The Federal Reserve Bank of New York's Liberty Street Economics blog published a brief entitled, "From the Vault: Funds, Flight, and Financial Stability." Written by Anna Snider, it says, "The money market industry is in the midst of significant change. With the implementation this month of new Securities and Exchange Commission rules designed to make money market funds (MMFs) more resilient to stress, institutional prime and tax-exempt funds must report more accurate prices reflecting the net asset value (NAV) of shares based on market prices for the funds' asset holdings, rather than promising [sic] a fixed NAV of $1 per share." We review this below and we also debunk a recent article claiming that some Prime Inst MMFs have traded below $1.0000. (This is not the case.)
ICI's latest "Money Market Fund Assets" report shows that MMFs decreased $13.5 billion in the latest week. Prime funds fell by $17.8 billion, less than a third of the size of the drop the previous week (when they fell $56 billion) and far smaller than the $110 billion 2 weeks ago. Prime assets have declined in 20 out of the past 21 weeks (-$768B), but the outflows appear to be subsiding. (They rose yesterday by $1.4 billion, according to our MFI Daily, their first increase in many weeks.) Since Oct. 29, 2015, when the "Great Prime-to-Govie Migration" started, Prime assets have fallen by a massive $1.064 trillion, or 72.9%. Tax Exempt funds have declined by another $117.0 billion, or 47.8%. Combined these two non-Government sectors (which are now subject to the possibility of emergency gates and fees) have fallen by $1,181 billion (-68%) over the past year. We review the latest ICI update below, and also excerpt from a new Fidelity paper and press release from Capital Advisors.
State Street Global Advisors published a new paper entitled, "Critical IPS Changes for the New Cash World," which reviews Investment Policies and recent money market changes and options. It says, "Cash investing has undergone major changes over the past several years. The new SEC rules with a phase-in deadline of October 14, 2016 have dramatically altered how money market funds (MMFs) operate, seeking to make them safer in aggregate but introducing new measures that can impact access and net asset value (NAV). Other market developments -- including a shortage of appropriate securities and widespread ratings downgrades on MMF counterparties -- have also reshaped cash investing."
Following on the heels of our European Money Fund Symposium last month in London (and our Money Fund Symposium this past summer in Philadelphia), Crane Data is now preparing for its next event, our "basic training" Money Fund University. Our seventh annual MFU will be held at the Westin Jersey City Newport, Jersey City, NJ, January 19-20, 2017. Crane's Money Fund University is designed for those new to the money market fund industry or those in need of a concentrated refresher on the basics. The event also focuses on hot topics like money market regulations, money fund alternatives, offshore markets, and other recent industry trends. The affordable ($500) educational conference (see the preliminary agenda here or e-mail us to request our brochure) features a faculty of the money fund industry's top lawyers, strategists, and portfolio managers. (Note: Crane Data would like invite those attending next week's Association for Financial Professionals annual conference in Orlando to stop by Booth #208 to say "Hello.")
An article published in American Banker, entitled, "Enough Already. Money-Market Funds Aren't Shadow Banks," argues against further regulation of money market funds following the latest set of reforms. Written by Paul Schott Stevens, President & CEO of the Investment Company Institute, it says, "In July 2014, the U.S. Securities and Exchange Commission enacted sweeping new rules for money-market funds, setting an aggressive implementation deadline: Oct. 14, 2016. Though the rules required significant operational changes, money-market funds have met the new requirements on time. As a result, today's money-market funds are very different products than their precrisis predecessors."
The October issue of Crane Data's Bond Fund Intelligence, which was sent out to subscribers Monday morning, features the lead story, "Fitch: Short-Term Bond Funds as MMF Subs Need Scrutiny," which reviews Fitch Ratings' recent "Short Term Bond Fund" release, and a profile of Doug McGinley, co-Portfolio Manager of Fidelity Municipal Conservative Income Fund. Also, we recap the latest Bond Fund News, including continued inflows in September and October, and the latest Worldwide Bond Fund statistics. BFI also includes our Crane BFI Indexes, which showed continued gains in September. In other news, ignites wrote Friday on Winners and Losers from Money Fund Changes. We also quote from this below.
