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The Independent Adviser, a newsletter covering Vanguard funds, discussed money fund fee waivers and the possibility of fee "recapture" in a recent story, "Vanguard's Million-Dollar Decision is the Industry's Billion-Dollar Problem." Editor Daniel Wiener writes, "Vanguard is facing a multi-million dollar decision. Its competitors are facing the same decision, but for them it's measured in billions. The decision: To allow money fund yields to rise as the Fed begins raising interest rates, or to begin paying themselves back for years of self-imposed fee waivers. You can be sure that fund marketers at Vanguard and elsewhere are debating the merits of "Which comes first, the chicken or the egg?" right now.... First, around the middle of 2009 Vanguard began to waive certain operating expenses on its money market funds. Vanguard called these "temporary limits" on some expenses but the bottom line is the bottom line. Vanguard was cutting back on expenses to make sure money market yields stayed above zero. At first they didn't disclose the numbers but over the past couple of years the level of these fee waivers has been disclosed in the footnotes to its money funds' semi-annual and annual reports."

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With U.S. money market reforms now on the books and pending, the global money fund industry's attention turns to European reforms, first proposed by the European Commission in September 2013. The European Parliament has not acted on the proposal yet, postponing a vote this past March. But the expectation is that Parliament will act at some point in coming months. The issue will be front and center at Crane's European Money Fund Symposium, which takes place next week (Sept. 22-23) in London. But in advance of that, we have come across some good articles written about European reforms in the past week. The first, called "Money Market Reform: Keeping Your Eye on the Ball," was published by Treasury Today, and quotes Euro Symposium keynote speaker and IMMFA Chairman Jonathan Curry. (We also "profile" IMMFA Secretary General Susan Hindle Barrone in the latest issue of our Money Fund Intelligence newsletter.)

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Late last week, we learned about the launch of a new family of money market funds, as well as the liquidation and outsourcing of another one. TCG Financial Services out of Miami appears to be attempting to create money funds comprised of FDIC-insured deposit blocks with the launch 10 new government money market funds, according to recent SEC Edgar filings. A story on ignites.com, entitled, "Small Shop Sees Massive Opportunity in Money Fund Rule," explains that TCG says the move is fueled by the SEC's money market reform. Writes Ignites author Peter Ortiz, "In part, the move reflects the shop's hopes to help its funds grow by attracting investors uncomfortable with another major provision of the rule: moving institutional prime funds away from a stable, $1 per share price." The 10 funds are: TCG Cash Reserve Money Market Fund (TCHIX), TCG Daily Liquidity Government Money Market Fund (TCDIX), TCG Liquid Assets Government Money Market Fund (TLAIX), TCG Liquidity Plus Government Money Market Fund (TLPIX), TCG US Government Select Money Market Fund (TUSIX), TCG US Advantage Money Market Fund (TUAIX), TCG US Government Primary Liquidity Money Market Fund (TUPIX), TCG US Government Max Money Market Fund (TUMIX), TCG US Premier Government Money Market Fund (TURIX), and TCG US Government Ultra Money Market Fund (TUUIX). Each of these funds has institutional shares and may add up to 4 other share classes.

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Crane Data published its latest Money Fund Intelligence Family & Global Rankings Wednesday, which ranks the asset totals and market share of managers of money funds in the U.S. and globally. The September edition, with data as of August 31, shows sizeable asset increases for the majority of money fund complexes in the latest month, and modest gains over the past three months and year. This comes after several months of decreases. (These "Family" rankings are available to our Money Fund Wisdom subscribers.) JP Morgan, BlackRock, Federated, Fidelity, and Morgan Stanley were the biggest gainers in August, rising by $7.3 billion, $6.9 billion, $5.5 billion, $5.3 billion, and $4.8 billion respectively, while Morgan Stanley, BofA Funds, Wells Fargo, Franklin, and Fidelity led the increases over the 3 months through August 31, 2014, rising by $4.2B, $3.8B, $2.5B, $2.3B, and $1.5 billion respectively. Money fund assets overall jumped by $40.8 billion in August, increased by $6.6 billion over the last three months, and increased by $15.2 billion over the past 12 months (according to our Money Fund Intelligence XLS).

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Crane Data released its August Money Fund Portfolio Holdings Wednesday, and our latest collection of taxable money market securities, with data as of August 31, 2014, shows a jump in Time Deposits and Fed Repo, but little change in almost every other asset category. Money market securities held by Taxable U.S. money funds overall (those tracked by Crane Data) increased by $28.2 billion in August to $2.392 trillion. Portfolio assets decreased by $6.2 billion in July, $18.0 billion in June, $3.7 billion in May, and $39.1 billion in April. CDs remained the largest portfolio composition segment among taxable money funds, followed by Repo, CP, then Treasuries, Agencies, Other (Time Deposits), and VRDNs. Money funds' European-affiliated holdings held steady at 29.6%. Below, we review our latest Money Fund Portfolio Holdings statistics.

