Crane Data, publisher of Money Fund Intelligence, celebrates its 9th birthday this month. As we wrote in our most recent issue of MFI, we'd like to take a moment to review our progress and update you on our efforts, which include growing our conference business and extending our coverage beyond money market funds. Crane Data was launched in May 2006 by money fund expert Peter Crane and technology guru Shaun Cutts to bring faster, cheaper and cleaner information to the money fund space. We began with our MFI newsletter and have grown to offer a full range of daily and monthly spreadsheets, news, database query systems and reports on U.S. and "offshore" money funds and other cash investments. (Note: We also wanted to remind you to make hotel reservations -- we expect the hotel to be sold out soon -- and to register for our upcoming Money Fund Symposium, June 24-26 in Minneapolis, and to start making plans for our European Money Fund Symposium, Sept. 17-18 in Dublin.)
As we first mentioned in our May MFI, our big new product addition over the past year is Bond Fund Intelligence, a monthly newsletter that tracks the bond fund universe, with a focus on the ultra-short and short-term bond fund sector. BFI includes news, features, and performance data on over 300 (and growing) of the largest bond funds and ETFs. We also publish a fund "profile" interview each month with a bond fund portfolio manager. As with MFI, Crane Data offers an Excel "complement" with even more performance, data and rankings, Bond Fund Intelligence XLS. BFI includes our new Crane Bond Fund Intelligence Indexes, which now provide benchmarks for various bond market segments, including a new Conservative Ultra-Short BFI Index, a more focused benchmark for the more conservative funds in the space just beyond money market funds.
The BFI newsletter was launched due to the changing nature of the money fund and cash space. With the SEC's money fund reforms making some aspects of the cash marketplace more restrictive, we saw an opportunity to cover the growing space just beyond money funds, the ultra short and short-term bond fund segment. We listened to feedback from clients and money managers who say that area will be more attractive in an era of money fund reforms and rising interest rates. (Watch for our May issue of BFI later this week, and let us know if you'd like to see the latest edition of BFI and BFI XLS.)
Crane Data President & Publisher Peter Crane comments, "While our first love and loyalty is of course to the money fund segment, our clients -- which now include several hundred asset managers, issuers, dealers, servicers, regulators and investors -- wanted to hedge their bets too and to gather more intelligence on this growing market segment. We look forward to working with readers, bond fund providers and others in building out this new product line. We plan to eventually track Bond Fund Portfolio Holdings and launch a Bond Fund Symposium conference in this sector, though these both will take time."
Crane Data has also continued to see great success in the money fund conference business. Our 7th Annual Money Fund Symposium will take place in Minneapolis, June 24-26, and we again expect to host the largest gathering of cash investors in the world. We're also preparing for our 3rd annual European Money Fund Symposium, which be in Dublin Sept. 17-18, 2015 (the preliminary agenda is now available and registrations are now being taken for this event), and our next Money Fund University, which will be Jan. 21-22, 2016, in Boston.
The past 9 years have brought dramatic change to the money fund industry and no doubt more is yet to come. But money funds continue to hold fast, and we think higher rates will soon bring higher assets. In our MFI update, we show the annual asset totals of money funds against our flagship Crane 100 Money Fund Index (the average of the 100 largest taxable funds). During our first two years, we saw assets increase by over $1.5 trillion and yields drop from almost 5% to under 1%. During the next three years, money fund assets declined by over $1.0 trillion, while yields settled just above zero. The past 4+ years, we've seen both assets and yields virtually flat, stuck around $2.6 trillion and 0.03%, respectively.
As for Crane Data, we continue to grow. We now have 14 employees and topped $1.1 million in annual revenue in 2014. We added a new Editor, Dave Kovaleski, who is now writing much of the commentary, and we continue to rely on our core of veteran employees -- Kaio Barbosa, who oversees our Money Fund Portfolio Holdings collection, and Statistics Editors Diana Bucaro, Natalia Mendonca, and Thereza Alves. We hope to continue to deliver good information at reasonable prices, and we thank you for your continued support! Please let us know if you have any feedback or requests. We're always happy to discuss. Sincerely, Pete Crane
The May issue of Crane Data's Money Fund Intelligence was sent out to subscribers Thursday morning. The latest edition of our flagship monthly newsletter features the articles: "Crane Data Celebrates 9 Yrs., Enters Bond Fund Info Market," which marks our 9th anniversary with a look back at the past year, including the launch of our new endeavor, Bond Fund Intelligence; "Schwab & Latest Fund Co. Changes; SEC Answers FAQs," which examines Schwab's recent update on their money market funds, recaps all of the fund company announcements since the beginning of the year, and looks at the SEC's response to reform FAQs; and "ICI Fact Book Shows Flat Is New Up for Money Funds," which reports on the fund flows and other trends from the ICI's 2015 Investment Company Fact Book. We have also updated our Money Fund Wisdom database query system with April 30, 2015, performance statistics, and sent out our MFI XLS spreadsheet earlier this a.m. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our May Money Fund Portfolio Holdings are scheduled to go out on Monday, May 11, and our May Bond Fund Intelligence is scheduled to ship Thursday, May 14. Also, we mention the news of IMMFA's new Chair below.
The lead article in MFI on Crane Data's 9th anniversary says, "Crane Data, publisher of Money Fund Intelligence, celebrates its 9th birthday this month. As we've done in past May issues, we'd like to take a moment to review our progress and update you on our efforts, which include extending our coverage beyond money market funds. Crane Data was launched in May 2006 by money fund expert Peter Crane and technology guru Shaun Cutts to bring faster, cheaper and cleaner information to the money fund space. We began with our MFI newsletter and have grown to offer a full range of daily and monthly spreadsheets, news, database query systems and reports on U.S. and "offshore" money funds and other cash investments."
It continues, "Our big new addition over the past year is Bond Fund Intelligence, a monthly newsletter that tracks the bond fund universe, with a focus on the ultra-short and short-term bond fund sector. BFI includes news, features, and performance data on over 300 (and growing) of the largest bond funds and ETFs. We also publish a fund "profile" interview each month with a bond fund portfolio manager. As with MFI, Crane Data also offers an Excel complement with even more performance, data and rankings, Bond Fund Intelligence XLS. BFI includes our new Crane Bond Fund Intelligence Indexes, which now provide benchmarks for various bond market segments, including a new Conservative Ultra-Short BFI Index, a more focused benchmark for the more conservative funds in the space just beyond money market funds."
In our middle column, we look at how Schwab and others are adapting to SEC reforms, as well as the SEC's FAQs. It reads, "Charles Schwab Investment Management became the latest money market fund complex to issue an update on how it plans to adapt to the SEC reforms. Since the beginning of the year, 10 of the 20 largest money market fund managers have announced changes or updates to their MMF lineups. In this article, we not only review Schwab's plans, but we also recap the changes that have happened so far in 2015. Also, the SEC came out with answers to Frequently Asked Questions about MF Reforms, though these mainly dealt with very technical and minor issues. We also briefly review these."
