (See also our latest brief on share class consolidations, Crane Data's July 2 "Link of the Day," "JPM MMFs Abandon B Shares; Federated Liquidates S-T Euro Prime MMF.")
During Federated Investors' Second Quarter earnings call with analysts, Chief Executive Officer Chris Donahue said Federated is working on developing "private" money funds that mirror existing Federated MMFs and he expects to have "substantially all of our product changes to be completed by the end of this year." He was joined on the call by Federated President Ray Hanley, CIO Debbie Cunningham, and CFO Tom Donahue, who discussed a range of money market fund related issues, from fee waivers to new product development. We also mention some excerpts from Northern Trust's earnings call, which mentioned fee waivers and fund "top-ups".
In the July issue of our new newsletter, Bond Fund Intelligence, we wrote about a session at Crane's Money Fund Symposium in Minneapolis last month called "MMF Alternatives: Ultra Short, Private, SMAs," which examined the space beyond 2a-7 money market funds. Given the yield and regulatory environments, this space continues to attention from investors. Much of the discussion focused on Ultra Short Bond Funds, the primary focus of Bond Fund Intelligence, but we also discuss the growing interest in Separately Managed Accounts. Below, we reprint the article, which featured commentary from moderator Alex Roever of JP Morgan Securities; and panelists Jonathan Carlson of BofA Global Capital Management; David Martucci of JP Morgan Asset Management; and Paul Reisz of PIMCO. (For a look at the latest Bond Fund Intelligence and BFI XLS, e-mail us at firstname.lastname@example.org and include "Sample BFI" in the Subject line.)
Experts from the three leading fund rating services addressed some of the concerns and questions that have been out there about money market fund ratings in a session at last month's Money Fund Symposium. The segment, called "Money Fund Ratings Roundtable," was moderated by Crane Data President Peter Crane and featured panelists Rory Callagy, Senior Analyst at Moody's; Roger Merritt, Managing Director of Fitch Ratings; and Peter Rizzo, Senior Director at Standard & Poor's Ratings. The discussion featured a range of issues, including ratings trends, the impact of regulations, and new criteria. (Note: Subscribers and attendees may access the full conference recordings and Powerpoints via our "Money Fund Symposium 2015 Download Center." Crane Data will also be hosting its next conference event, the 3rd annual European Money Fund Symposium Sept. 17-18 in Dublin.)
With the October 2016 implementation of the pending money fund reform rules a little over a year away, money market fund managers have been busy this year making plans to adapt to the new environment. We have reported extensively on the announcements that have come to our attention over the past six months, including the most recent, this week's announcement by Deutsche and filings from State Street. Of the 20 largest money market fund complexes, almost all have issued updates, including the 5 largest -- Fidelity, JP Morgan, BlackRock, Federated, and Vanguard. Only 4 of the top 20 companies have not made their plans known publicly, including Northern, BofA, Franklin, and American. Here is a recap of the changes announced so far, including links to our original "News" stories.
Deutsche Asset & Wealth Management is shifting the vast majority of its Prime money market funds to Government funds as part of its money fund reform reorganization plans, the company announced Monday in a press release entitled, "Deutsche Asset & Wealth Management Announces Intended Plans for Money Market Fund Reform." In short, Deutsche will convert 5 Prime Institutional portfolios into Government funds, including Cash Management Fund; Cash Reserves Fund Institutional; Deutsche Money Market Series; Deutsche Money Market VIP; and Prime Series of Cash Reserve Fund, Inc. It will keep just one Prime Institutional Fund, the $113 million Deutsche Variable NAV Money Market Fund. Deutsche is the 18th largest money market fund manager with $31.2 billion in assets, and $55.8 billion in global MMF assets. It will also offer Retail funds, Separately Managed Accounts, and is considering new products as well.
