Crane Data has begun tracking Daily Liquid Assets (DLA) and Weekly Liquid Assets (WLA), adding the two statistics to our Money Fund Intelligence Daily product. DLA includes securities maturing in one day plus all Treasury securities, while WLA includes securities maturing within 7 days plus Treasury and Government discount securities. We added these to MFI Daily, our daily 8am e-mailed Excel file with assets, yields, dividends, Crane Indexes and daily commentary, late last week. The addition of DLA and WLA is in response to the SEC's 2014 Money Market Fund Reforms, which will require money fund providers to report such data on their websites starting in April 2016. A number of fund companies have already begun posting these statistics. (We also already track MNAVs, or market NAVs, on MFI Daily, which money fund managers will also be required to post as part of the new disclosure rules but many already post.) In other news, we report that Wells Fargo is rebranding its family of mutual funds by eliminating the "Advantage" moniker and we cite a new paper from Capital Advisors, below.
The 19th largest money market fund manager, Franklin Templeton, recently filed with the Securities and Exchange Commission, to convert all of its Prime portfolios into Government money funds, including the Franklin Money Fund, Franklin Templeton Money Fund, and the Franklin Institutional Fiduciary Trust (IFT) Money Market Portfolio. Overall, these 3 portfolios have about $24.5 billion in assets. Franklin is the latest in a parade of money fund providers filing to convert Prime assets to stable NAV Government funds in response to SEC reforms. So far, about $200 billion worth of Prime funds have declared their intent to convert to Government funds. Of course, it remains to be seen whether those assets will stay put if interest rates go up and the spread between Prime and Government funds widens. Below, we recap the latest Prime to 'Govie' move, as well as the others that have been announced so far.
The August issue of our Bond Fund Intelligence newsletter features a profile of Fidelity Investments' Kim Miller, who manages the $4 billion Fidelity Conservative Income Bond Fund. The fund, which launched in 2011, is one of the largest offerings among our Conservative Ultra Short Bond Fund category and was designed to fill the space just outside of money market funds. In the Q&A, which we excerpt below, Miller tells us why he is bullish on ultra-short space. (Note: E-mail us to request a copy of the latest issue of our new Bond Fund Intelligence product and our BFI XLS spreadsheet "complement". As with our MFI, BFI is $500 a year; $1K including the XLS.)
Money market mutual fund assets increased for the fourth week in a row and for the 11th of the last 15 weeks, according to ICI's latest weekly "Money Market Fund Assets" report. They've also increased for 4 months in a row, rising $113 billion, or 4.4% since the end of April, the strongest late spring and summer stretch for assets since 2008. Month-to-date in August (through 8/26), money market fund assets are up $47.0 billion to $2.695 trillion. We also review ICI's latest "Trends in Mutual Fund Investing" for July, which shows that total money fund assets increased by $45.9 billion last month, and review ICI's latest "Month-End Portfolio Holdings of Taxable Money Funds" below. The latter verifies our previously reported decrease in Fed Repo and jump in CDs and TDs in July. (See Crane Data's August 12 News, "MF Port Holdings: Repo Plunges; Time Deposits, CDs, CP Jump in July.")
Ireland's money market fund industry has grown by 4 percent this year through June, according to a new release from the Central Bank of Ireland. Ireland is the second largest money fund market in the world, and the largest outside of the US, with 7.9% of the global MMF market, according to Crane Data's analysis of the Investment Company Institute's quarterly "Worldwide Mutual Fund Assets and Flows." The third largest MMF market, China, with 7.2% market share, also faces new challenges in light of the removal of a cap on bank deposit rates. We discuss the 2nd and 3rd largest money fund global marketplaces below. (Note: The European and Global money fund industry will also be discussed in depth at next month's Crane's European Money Fund Symposium, which will take place Sept. 17-18 in Dublin, Ireland, and in next month's issue of Money Fund Intelligence.)
It's been a long time since bad news for stocks meant good news for money funds, but we think we've seen a little of the old relationship return over the past week. As the stock market has fallen, with the Dow Jones Industrial Average dropping a total of 1,674 points from August 18 to August 24, money market fund assets have surged. According to the latest numbers from our Money Fund Intelligence Daily product, money fund assets have gained $46.8 billion over the past week (through 8/24). (Note that these were inflated slightly by the addition of several new Fidelity and Federated funds.) The Wall Street Journal's CFO Journal detailed this trend in its story, "Money Funds Raking in Money," which we excerpt from below. Also, the Securities & Exchange Commission released its latest "Money Market Fund Statistics" report, which shows assets up $40.9 billion for the month ended July 31, 2015 (and up $69.7 billion over 3 months) as total assets climbed back over the $3.0 trillion.