It explains, "We have reported on all of the announcements that have come to our attention over the past several months. Of the 20 largest money fund complexes, half have issued updates, including the four largest -- Fidelity, JP Morgan, BlackRock, and Federated. Here is a look at the changes (and dates) announced so far." (We also list the 15 largest managers with their assets by type in the article.)
The third article says, "ICI's new "2015 Investment Company Fact Book" revealed some interesting trend data on money market fund flows in 2014. For instance, despite landmark SEC reforms, money funds saw overall inflows in 2014. What's more, institutional MMFs, which were hit hardest by reforms, saw significant inflows, while retail funds saw outflows. In addition, corporate investment in money fund assets was stable last year."
Crane Data's May MFI XLS, with April 30, 2015, data shows total assets plunging in April, the fourth monthly drop in a row, down $89.3 billion to $2.487 trillion, after falling $20.9 billion in March, $1.6 billion in February, and $44.6 billion in January. Our broad Crane Money Fund Average 7-Day Yield and 30-Day Yield remained at 0.02%, while our Crane 100 Money Fund Index (the 100 largest taxable funds) stayed at 0.03% (7-day and 30-day). On a Gross Yield Basis (before expenses were taken out), funds averaged 0.15% (Crane MFA, up from 0.14 last month) and 0.18% (Crane 100, same as last month) on an annualized basis for both the 7-day and 30-day yield averages. Charged Expenses averaged 0.13% (unchanged) and 0.15% (unchanged) for the two main taxable averages. The average WAMs for the Crane MFA and the Crane 100 were 39 and 41 days, respectively, both down 2 days from last month. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
In other news, the U.K.-based Institutional Money Market Fund Association confirmed Reyer Kooy as the new Chair of IMMFA. The statement reads, "Reyer is head of Institutional Liquidity Management, EMEA and Asia business, for Deutsche Asset & Wealth Management (DeAWM) and has been with Deutsche for nearly 5 years. Prior to joining DeAWM, Reyer was head of EMEA for a similar business at Credit Suisse, and also worked at JP Morgan for 12 years. Reyer has represented DeAWM on the Board of IMMFA since June of 2012 and also acted as its Treasurer.
Outgoing Chair Jonathan Curry of HSBC Global Asset Management was thanked for his 3 years' service as Chair of IMMFA, which followed an earlier 3 year spell as Chair of IMMFA's Investment Committee. Curry comments, "The past 3 years have been challenging for money market funds. I believe IMMFA has been instrumental in ensuring that the views of the investors and industry have been heard. There is still work to do, but we look forward to continuing the Association's work in this key area, supporting our Members."
Today, we excerpt from the April issue of Crane Data's newest publication, Bond Fund Intelligence, which tracks the bond fund marketplace with a focus on the ultra-short and most conservative segments. The article says: Our April Bond Fund Intelligence "profile" interviews `Putnam Investment's Portfolio Managers Joanne Driscoll and Michael Salm, who is also Co-Head of Fixed Income at the firm. Driscoll and Salm run the $2.2 billion Putnam Short Duration Income Fund, one of the largest funds in our Conservative Ultra Short Bond Fund universe. They talk about the importance of differentiating between various types of Ultra Short Bond Funds and why this niche is poised for growth in an environment of rising rates and more regulations.
BFI: How long have you been involved in this space? Driscoll: I have been at Putnam for almost 20 years and currently oversee the short-term liquid markets team where I'm responsible for all of our front-end strategies. Putnam launched Short Duration Income Fund in October 2011 -- with Mike and I serving as the lead managers. In 2009, we looked at the changing regulatory environment for money funds, driven by the pending amendment to SEC Rule 2a-7. While money funds were forced to shorten their investments, issuers were being told by regulators that they needed to become less reliant on the front end and extend the duration of their debt. So, our goal in launching this fund was to leverage the changes in money funds and the opportunities that were created in the market by this change. We felt this would create a demand for a fund just outside of 2a-7, but something more conservative than a short term bond fund.
Salm: During my 18 years at Putnam, I have focused quite a bit on structured products, mortgages in particular. Over time, I have worked a lot on liquid markets in general, focusing on interest rates and volatility, as well as our views about the Fed. In thinking about this strategy, there was a lot of overlap in using our expertise on the front end of the curve and in using our expertise just beyond the traditional 2a-7 venue. We wanted to leverage this very interesting combination of investment processes that you don't necessarily see blended together in normal fund structures.
BFI: How has the Short Duration Income Fund been received? Driscoll: The fund has grown to about $2.2 billion in assets under management. The objectives of our fund are capital preservation and income maximization. Our process is primarily built around the best ideas of our credit team, which focuses on alpha generation within a host of areas. We believe that prudent short term investing requires relentless focus on credit quality and risk management. Due to the nature of the fund, we focus on credit fundamentals and the risk-return trade off. Something that really differentiates Putnam in this space is the way our fixed income team works: We can leverage the entire research team; our analysts cover the sectors across all asset types -- high yield, high grade, money markets, and munis in some cases. With our broader coverage, we can put an intense focus on credit analysis.
We have found that the fallout from the financial crisis has made the ratings agencies reactionary and that impacts many issuers. While our analysts view some of these companies to be either equal to or stronger than prior to the downgrade, due to the ratings requirements of 2a-7, they cannot be purchased by money funds, even though internally we feel that they would be appropriate. These institutions are attractive purchases for Putnam Short Duration Income Fund and add some good yield to the portfolio.
There's a big difference between our fund and our peer group. Putnam Short Duration Income Fund is generally higher quality than many of its peers. We don't buy below investment grade, so we don't have high yield or floating rate bank loans like you see in some competitors. We limit our investments in the low triple-B category because we're trying to minimize the volatility in this fund as much as possible. The reception to the fund has been very positive. We find a lot of investors are challenged by the low level of interest rates and the new 2a-7 amendments. We see more and more interest in the fund because they are looking for products that can add incremental yield over a money fund with low NAV volatility.
BFI: What are the challenges for this fund? Driscoll: For us, it's making sure that financial advisors understand that this is not a money fund or a cash alternative. Prior to the crisis, many firms sold cash alternatives that behaved and looked more like a short term bond fund, and those outcomes, as we know, weren't always good. We spend a significant amount of time educating our financial advisors on the strategy and the risk-return tradeoff, so there are few, if any, surprises. We've seen a large amount of variability in this peer group, so we want to make sure the advisors understand what this fund is.
Salm: In fact, we're very sensitive about distinguishing ourselves so that people know that this category itself can be very heterogeneous. Don't mistake us in any way, shape, or form as a money market fund. We think there's a really good space between the ultra-short bond fund and money market fund categories, which is where the Short Duration Income Fund resides. The fund has been able to meet its objective in the last three years, delivering a high degree of capital preservation and a consistent return.