State Street filed with the Securities & Exchange Commission last week to launch 3 new money market funds and 3 new ultra-short, "enhanced cash" bond funds, we first learned from mutual fund publication, ignites. A search of the SEC EDGAR database filings shows that State Street Institutional Investment Trust filed Form N-1A Registration Statements on July 15 for the new State Street 60 Day Money Market Fund, State Street Institutional Liquid Assets Fund, and State Street Cash Reserves Fund. The 3 new bond funds are State Street Ultra Short Term Bond Fund, State Street Current Yield Fund, and State Street Conservative Income Fund." (See also our recent "News" articles, June 15 "SSgA Says State Street ILR Will Float, Defends Gates, Fees," and June 19 "SSgA White Paper Calls for Cash Bucketing, Short-Duration Bond Funds.")
"What would you do with a trillion dollars?" That was the question from conference host Peter Crane that kicked off the session called "Government and Treasury Money Fund Issues" at last month's 7th Annual Money Fund Symposium in Minneapolis. Government money funds are poised to pick up hundreds of billions of dollars in assets come October 2016 when SEC reforms go live. Some say it could be as high as a trillion when you factor in money migrating from Prime money funds and bank deposits, both of which face new regulations. Government money market fund portfolio managers Michael Bird of Wells Fargo Advantage Funds, and Susan Hill of Federated Investors, shared their thoughts on the "Govie" Fund space. The session was moderated by Citigroup Fixed Income Strategist Andrew Hollenhorst and featured Jonathan Hartley of the Federal Home Loan Banks-Office of Finance. Also, we report on the challenges and opportunities in the Tax-Exempt money fund space from the session, "Muni & Tax Exempt Money Fund Issues," featuring Colleen Meehan of Dreyfus, John Carbone of Vanguard, and Isaac Fine of Fidelity Management and Research. (Note: Next year's Money Fund Symposium will be June 22-24, 2016, in Philadelphia, but we'll be hosting our next European Money Fund Symposium in two months, Sept. 17-18, 2015, in Dublin.)
The Federal Reserve Bank of New York announced that it was making some changes to the Federal Funds rate last week in a release entitled, "Statement Regarding the Calculation Methodology for the Effective Federal Funds Rate and Overnight Bank Funding Rate." In February, the NY Fed announced plans to enhance the effective federal funds rate calculation process by "transitioning the data source from data supplied by federal funds brokers to transaction-level data collected from depository institutions in the FR 2420 Report of Selected Money Market Rates." Also in February, the New York Fed also announced a new overnight bank funding rate (OBFR) that's calculated based on both federal funds transactions and the Eurodollar transactions of U.S.-managed banking offices, as reported in the FR 2420. The new release says, "As part of the preparation for these changes, the methodology for calculating the EFFR was reviewed to determine if enhancements could be made to provide a more robust measure of trading conditions in the federal funds market."
In their latest "Overview, Strategy, and Outlook" Wells Fargo Advantage Funds' Money Market Funds team offered a nice recap of Crane's 7th Annual Money Fund Symposium last month in Minneapolis, focusing on the major themes that came out of the conference -- Fed RRP, Supply, Fund Flows, and Market Liquidity. We also report on a new paper from Fitch Ratings called "Cash Management: The World Has Changed, Your Investment Guidelines Should, Too," which highlights the importance of reviewing investment guidelines, particularly the use of ratings agencies. The Wells team, led by Jeff Weaver, Head of Money Funds and Short Duration Strategies, writes, "In late June, more than 500 industry professionals descended on Minneapolis for the seventh annual Money Fund Symposium, sponsored by Crane Data. This is the largest conference aimed at money market fund portfolio managers, credit analysts, investors, servicers, issuers of money market securities, and others involved in the money market fund industry."
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, were sent out to subscribers late last week. The July edition, with data as of June 30, 2015, shows asset increases for the majority of US money fund complexes in the latest month. However, most fund complexes show losses over the past three months due to steep drops in April. Assets increased by $9.2 billion overall, or 0.4%, in June; over the last 3 months, assets are down $53.3 billion, or 2.1%. But for the past 12 months through June 30, total assets are up $42.2 billion, or 1.7%. Below, we review the latest market share changes and figures. (Note: Crane Data's July Money Fund Portfolio Holdings were released on Friday, and our July Money Fund Intelligence was released last Wednesday.)Archives »