October 14 marks the implementation date for the final phase of the SEC's 2014 Money Fund Reforms, which most notably include a floating (4-digit) NAV for Prime Institutional funds and emergency gates and fees provisions for all Prime and Municipal money market funds. (See our July 24, 2014 News, "SEC Adopts MMF Reforms; Chair White on Rule's Fundamental Changes.) ICI released a "Statement on SEC Money Market Fund Rules," which is subtitled, "Reforms from 2010 and 2014 Have Fundamentally Changed Product to Address Any Pre-Crisis Risks." We excerpt their statement, as well as comments from Fitch Ratings and S&P Global Ratings, below.
Crane Data released its October Money Fund Portfolio Holdings yesterday, and our latest collection of taxable money market securities, with data as of Sept. 30, 2016, again shows big increases in Repo and Treasuries, and big decreases in CDs, CP and Other (Time Deposits). Money market securities held by Taxable U.S. money funds overall (tracked by Crane Data) decreased by $114 billion to $2.554 trillion last month, after increasing by $75.9 billion in August and $47.9 billion in July, and decreasing by $59.7 billion in June. Repos remained the largest portfolio segment, growing to record levels and breaking over $800 billion for the first time ever, followed by Treasuries and Agencies. Holdings of "credit" instruments continued to plummet as the shift from Prime to Government money funds reached a crescendo in September. CDs were in fourth place, followed by Commercial Paper, Other/Time Deposits and VRDNs. Money funds' European-affiliated securities plunged to 15% of holdings, down from the previous month's 25%. Below, we review our latest Money Fund Portfolio Holdings statistics.
Recently, the results of the "2016 Citigroup Money Market Industry Survey," which polled a number of money market professionals about their post-reform expectations, were released. Citi's Steve Kang writes, "This week, we present the results of our recently conducted money market reform survey. The survey was conducted to gauge investor expectations after the reform date. We sent it to a diverse set of market participants who follow short-end markets regularly ... from Sept 30 to Oct 6. 102 participated in the survey." We review Citi's results below, and we excerpt from a paper from S&P on "Banks Feel the Pinch from MMF Reform".
Crane Data's latest Money Fund Market Share rankings show asset declines for most U.S. money fund complexes in September as money market fund assets fell by $54.6 billion, or 2.1%. Overall assets inched lower, falling $17.6 billion, or 0.7%, over the past 3 months. But over the past 12 months through Sept. 30, they rose by $13.8 billion, or 0.5%. The biggest gainer in September was Vanguard, whose MMFs rose by $2.6 billion, or 1.3%. Dreyfus, First American, BlackRock, and Wells Fargo also saw assets increase, rising by $1.4 billion, $1.0 billion, $905 million, and $297 million, respectively. The biggest declines were seen by SSGA, Fidelity, JPMorgan and Western. (Our domestic U.S. "Family" rankings are available in our MFI XLS product, our global rankings are available in our MFI International product, and the combined "Family & Global Rankings" are available to Money Fund Wisdom subscribers.) We review these below, and we also look at money fund yields the past month, which were up across the board (especially in the Tax Exempt sector).
The October issue of our flagship Money Fund Intelligence newsletter, which was sent to subscribers Friday morning, features the articles: "MMFs Give Up Prime Ghost; $1.1 Trillion Now 'Gone Govie'," which reviews the massive shift away from Prime and into Govt MMFs; "Federated Reveals Prime Private Liquidity Fund," which profiles Bud Person on Federated's new "3c-7" fund; and "Regulations, Brexit Focus of European MF Symposium," which excerpts highlights from our recent European Money Fund Symposium. We have updated our Money Fund Wisdom database query system with Sept. 30, 2016, performance statistics, and we also sent out our MFI XLS spreadsheet Friday a.m. (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 Wednesday, Oct. 12, and our Oct. Bond Fund Intelligence is scheduled to go out Monday, Oct. 17.
As the unprecedented trillion-dollar shift of assets from Prime to Government money market funds approaches its final crescendo, we review the latest and perhaps final batch of Prime to Government funds conversions. Nationwide, Northern, Oppenheimer, PFM, PIMCO, and Columbia have all converted funds in recent days, bringing the total Prime-to-Govie conversion tally to almost 350 billion, over one-third of the 1.0 trillion that has shifted out of Prime overall. We review some of these latest moves below, and we also excerpt from Federal Reserve Vice Chairman Stanley Fischer's speech yesterday on "Low Interest Rates."Archives »