Watch for more of our latest BFI profile in coming days, or contact us to see the latest issue of our Bond Fund Intelligence. (BFI is $500 a year, or $1,000 including our BFI XLS spreadsheet.)
Crane Data has posted the preliminary agenda and is now accepting registrations for its 3rd Annual European Money Fund Symposium (www.euromfs.com), which will be held Sept. 17-18, 2015, at The Conrad Hilton in Dublin, Ireland. Crane Data's previous European event, held last September in London, attracted over 110 attendees, sponsors and speakers, and we expect our return to Dublin to be even bigger and better. We expect once again to host the largest money fund conference in Europe. European Money Fund Symposium offers "offshore" money market portfolio managers, investors, issuers, dealers and service providers a concentrated and affordable educational experience, as well as an excellent and informal networking venue. Our mission is to deliver the best possible conference content at an affordable price to money market fund professionals. Attendee registration for our 2015 Crane's European Money Fund Symposium is $1,000. Thanks for your support, and we hope to see you in Dublin! Finally, also visit www.moneyfundsymposium.com to learn more about our big U.S. show, Crane's Money Fund Symposium which will be held June 24-26, 2015, in Minneapolis, and www.moneyfunduniversity.com to learn more about our "basic training" event, Crane's Money Fund University, which will take place January 21-22, 2016, in Boston, Mass.
The April issue of Crane Data's Money Fund Intelligence was sent out to subscribers Wednesday morning. The latest edition of our flagship monthly newsletter features the articles: "BlackRock Latest to Telegraph Changes; 7-Day Max Maturity," which reviews big changes from the country's third largest money fund manager, BlackRock; "Wells Fargo's Weaver Says Clients Still Want Yield Too," which profiles Wells Capital Management's new head of money market funds, Jeff Weaver; and "Deposits, FDIC 'Amalgamators' Growing; Going Inst," which examines the increasing availability of FDIC insurance far above the $250K limit. We have also updated our Money Fund Wisdom database query system with March 31, 2015, performance statistics, and have sent out our MFI XLS spreadsheet. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our April Money Fund Portfolio Holdings are scheduled to go out on Friday, April 10, and our March Bond Fund Intelligence is scheduled to ship next Wednesday, April 15.
The lead article in MFI on BlackRock and Western's Changes says, "Another month, another major announcement in the money market fund world. This time it’s from the second largest money fund manager, BlackRock, which informed clients of significant changes to its MMF lineup, including fund conversions, liquidations, and the addition of innovative new 7-day maximum maturity funds. Also notable: the fourth largest MMF, BlackRock TempFund -- a Prime Institutional fund -- will remain as is. BlackRock writes in its April 6 letter, "A number of clients have indicated they are interested in continuing to invest in prime funds. We plan to maintain our largest prime fund, the $66.5 billion TempFund as a prime institutional fund. Our historical analysis shows that in normal market conditions, TempFund has demonstrated minimal per share net asset value volatility. Given the anticipated forward environment, we believe that institutional prime funds are likely to offer investors a compelling yield premium relative to CNAV government funds."
On the proposed 7-day maximum maturity funds the article comments, "The $2.4 billion BlackRock TempCash Fund, however, will be converted to a 7-day maximum maturity fund, essentially eliminating the floating NAV and the concerns over emergency gates and fees. The letter explains, "Some clients have indicated interest in a cash investment product that fits between a CNAV government fund and a FNAV institutional prime fund.... BlackRock will offer an institutional prime fund that limits holdings to those with a maturity of seven days or less."
In our middle column, we feature an interview with Wells Fargo's new head of MMFs, Jeff Weaver. It reads, "When Dave Sylvester, the long-time head of money market funds at Wells Fargo, announced his retirement at the end of 2014, the reins were handed over to Jeff Weaver, who now wears two hats. Weaver, the head of Wells Capital Management's short-duration team, also become head of the money market fund team effective January 1, 2015. We sat down with him to get his thoughts on not just money funds, but on separate accounts and the short-duration bond fund space. He also discussed how Wells is evaluating its money fund lineup to prepare for the upcoming rule changes."
We asked him, "Will you make any lineup changes? Weaver: We remain committed to offering retail and institutional prime, government, and municipal funds -- particularly if that's what our clients want -- and we believe they do. Many of our clients are in a wait-and-see mode until that October 2016 deadline approaches. Right now, we're evaluating our product lineup. We're speaking with clients with the goal of developing product solutions that best meet their needs. Our client base is largely institutional -- 90% institutional versus 10% retail -- so that is always front of mind as we're making these changes. Once we finalize a plan of action, we will present it to our Funds' board. We will not make any announcements until the board has seen and approved those changes."
The article on "Deposits and FDIC 'Amalgamators'" says, "Zero yields and the expiration of unlimited FDIC insurance haven't stopped the growth of bank deposits over the past year or two. Deposits have increased by almost $500 billion in the year through Jan. 31, 2015, and they've increased by almost $1.6 trillion the past 3 years. Bank and thrift deposits combined have almost doubled since the financial crisis hit hardest in late 2008; they now total a massive $7.65 trillion." It adds, "We also discuss the continued rapid growth of FDIC insurance "amalgamators," who are in the business of breaking too-big-for-insurance deposits into smaller FDIC insured pieces (spreading them among a network of banks). This segment continues to grow via brokerage sweeps, and is starting to see growth from the institutional and corporate cash segment."
Crane Data's April MFI XLS, with March 31, 2015, data shows total assets decreasing in March, the third month in a row, down $20.9 billion to $2.576 trillion after falling $1.6 billion in February and $44.6 billion in January. Our broad Crane Money Fund Average 7-Day Yield and 30-Day Yield remained at 0.02%, while our Crane 100 Money Fund Index (the 100 largest taxable funds) stayed at 0.03% (7-day and 30-day). On a Gross Yield Basis (before expenses were taken out), funds averaged 0.14% (Crane MFA, same as last month) and 0.18% (Crane 100, up from 0.17%) on an annualized basis for both the 7-day and 30-day yield averages. Charged Expenses averaged 0.13% (unchanged) and 0.15% (up from 0.14%) for the two main taxable averages. The average WAMs for the Crane MFA and the Crane 100 were 41 and 43 days, respectively. The Crane MFA WAM was the same as last month while the Crane 100 WAM is down 1 day from the prior month. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
Today, we excerpt from the March issue of Crane Data's new publication, Bond Fund Intelligence, which tracks the bond fund marketplace with a focus on the ultra-short and most conservative segments. Our latest monthly "profile" follows.... This month, Bond Fund Intelligence interviews Managing Director & Portfolio Manager Dave Martucci and Managed Reserves Investment Policy Committee Chairman and Risk Manager Saad Rehman from JPMorgan Asset Management. Martucci runs the $6 billion JPMorgan Managed Income Fund, which is the largest fund we currently track in our Conservative Ultra Short Bond Fund category, and Rehman has been instrumental in the creation of our new "Conservative" category. We discuss risk management, the growing demand for short-term products, and conservative ultra short’s place within a cash segmentation strategy, below.