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Federated Investors' CEO Chris Donahue talked about money market fund reform -- and the potential opportunities going forward -- at Barclays Global Financial Services Conference on Monday in New York City. He discussed how Federated and other public commenters helped make the reforms better, new products they are developing, growth opportunities in the money fund space, and plans for future acquisitions. In his 40 minute address, available for replay on Federated's website, Donahue said money funds at Federated have accounted for, on average, 38% percent of revenues, reaching a high of 58% in the second quarter of 2009 and a current low of 26% at present. Of Federated's $352 billion in total assets under management, $245 billion are in money market fund assets. About $114 billion are in government funds, $80 billion are in prime funds, $16 billion are in tax-free funds, and $33 billion are in separate accounts.

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Since the SEC passed its Money Market Fund Reforms in July, the big question from investors shifted from "What will reforms look like?" to "How will reforms impact money funds?" While implementation is still over two years away, money managers are already planning their strategies for the new realities. The SEC certainly took this into account and offered some guidance in its new rules. We explore the potential implications a little further, excerpting from the section of the final rules titled, "Certain Macroeconomic Consequences of the New Amendments" (which starts on page 593).

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The September issue of Crane Data's Money Fund Intelligence was sent out to subscribers Monday morning. The latest edition of our flagship monthly newsletter features the articles: "MMF Assets Jump in August; SEC Reforms Loom in 10/16," which discusses how MMF assets have increased since new regulations were passed; "IMMFA's Susan Hindle Barone on MMFs in Europe," our monthly "profile" with the Secretary General of the Institutional Money Market Fund Association; and, "MFI Intl Review: Sterling, USD MFs Gain; Euro Down," which looks at assets, market share, and trends among "offshore" money market funds. We also updated our Money Fund Wisdom database query system with August 31, 2014, performance statistics, and sent out our MFI XLS spreadsheet this morning. (MFI, MFI XLS and our Crane Index products are available to subscribers via our Content center.) Our August 31 Money Fund Portfolio Holdings are scheduled to go out on Wednesday, Sept. 10.

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The Federal Reserve Board and the FDIC finalized a rule on Wednesday to strengthen the liquidity positions of large financial institutions. The rule, called the Liquidity Coverage Ratio or LCR, was adopted under the international Basel III standards for banking. The Fed's new LCR rules, which go into effect, in part, January 1, 2015, are designed to ensure banks have sufficient funding to withstand a crisis. But Treasury Strategies, in an alert released Wednesday, believes it could be disruptive for corporate treasurers.

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Money market pros have had time to take in and process the latest actions from the Federal Reserve and have detected an attitude adjustment by the Fed with respect to interest rates and the reverse repo program. Specifically, Federated's Debbie Cunningham, chief investment officer, global money markets, suggests a possible shift in the Fed's thinking on interest rates in latest "Month in Cash" column, "Fed Shifting to the Other Side of Average." Writes Cunningham, "While reflecting on the recently released minutes of the July Federal Open Market Committee (FOMC), I felt one good way to explain the Federal Reserve's slight shift in policy language is to imagine a line that represents the average of the members' opinions on when the federal funds rate will raise and to what level. This year to date, the majority of the officials have fallen below the mean, so the Fed has tended to be the "dovish" side of the average, in need of continued accommodative policy to reach target employment and inflation levels. This is why the Fed is likely to further draw out the inordinate amount of time rates are extremely low. Lately, however, more policymakers have crossed over that magic line, pushing the Fed to watch out for overstimulation instead in light of an improving economy."

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Attorney Stephen Keen from the law firm Reed Smith released a series of papers on fair valuation and mutual fund directors. The fourth in the series, released August 29, deals specifically with "Fair Valuation and Mutual Fund Directors: New Guidance from the SEC." Keen, who spoke at Crane's Money Fund Symposium in June on pending (at the time) SEC reforms, has more to say now that they are reality. "In June, I began a series of Client Alerts on Fair Valuation and Mutual Fund Directors. The third installment in the series was released in July. Although I was not certain what path the series would take, I knew where it would end -- with an irrefutable argument that it was past time for the SEC to address the use of pricing services to fair value securities, particularly fixed-income securities."

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Late Thursday, ICI posted its latest weekly "Money Market Fund Assets" report, which showed that money fund assets rose for the 4th week in a row in August. Month-to-date through August 28, total money fund assets have increased by $54.2 billion, according to Crane's Money Fund Intelligence Daily. (Note: these numbers are inflated by about $13 billion, since we added several new funds to our MFI Daily last week, so the adjusted gain for August is up $41 billion.) Prime Institutional assets, which are the most impacted by the SEC's recent reforms have increased by $17.5 billion month-to-date through August 28 (or up $11 billion when we remove the new funds added). ICI also released its latest "Trends in Mutual Fund Investing, July 2014" late last week, which tells us that total money fund assets decreased by $16 billion in July to $2.54 trillion after decreasing $17 billion in June, increasing $3.8 billion in May, and decreasing $57.9 billion in April. Below, we review ICI's latest monthly and weekly assets survey, and our daily numbers, as well as ICI's July Portfolio Composition statistics.

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