As the U.S. Congress heads towards what may be yet another standoff over the Treasury's "debt ceiling" this fall, a new research paper, entitled, "Money Market Funds and the Prospect of a Treasury Default," examines the impact this could have on money market funds. Authors Emily Gallagher, an ICI Economist who did the study while at the Paris School of Economics, Sorbonne, and Sean Collins, ICI's Senior Director of Industry and Financial Analysis, look at past debt ceiling crises in 2011 and 2013 to evaluate the "behavior and motivations of investors redeeming from MMFs during these crises." The debt ceiling battle and possibility of a "technical" Treasury default takes on added significance going forward, given the potentially massive migration to government assets (or not) as a result of money market reforms and other regulatory changes.
Below is the second half of our interview with Jerome Schneider, Managing Director and Lead Portfolio Manager for Short Term Strategies at PIMCO. (We ran part I of our article, "PIMCO's Jerome Schneider Looks at 2a-7 and Beyond" on Friday; it originally appeared in the August issue of our Money Fund Intelligence newsletter.) In part II, Schneider talks about portfolio strategies, the transformational period that MMFs are about to go through, new products, and the outlook for money market funds.
The August issue of our flagship Money Fund Intelligence newsletter features an interview with Jerome Schneider, Managing Director and Lead Portfolio Manager for Short Term Strategies at PIMCO. Schneider oversees not only money market funds, but all short duration strategies. In that role, Schneider and his team have positioned PIMCO to compete in an evolving marketplace, "focusing on actively managed strategies which offer liquidity management, capital preservation, and income." As he tells us, investors are now dealing with a "different set of cards" that will change the game going forward. Schneider discusses those changes and PIMCO's strategy of creating opportunities in 2a-7 and beyond. The first half of our article follows.
The Investment Company Institute released a report on defined contribution plans, "The Economics of Providing 401(k) Plans: Services, Fees, and Expenses, 2014," which shows that money market mutual funds represent just 3% of the $2.9 trillion in 401(k) plan mutual fund assets, or roughly $87 billion. We also report on a story published by Plan Sponsor magazine entitled "Clearing Up Money Market Fund Reform Misunderstanding" which looks at the need to educate 401(k) plan sponsors and participants on the SEC money market reforms. Finally, we examine trends in US Dollar, Euro, and Sterling money markets from Moody's "Prime Money Market Funds 2Q Review."
Add T. Rowe Price to the list of money market fund complexes that are converting Prime fund assets to Government fund assets. However, bucking recent trends, the 21st largest money fund manager with $14.6 billion in assets (all classified as "Retail" by Crane Data), is also launching a new Prime Institutional fund, according to a story published in Ignites, "T. Rowe Tinkers with Money Fund Lineup." T. Rowe officials say they want to be prepared for growth in the new money market fund landscape. The ignites article says, "T. Rowe Price will convert its largest money market fund -- the $6.4 billion Prime Reserve -- to a government fund and launch a new prime institutional fund as part of its moves to comply with the SEC's 2014 reforms, the firm announced last week." In other news, we also report on ICI's and "J.P. Morgan Securities' latest "Money Fund Holdings" reports.
One of the most controversial, and in some cases misunderstood, components of the SEC money market reforms are the "liquidity fees and redemption gates" provisions. In a new white paper entitled, "Break Glass Only in Case of Emergency," BofA Global Capital Management's Jeffrey Coleman, Head of Fund Operations, and Nitin Mehra, Head of Strategy and Product, analyze this portion of the new rules and explain why "Liquidity fees and redemption gates are valuable shareholder protections that would be used only under dire circumstances." They write, "With its latest money market fund reforms, the Securities and Exchange Commission (SEC) seeks to mitigate the impact of runs on money market funds by giving fund boards the option to impose temporary liquidity fees and redemption restrictions or "gates" to protect shareholders should liquidity fall below certain thresholds." (Note: Crane Data also released the August issue of its new Bond Fund Intelligence publication yesterday. Watch for excerpts from our "profile" with Fidelity Conservative Income's Kim Miller later this month, or e-mail us to request the latest issue.)Archives »