BFI: How long have you been involved in the conservative ultra short bond space? Martucci: JPMorgan Chase & Co. has been managing money for corporations, governments, endowments, foundations, and individuals worldwide for well over a century. Currently, J.P. Morgan Asset Management has $1.7 trillion in AUM, around 25% of which is in our Global Liquidity business, which we've been in for over 30 years. Within the Global Liquidity business we manage cash and money market fund portfolios, as well as our conservative ultra short bond fund offering, which we call the Managed Reserves strategy.
The strategy dates back to 2004 and currently has $43 billion in AUM. Of that, around $9B is in mutual funds and the remainder is in separately managed accounts. Within the Managed Reserves strategy is the JPMorgan Managed Income Fund (JMGIX), which was launched in 2010 and now has $6B, an all-time high. I'm the lead portfolio manager and head of our Managed Reserves trading desk. I have 15 years of experience running liquidity strategies, and I've also been a portfolio manager for short duration and intermediate portfolios.
Rehman: I am a Risk Manager and Chairman of the Managed Reserves Investment Policy Committee, which formulates and approves investment policies and procedures as they relate to credit, market, and other risks applicable to the investment management of these funds and accounts. I've worked at JPM for 10 years.
BFI: How has the fund been received? Martucci: We've seen a significant amount of interest recently, as clients continue to be challenged by the Fed's zero interest rate policy. Additionally, they now face the prospect of floating NAVs on the short end and rising rates on the long end. These clients are looking for some incremental return over money market funds, but they still want a conservative approach. Rehman: In the wake of the financial crisis, a lot of clients built up large cash positions on their balance sheets. This excess cash, combined with an effective segmentation strategy, has been driving growth in this space. A natural place to put a strategic cash position to work is in a conservative solution that offers an incremental return over money funds.
Martucci: This is where the Managed Reserves strategy comes in, as it was a natural extension of our well-established money market fund platform, leveraging the best practices and procedures that we employ in that platform. For instance, an approved credit list that you typically find in a money market fund has been built upon and expanded, serving as a key piece of our Managed Reserves strategy. Since the strategy launched, these conservative foundations have enabled Managed Reserves to provide a strong track record of consistent returns over money market funds, with very limited volatility. Since inception, the Managed Reserves composite has had no period of rolling three-month losses. Fund assets are at an all-time high.
BFI: What are the biggest challenges for funds in the conservative space? Martucci: The main issue that we see is the variability of funds in this category. The issue comes from trying to define what that conservative ultra short space is. We're happy that industry leaders such as Crane and others are starting to focus on this and trying to establish it as a category of its own. Clearly, the space is somewhere between money market funds and short duration. We believe that the conservative ultra short space is not determined solely by interest rate duration, but also by spread duration, credit selection, the type of securities these funds can and do choose to hold and, most importantly, the volatility of performance. We address all these factors through robust risk management.
Rehman: What clients are looking for in this space is not just returns, but the risk associated with those returns. We have seen a period of low volatility over the past few years, which we think is masking some of the potential downside. We expect to see more volatility, potentially due to diverging central bank actions, regulations for money market funds and banks, as well as geopolitical risk. With volatility, we expect that we'll start to see divergence in performance for these conservative ultra short funds. One of the factors driving that divergence will be credit selection in these funds. For example, some funds in the ultra short space actively participate in below investment grade credit while others, like JPMorgan Managed Income, do not.
There are many ways you can analyze the risk and returns of funds in the ultra short space. For example, when you look at the average monthly returns of these funds they are somewhat clustered tightly around a mean -- whereas there's a much wider range when you look at the volatility of those returns. Another way to get a general sense of how risky a fund's returns are is to compare the percentage of negative monthly returns over a period, such as the past 12 or 36 months. You can see that the percentage for some funds is almost double that of others in the space. (Note: Watch for more excerpts from our latest BFI "profile" in coming days, or contact us to see the full issue of our new Bond Fund Intelligence.)
Crane Data released its March Money Fund Portfolio Holdings late yesterday, and our latest collection of taxable money market securities, with data as of Feb. 28, 2015, shows a jump in Repo and CP, and drops in VRDNs, Agencies, Treasuries, CDs, and Other. Money market securities held by Taxable U.S. money funds overall (those tracked by Crane Data) decreased by $52.1 billion to $2.473 trillion in February, after increasing by $5.6 billion in January, $68.3 billion in December, $11.5 billion in November, and $4.7 billion in October. CDs remained in the top spot as the largest portfolio segment among taxable money market funds, ahead of Repos. CP moved into third place, jumping ahead of Treasuries. Agencies were fifth, followed by Other (Time Deposits) and VRDNs. Money funds' European-affiliated securities represented 29.1% of holdings, down from 29.3% the previous month, while the Americas' market share fell slightly to 58.5% from 58.8%. Below, we review our latest Money Fund Portfolio Holdings statistics.
Among all taxable money funds, Certificates of Deposit (CDs) were down $7.4 billion (1.3%) to $549.0 billion, or 22.2% of assets, after increasing $28.0 billion in January and dropping $34.8 billion in December. Repurchase agreements (repo) increased $10.8 billion (2.1%) to $531.7 billion, or 21.5% of assets, after dropping $141.5 billion in January and increasing $140.3 billion in December. Commercial Paper (CP) moved up to the third largest segment, jumping $8.2 billion (2.1%) to $397.4 billion, or 16.1% of assets.
Treasury holdings, the fourth largest segment, dropped $8.2 billion (2.0%) to $395.4 billion, or 16% of assets, while Government Agency Debt remained in fifth, decreasing $42.9 billion (11.1%) to $342.3 billion, or 13.8% of assets. Other holdings, which include primarily Time Deposits, dropped $2.4 billion to $236.7 billion, or 9.6% of assets. VRDNs held by taxable funds decreased by $10.3 billion to $20.0 billion (0.8% of assets).
Among Prime money funds, CDs still represent over one-third of holdings with 35.6% (up from 35.3% a month ago), followed by Commercial Paper (25.8%). The CP totals are primarily Financial Company CP (15.7% of holdings) with Asset-Backed CP making up 5.5% and Other CP (non-financial) making up 4.6%. Prime funds also hold 5.1% in Agencies (down from 6.3%), 4.4% in Treasury Debt (up from 4.2%), 4.3% in Other Instruments, and 6.2% in Other Notes. Prime money fund holdings tracked by Crane Data total $1.540 trillion (down from $1.577 trillion last month), or 62.3% of taxable money fund holdings' total of $2.525 trillion.
Government fund portfolio assets totaled $468 billion in February, down from $472 billion in January, while Treasury money fund assets totaled $465 billion in February, down from $476 billion at the end of January. Government money fund portfolios were made up of 55.8% Agency Debt, 22.4% Government Agency Repo, 2.6% Treasury debt, and 18.7% in Treasury Repo. Treasury money funds were comprised of 67.8% Treasury debt, 31.0% Treasury Repo, and 1.2% in Government agency, repo and investment company shares.
European-affiliated holdings fell $19.9 billion in February to $719.0 billion (among all taxable funds and including repos); their share of holdings fell to 29.1% from 29.3% the previous month. Eurozone-affiliated holdings fell $10.8 billion to $399.3 billion in February; they now account for 16.2% of overall taxable money fund holdings. Asia & Pacific related holdings increased by $5.8 billion to $305.8 billion (12.4% of the total). Americas related holdings plunged $38.0 billion to $1.445 trillion, and now represent 58.5% of holdings.
The overall taxable fund Repo totals were made up of: Treasury Repurchase Agreements (up $19.2 billion to $286.7 billion, or 11.6% of assets), Government Agency Repurchase Agreements (down $5.0 billion to $157.8 billion, or 6.4% of total holdings), and Other Repurchase Agreements (down $3.3 billion to $87.1 billion, or 3.5% of holdings). The Commercial Paper totals were comprised of Financial Company Commercial Paper (up $9.8 billion to $241.2 billion, or 9.8% of assets), Asset Backed Commercial Paper (down $5.7 billion to $85.4 billion, or 3.5%), and Other Commercial Paper (up $4.2 billion to $70.8 billion, or 2.9%).
The 20 largest Issuers to taxable money market funds as of Feb. 28, 2015, include: the US Treasury ($396.2 billion, or 16.0%), Federal Home Loan Bank ($203.6B, 8.2%), Federal Reserve Bank of New York ($160.9B, 6.5%), BNP Paribas ($69.3B, 2.8%), Wells Fargo ($69.1B, 2.8%), Credit Agricole ($69.0B, 2.8%), JP Morgan ($57.8B, 2.3%), Bank of Tokyo-Mitsubishi UFJ Ltd ($55.5B, 2.2%), RBC ($55.2B, 2.2%), Federal Home Loan Mortgage Co ($54.2B, 2.2%), Bank of Nova Scotia ($53.4B, 2.2%), Bank of America ($47.6B, 1.9%), Natixis ($45.6B, 1.8%), Sumitomo Mitsui Banking Co ($45.1B, 1.8%), Toronto-Dominion Bank ($43.3B, 1.7%), Federal Farm Credit Bank ($42.1B, 1.7%), Barclays PLC ($41.9B, 1.7%), Federal National Mortgage Association ($39.8B, 1.6%), Credit Suisse ($38.9B, 1.6%), and DnB NOR Bank ASA ($38.7B, 1.6%).
In the repo space, Federal Reserve Bank of New York's RPP program issuance (held by MMFs) remained the largest program with $160.9B, or 30.3% of the repo market, down fractionally from 30.6% a month ago. Of the $160.9B, $117.7 billion, or 73.2%, was in Overnight Repo, while $43.1 billion, or 26.8% was in Term Repo. The 10 largest Repo issuers (dealers) (with the amount of repo outstanding and market share among the money funds we track) include: Federal Reserve Bank of New York ($160.9B, 30.3%), Bank of America ($38.5B, 7.2%), BNP Paribas ($37.9B, 7.1%), Wells Fargo ($34.1B, 6.4%), Credit Agricole ($30.0B, 5.7%), Societe Generale ($28.1B, 5.3%), JP Morgan ($22.8B, 4.3%), Barclays PLC ($21.1B, 4.0%), Citi ($20.2B, 3.8%), and Credit Suisse ($19.3B, 3.6%).
The 10 largest issuers of CDs, CP and Other securities (including Time Deposits and Notes) combined include: Bank of Tokyo-Mitsubishi UFJ Ltd ($48.9B, 4.6%), Sumitomo Mitsui Banking Co ($45.1B, 4.3%), Credit Agricole ($39.0B, 3.7%), DnB NOR Bank ASA ($38.7B, 3.7%), RBC ($38.6B, 3.7%), Toronto-Dominion Bank ($38.3B, 3.6%), Bank of Nova Scotia ($37.9B, 3.6%), Natixis ($37.6B, 3.6%), Wells Fargo ($34.9B, 3.3%), and JP Morgan ($34.6B, 3.3%).
The 10 largest CD issuers include: Bank of Tokyo-Mitsubishi UFJ Ltd ($38.6B, 7.1%), Toronto-Dominion Bank ($37.4B, 6.9%), Sumitomo Mitsui Banking Co ($37.0B, 6.8%), Bank of Nova Scotia ($31.5B, 5.8%), Mizuho Corporate Bank Ltd ($29.5B, 5.4%), Bank of Montreal ($26.3B, 4.8%), Wells Fargo ($26.1B, 4.8%), Rabobank ($24.9B, 4.6%), Natixis ($20.7B, 3.8%), and Sumitomo Mitsui Trust Bank ($19.5B, 3.6%).
The 10 largest CP issuers (we include affiliated ABCP programs) include: JP Morgan ($23.9B, 7.1%), Commonwealth Bank of Australia ($17.5B, 5.2%), Westpac Banking Co ($16.7B, 5.0%), RBC ($15.9B, 4.8%), Lloyds TSB Bank PLC ($14.3B, 4.3%), National Australia Bank Ltd ($11.9B, 3.5%), Australia & New Zealand Banking Group Ltd ($10.6B, 3.2%), Toyota ($10.1B, 3.0%), BNP Paribas ($9.6B, 2.9%), and Barclays PLC ($9.0B, 2.7%).
The largest increases among Issuers include: Wells Fargo (up $9.6B to $69.1B), Lloyds TSB Bank PLC (up $8.5B to $27.0B), Skandinaviska Enskilden Banken AB (up $3.0B to $31.5B), Goldman Sachs (up $2.9B to $13.4B), Bank of America (up $2.5B to $47.6B), Sumitomo Mitsui Trust Bank (up $2.4B to $21.0B), Norinchukin Bank (up $2.3B to $12.6B), Canadian Imperial Bank of Commerce (up $2.3B to $18.3B), ING Bank (up $2.2B to $28.9B), and Sumitomo Mitsui Banking Co. (up $2.0B to $45.1B).
The largest decreases among Issuers of money market securities (including Repo) in February were shown by: Federal Home Loan Bank (down $24.5B to $203.6B), Federal National Mortgage Association (down $9.1B to $39.8B), Federal Home Loan Mortgage Co. (down $8.2B to $54.2B), Nordea Bank (down $7.9B to $20.6B), US Treasury (down $7.4B to $396.2B), Citi (down $7.3B to $33.8B), Svenska Handelsbanken (down $6.5B to $23.5B), Standard Chartered Bank (down $5.1B to $15.9B), KBC Group NV (down $5.0B to $9.5B), and Natixis (down $4.4B to $45.6B).
The United States remained the largest segment of country-affiliations; it represents 49.3% of holdings, or $1.219 trillion (down $44B). France (10.3%, $255.4B) stayed in second, followed by Canada (9.0%, $222.8B) in third. Japan (7.5%, $186.4B) remained in fourth, while the U.K. (4.9%, $121.5B) was fifth. Sweden (4.3%, $105.6B) was sixth, followed by Australia (3.6%, $89.9B) in seventh. The Netherlands (3.0%, $75.0B), Switzerland (2.2%, $53.8B), and Germany (2.1%, $50.6B) round out the top 10 among country affiliations. (Note: Crane Data attributes Treasury and Government repo to the dealer's parent country of origin, though money funds themselves "look-through" and consider these U.S. government securities. All money market securities must be U.S. dollar-denominated.)
As of Feb. 28, 2015, Taxable money funds held 25.5% of their assets in securities maturing Overnight, and another 15.1% maturing in 2-7 days (40.6% total matures in 1-7 days). Another 19.9% matures in 8-30 days, while 12.3% matures in 31-60 days. Note that almost three-quarters, or 72.7% of securities, mature in 60 days or less, the dividing line for use of amortized cost accounting under the new pending SEC regulations. The next bucket, 61-90 days, holds 11.6% of taxable securities, while 12.0% matures in 91-180 days and just 3.7% matures beyond 180 days.
Crane Data's Taxable MF Portfolio Holdings (and Money Fund Portfolio Laboratory) were updated Tuesday, and our MFI International "offshore" Portfolio Holdings and Tax Exempt MF Holdings will be released later this week. Visit our Content center to download files or visit our Portfolio Laboratory to access our "transparency" module. Contact us if you'd like to see a sample of our latest Portfolio Holdings Reports or our new Holdings Reports Issuer Module.
The preliminary agenda is available and registrations are now being taken for Crane Data's 7th annual Money Fund Symposium, which will take place June 24-26, 2015 at The Hilton Minneapolis, in Minneapolis, Minn.. Money Fund Symposium is the largest gathering of money market fund managers and cash investors in the world. Last summer's event in Boston attracted nearly 500 attendees, and we expect yet another robust turnout for our Minneapolis event this June. (Symposium participants include money fund managers, marketers and servicers, cash investors, money market securities dealers, issuers, and regulators.) Visit the MF Symposium website (www.moneyfundsymposium.com) for more details. Registration is $750, and discounted hotel reservations are also now available. We review the agenda and conference details below. (E-mail us at firstname.lastname@example.org to request the full brochure.)
The June 24 opening afternoon agenda includes: "Welcome to Money Fund Symposium 2015" by Peter Crane, President & Publisher of Crane Data; our keynote discussion, "The New Look of Money Market Funds" with Wells Fargo Advantage Funds' President Karla Rabusch; "State of the Money Fund Industry" with Peter Crane, Debbie Cunningham of Federated Investors, and Alex Roever of JP Morgan Securities; a "European & Global Money Fund Outlook," with Jonathan Curry of the Institutional Money Market Fund Association and Jim Fuell of JP Morgan Asset Management; and, finally, a panel moderated by Charles Schwab's Rick Holland entitled, "Major Money Fund Issues 2015," featuring Tom Callahan of BlackRock, John Donohue of J.P. Morgan A.M., and Nancy Prior of Fidelity. (The opening evening's reception will be sponsored by Bank of America Merrill Lynch.)
Day 2 of Money Fund Symposium 2015 features: "Repo Review & Money Market Observations" with Joseph Abate of Barclays and Lou Crandall of Wrightson ICAP; "Senior Portfolio Manager Perspectives," moderated by Garret Sloan of Wells Fargo Securities and including Danny Burke of Goldman Sachs AM, James Palmer of First American Funds, and Rob Sabatino of UBS Global Asset Management; "Government and Treasury Fund Issues," moderated by Andrew Hollenhorst of Citi, and featuring Mike Bird of Wells Fargo Advantage Funds, Jonathan Hartley of FHL Banks Office of Finance, and Sue Hill of Federated Investors; and "Muni & Tax Exempt Money Fund issues" with Colleen Meehan of Dreyfus.
The afternoon of Day 2 (after a Dreyfus-sponsored lunch) features: "Dealer Panel: Supply Update and Outlook," moderated by Peter Yi of Northern Trust and featuring Rob Crowe of Citi; Stewart Cutler of Barclays, and Ron Flynn of JP Morgan Securities; "MMF Alternatives: Ultra-Short, Private, SMAs," moderated by JPM's Alex Roever and featuring Jonathan Carlson of BofA Global Capital Management, David Martucci of JP Morgan Asset Management, and Paul Reisz of PIMCO; "Operational & Settlement Issues with Reform," with Tony Carfang of Treasury Strategies and Charles Hawkins of BNY Mellon Asset Servicing; and a "Money Fund Ratings Roundtable" with Robert Callagy of Moody's Investors Service, Roger Merritt of Fitch Ratings, and Peter Rizzo of Standard & Poor's Ratings. (The Day 2 reception is sponsored by Barclays.)
The third day of Symposium features: "Strategists Speak '15: Rates and Higher Rates," with Brian Smedley of Bank of America Merrill Lynch, Michael Cloherty of RBC Capital Markets, and Ira Jersey of Credit Suisse; "Money Fund Reforms: Questions on the Rule" with Stephen Keen of Reed Smith, Sarah ten Siethoff of the U.S. Securities & Exchange Commission, and Jack Murphy of Dechert LLP; "More on Money Fund Reforms: Adoption Issues" with Joan Swirsky of Stradley Ronon <i:http://www.stradley.com>`_ and Tim Schiltz of Ameriprise Financial. Finally, the last session is entitled, "Money Fund Data, Statistics, and Software," with Peter Crane presenting on the latest money fund information tools.
We hope you'll join us in Minneapolis this June! (We'd also like to encourage attendees, speakers and sponsors to register and make hotel reservations early.) In other conference news, Crane's 3rd annual "offshore" money fund event, European Money Fund Symposium, will be held in Dublin, Ireland, September 17-18, 2015. This website (www.euromfs.com) is also now live and accepting reservations, though we continue to tweak our preliminary agenda. (Contact us if you'd like to sponsor.) Finally, our next Money Fund University "basic training" event is tentatively scheduled for Jan. 21-22, 2016 in Boston. Watch www.cranedata.com in coming months for more details.
In other news, the NY Fed released yet another "Statement Regarding Term Reverse Repurchase Agreements." The latest one says, "As noted in the January 28, 2015, Statement Regarding Term Reverse Repurchase Agreements, the Federal Open Market Committee (FOMC) instructed the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York to conduct a series of term RRP operations from mid-February through early March. These tests are intended to help the Desk examine how term RRP operations might work as an additional supplementary tool to help control the federal funds rate. The tests will consist of four one-week term RRP operations to take place on successive Thursdays. The amount offered and maximum offering rate associated with each operation will be announced on or around the Monday prior to the operation. A tentative schedule, updated to include additional details on the operation to be conducted on February 19, follows."
Crane's 5th Annual Money Fund University, a two-day crash course in money market mutual funds, attracted nearly 100 attendees to the Stamford Marriott in Stamford, Conn., late last week. Our Day 1 recap features coverage of the History of Money Funds, the Federal Reserve, Interest Rates and Money Fund Math, and Fund Ratings, as well as sessions explaining the various Instruments of the Money Markets (including Repurchase Agreements, Commercial Paper, CDs, Tax-Exempt/VRDNs, CDs, Treasurys, and Time Deposits). Day 2, which we will report on in coming days (and in our February MFI), focused exclusively on Money Fund Regulations. "A day and a half is really not enough time to learn about a space as big as the money fund sector, but we're going to give you a crash course and try," said Peter Crane, President, Crane Data, as well as host and MC for the event. He opened the conference leading a session called "History and Current State of Money Funds. (Note: Crane Data's next conference will be our flagship Money Fund Symposium, June 24-26 in Minneapolis. The next European Money Fund Symposium will be Sept. 17-18 in Dublin and our next MF University will be Jan. 21-22, 2016, in Boston.)
"In 1994, when I started writing about money funds and when the Community Bankers Fund 'broke the buck,' the space was only about $500 billion. Money market funds were not this behemoth that they were when the Reserve Fund broke the buck in 2008 and almost took down the world economy with it. Money funds peaked at $3.9 trillion in January 2009 after Reserve broke the buck; money was still pouring in because money funds lagged the money markets." Since that time, money fund assets declined precipitously over the next few years, dropping by about 15% per year in 2010 and 2011, he explained. But then the last 3 years in a row, money fund assets have clawed higher despite a near zero interest rate environment. "The fact that money fund assets have gone up fractionally the last 3 years in a row is just mind boggling," he said, testament to the safety and stability of the funds, which were made even safer by recent reforms.
On the other hand, there is the question of how recent reforms will impact money funds going forward, particularly Prime Institutional, which will be subject to a floating NAV in October 2016. "Institutional investors say they are going to leave, but as Churchill said about America, institutional investors will do the right thing, and stay in prime institutional money funds, after they've exhausted every other possibility," quipped Crane. He believes that any outflows we do see from Prime Institutional MMFs will be "dwarfed by inflows from bank deposits and perhaps from bond funds as well."
In the session that followed, two of the leading strategists in the space discussed "The Federal Reserve and US Money Markets." Brian Smedley, US Rates Strategist at BofA Merrill Lynch Global Research, shared his thoughts on when interest rates will rise. "Our expectation is that the Fed will start to shift up the Fed Funds target range starting in September of this year and from there we see hikes proceeding every other meeting, so half as fast as what they pursued last time." He expects it will go up to the 0.25-0.50% range in September, then to 0.50-0.75% in December 2015. By December 2016, rates will reach the 1.50-1.75% range, he said.
"There's an old proverb that says, "May you live in interesting times," and I think that's a fairly accurate description of financial market conditions, certainly in money markets at the moment," said Joseph Abate, Senior Vice President, Liquid Market Research at Barclays Capital. He focused on 4 topics; 1) the ongoing shortage of government safe assets in the financial sector and how that effects behavior in money markets, 2) how the repo market is changing largely because of dynamics related to the Fed and regulation, 3) the Federal Reserves arsenal of tools, namely reverse repo and term deposits, and 4) market liquidity, especially in prime assets. Going forward, he said, "The next battle, if you will, is not going to show up on this front, it's going to come from somewhere else, and I think it's going to be liquidity."
In her overview of the "Instruments of the Money Markets," J.P. Morgan Securities' Teresa Ho, Vice President, Short Duration Strategy, talked about challenges related to supply. "At its peak (in 2007) total money market supply was around $11.5 trillion. If you exclude Treasurys, the peak was about $9.5 trillion" she said. "Fast forward to today, and that has fallen to $5.5 trillion (excluding Treasurys) so we've seen a drop of about $4 trillion in the sector. As you might expect, a lot of it was driven by banks.
Case in point, the commercial paper market peaked at about $2 trillion at the end of 2006; half of that was in ABCP, or asset-backed commercial paper. This was a very popular way back in the day for banks to fund on a short-term basis on behalf of their clients. This particular product has really fallen by the wayside. The economics for banks to participate in this market has really waned. So right now the ABCP market is at its all-time low, at $230 billion, and it is our expectation that this sector will continue to decline going forward because of other regulatory headwinds." Another sector that has declined is the repo sector. "This is a market that has also suffered from the liquidity crisis. It has shrunk almost by half since 2007 and will continue to shrink if you look at all the regulations out there.
On the other hand, investors still see money market funds as a good way to invest their cash on a short-term basis, so demand is strong. "When you think about what has happened with supply over the last couple of years and factor that in to what's happened with demand -- you have a situation where there's too much cash chasing too few assets. There's a huge gap between supply and demand, and it's the reason why we see the competition for assets right now.... [It's] so intense that's its driving rates very, very low in the front end market. There's a real concern that a lot of money will move out of bank deposits into money market funds because of regulations.... If indeed that is the case and cash moves from bank deposits to money market funds, then this supply/demand imbalance becomes even more acute in the absence of additional supply."
There are some bright spots, however. One is Collateralized CP, which is a small but growing sector of the market at about $30-$35 billion. "Investors have been very attracted to this product." (Rob Crowe, Director, Institutional Clients Group, and Jean Luc Sinniger, Director, Money Markets, both of Citi Global Markets, took a deeper dive into CP in their session later in the day on "Instruments: Commercial Paper and ABCP.") Another glimmer of hope is in the Treasury Bill market.
Ho commented, "We have heard from the U.S. Department of the Treasury that they intend to increase their operating cash balances. Right now they run an average of about $60 billion; the expectation is that that they want to raise it to $500 billion. I suspect if they do that, a lot of it would be funded in the bill [market]. If that is the case, we'll see about $400-$450B in T-Bill supply." She said in closing, "Regulations are going to alter and fundamentally change the landscape, but the markets will adapt and they will evolve and meet whatever needs are out there."
Finally, Day 1 ended with a session led by Adam Ackerman, Vice President and Portfolio Manager at J.P. Morgan Asset Management on "Portfolio Management & Credit Analysis." Ackerman said, "My presentation is about taking everything you've seen today and bringing it all together to give you some insight into how portfolio managers think -- how we assess risk and model a portfolio for our fundamental goal, which is to provide liquidity." He said his primary goal is the preservation of capital. After that, his goals are to provide adequate liquidity and competitive yield, in that order. "Yield is important but it doesn't drive our decision making as portfolio managers, primarily."
He added, "We are in the business of providing liquidity; cash right now. We need to provide any type of liquidity that's demanded, whether it's billions or millions. We need to manage well enough so that we can manage any type of flow risk at any time." In terms of credit analysis, "Generally, the way we think about it is, the higher the credit rating, the higher the liquidity. The better the credit quality, the more concentration I'm comfortable with. Conversely, with lower credit quality, you want to lower your risk through lower concentrations." J.P. Morgan employs a rigorous credit selection process that includes their own internal analysis, he explained. Finally, he said, the ultimate measure of success is how well you meet investors' demands of preservation of capital, liquidity, managing risk, and yield. Do that well, and the assets will come.... Stay tuned for coverage of Day 2 in coming days.
As we mentioned Thursday when we released the January issue of our flagship Money Fund Intelligence newsletter, each year Crane Data recognizes the top-performing money funds, ranked by total returns, for calendar year 2014, as well as the top-ranked funds for the past 5‐year and past 10-year periods. We present the following funds with our annual Money Fund Intelligence Awards. These include the No. 1-ranked funds based on 1-year, 5-year and 10-year returns, through Dec. 31, 2014, in each of our major fund categories -- Prime Institutional, Government Institutional, Treasury Institutional, Prime Retail, Government Retail, Treasury Retail and Tax‐Exempt. Below, we reprint the MFI article announcing the winners. (We mentioned the 1-year winners on the website Thursday -- see our Jan. 8 News "Dec. MFI Features Awards, JPM's Donohue & Linton; Fed Shelves CSAs". We repeat them here, but we also review the 5-year and 10-year top-performers below.)
The Top-Performing Taxable fund overall in 2014 and top among Prime Institutional funds was BlackRock Cash Inst MMF (BGIXX), which returned 0.11%. (We excluded BlackRock Cash's SL class due to its limited availability.) Among Prime Retail funds, Invesco Money Market Cash Reserve (AIMXX) and Schwab Cash Reserve (SWSXX) had the best return in 2014 (0.06%). BofA Govt Plus Reserve Capital (GIGXX), Morgan Stanley Inst Liquid Govt Inst (MVRXX), and Western Asset Inst Govt MM Inst (INGXX) were the Top Government Institutional funds over a 1-year period with returns of 0.04%, while BofA Govt Plus Reserve Investor (BOPXX) and Morgan Stanley Inst Liq Govt Cash Mgmt (MSGXX) won the MFI Award for Government Retail Money Funds (based on 1-year return). Morgan Stanley Inst Liq Treasury Inst (MISXX) and Western Asset Inst US Treasury Obligation MMF Inst (LUIXX) were No. 1 in the Treasury Institutional class, and Morgan Stanley Inst Liq Treasury Cash Mgmt (MREXX) ranked tops among Treasury Retail funds.
For the 5-year period through Dec. 31, 2014, BlackRock Cash Inst MMF Inst (BGIXX) and Fidelity Inst MM Portfolio (FNSXX) took top honors for the best performing Prime Institutional money fund with returns of 0.18%. Meeder Money Market Fund Retail (FFMXX) once again ranked No. 1 among Prime Retail with an annualized return of 0.11%. American Beacon US Govt Select (AAOXX) ranked No. 1 among Govt Institutional funds, while Davis Government MMF (RPGXX) ranked No. 1 among Govt Retail funds over the past 5 years. BlackRock Cash Treasury MMF Inst (BRIXX) ranked No. 1 in 5-year performance among Treasury Inst money funds, and Northern Trust Treasury Money Market (NITXX) ranked No. 1 among Treasury Retail funds.
The highest‐performers of the past 10 years included: Touchstone Inst MMF (TINXX), which returned 1.82% (it was No. 1 overall and first among Prime Inst, though this fund will be liquidating -- see our Dec. 26 News "Touchstone to Liquidate Money Funds, Victim of SEC's MMF Reforms"); Fidelity Select MM Portfolio (FSLXX), which returned 1.67% (the highest among Prime Retail); American Beacon US Govt Select (AAOXX) and Goldman Sachs FS Govt Inst (FGTXX), which returned 1.61%, (No. 1 among Govt Inst funds); and Vanguard Federal Money Market Fund (VMFXX), which ranked No. 1 among Govt Retail funds (1.57%). BlackRock Cash Treasury MMF Inst (BRIXX) returned the most among Treasury Institutional funds over the past 10 years; and, Morgan Stanley Inst Liq Treasury Inv (MTNXX) ranked No. 1 among Treasury Retail money funds.
We're also giving out awards for the best-performing Tax‐Exempt money funds. Fidelity AMT Tax Free Money Fund (FIMXX) and Invesco Tax Exempt Cash Fund A (ACSXX) ranked No. 1 for the 1-year period ended Dec. 31, 2014, with returns of 0.11%. Over the last 5 years, BMO Tax Free MMF I (MFIXX) was the top performer with a return of 0.21%. BMO Tax Free MMF I also was the top-ranked fund for the 10-year period ended Dec. 31, with a return of 1.37%. See our latest Money Fund Intelligence XLS for more detailed rankings. Winners will receive a letter and certificate stating their No. 1 ranking , the number of funds in their category, and the criteria used.
In others news, management consulting firm Beacon Consulting Group released a white paper, entitled, "Getting Ready for Money Market Reform last week. BCG Principal Gerry Healy writes, "The Securities and Exchange Commission's (SEC) money market reform imposes new operational requirements on institutional money market funds and provides retail money market fund boards with new tools should certain market events occur. Now is the time for asset managers and service providers to organize a readiness assessment program in anticipation of potential operating model changes, new procedures, technology modifications and new data flows that may be required in order to meet the operational requirements and regulatory filing deadlines,"
The paper explains, "Money market reform readiness activities generally consist of working with all affected functions to ensure that: Systems and processes are capable of handling the requirement for institutional funds to use a floating NAV out to four decimal places; Data and processes are established to comply with SEC filings (new data on Form NMFP and new Form N-CR) that may be required; and, Investor liquidity requirements (e.g. intraday dealing) are met."
On Accounting and NAV Dissemination, it says, "Fortunately, most fund accounting systems currently in use appear to be able to calculate the floating NAVs to the four decimal place requirement. Where firms will likely spend the most time during this phase is ensuring that the extracts and reports delivered to internal and external interested parties are retrofitted to accommodate the dissemination of the four decimal place NAV. All reports currently used to support money market funds, including hard copy reports, data extracts, management reporting, should be analyzed to ensure compliance. The reports will drive the development of business requirements that may be required to close any gaps related to NAV dissemination."
On the subject, Regulatory Filings - Data, the paper explains, "A trigger event that may require a filing occurs in one of two ways: via market activity or through board approved measures such as redemption gates or redemption fees. Once a trigger event is approved by the board or occurs within the portfolio due to market activity, a Form N-CR filing requirement results. A "sources and uses" data matrix for the N-CR and NMFP filings is useful in developing requirements for any data or reporting gaps and tracks key inputs required to complete the new forms."
Finally, the paper says, "Complying with money market reform requirements will require a significant collaboration between asset managers and service providers. The asset manager's role in orchestrating this coordination is critical. An approach that includes a sound analysis of process changes and data requirements, followed by a comprehensive action plan to remediate any gaps can ensure a successful compliance process."Archives »