Press Releases & Quotes
The Wall Street Journal writes "Money-Fund Plan Gets Cold Shoulder". It says, "Regulators' latest plan to shore up the $2.7 trillion money-market mutual fund industry is getting an icy reception from some individual investors. As part of a proposal being floated by the Securities and Exchange Commission, investors who wish to sell all their holdings in a money-market fund would only be allowed to receive 95% to 97% of their cash back immediately. The remaining money would be returned to them after 30 days, according to the SEC. That isn't sitting well with investors like Robert "Willie" Williamson, a 66-year-old retired Navy rear admiral who lives in Annapolis, Md.... The goal of the SEC's proposal, expected to be announced as soon as the end of March, is to make sure the funds, which are designed to be safe, have enough cash on hand to pay back all investors during a market storm. It also would require money funds to boost their capital cushions, an idea that is meeting stiff resistance from the fund industry. The SEC proposal is presenting a rare instance where money-management firms and some customers are united." The Journal adds, "Industry experts warn that funds still are struggling under the weight of the 2010 rules, which have forced some funds to hold lower-yielding securities -- at a time when interest rates are at multidecade lows. The yield on the Crane 100, an index of the 100 largest money funds, sunk to 0.06% at the end of January from 4.98% in January 2007, according to Crane Data LLC, a Massachusetts-based money-fund tracker. Assets in retail money funds have fallen to $939 billion at the end of last year from a 14-year-peak of $1.2 trillion in 2007, according to Crane Data. Peter Crane of Crane Data says low returns are the main reason investors are fleeing. "Retail investors have not blinked when it comes to safety issues in money-market funds," says Mr. Crane. "It's all about yield.""
St. Louis Post-Dispatch writes "Money market funds mix low yields with high controversy". It says, "Money-market funds aren't making much money for anybody right now, but they're becoming a hot issue in Washington. The Securities and Exchange Commission is about to propose rules designed to bolster confidence in the funds. Its goal is to prevent a repeat of 2008, when one fund's losses caused a run on other funds, forcing the government to implement a temporary insurance program. The SEC hasn't made a formal proposal yet, but the mutual fund industry is already accusing the agency of regulatory overkill. The industry worries that drastic changes could cause investors to pull out much of the $2.7 trillion they hold in money market funds. Certainly no one invests in money funds today for the yields, which average just 0.03 percent.... The SEC reportedly is considering three types of new rules: A floating share price, a 30-day hold on part of each investor's account, and higher capital requirements.... The fund industry is gearing up to fight the proposed rules. Paul Schott Stevens, president of the Investment Company Institute, a trade group, posted a commentary last week saying that the proposals would "drive fund sponsors out of the industry ... and leave the remaining sponsors with a product that few investors or their financial advisers will use." The piece quotes, "Peter Crane, founder of fund-tracking firm Crane Data, thinks none of the ideas will be implemented. SEC Chairman Mary Schapiro wants tighter regulations, but it's not clear whether she has enough votes on the commission, or whether the rules could withstand a legal challenge." Crane says, "The thought that the SEC is going to harm 30 million investors is ridiculous. It's one of the most powerful voting blocs in the country: people with money."
Saturday's Wall Street Journal featured an article titled, "Time to Leave Your Money Market Fund", which says, "Short-term savings yields won't make anyone rich these days. But investors can pick up some extra cash -- and get a little added safety -- by switching from money-market funds offered by investment companies to money-market accounts held at banks. There are some trade-offs, however, and the maneuver won't make sense for everyone. "Money market" can refer to two entirely different financial products. One is a mutual fund that invests in safe, short-term securities and passes the income along to investors. The other is a bank account where the rate is set by the lender. Both offer safety and easy access. The average money-market fund yields just 0.06% as of Wednesday, according to Peter Crane, president of Crane Data, which tracks the funds."
The Journal piece, by Jack Hough, continues, "Why is the difference between money funds and money-market accounts so vast? New restrictions on what money funds can buy have "put managers in a smaller box and made yields more similar," says Deborah Cunningham, chief investment officer at Federated Funds, one of the largest money-fund companies. A big money fund called Reserve Primary "broke the buck" after the 2008 collapse of Lehman Brothers, meaning its share price slipped below the $1 a share that such funds seek to maintain. A judge ordered the fund to liquidate and investors got back about 99% of their money."
It explains, "Such losses have been rare, and new rules that took effect in 2010 have made money funds as safe as they have ever been, say Peter Rizzo, director of the fund research group at Standard & Poor's, and Roger Merritt, head of the fund group at Fitch Ratings. The Securities and Exchange Commission announced a plan this week that could make funds even safer, but fund-industry executives say it could squeeze yields even more."
The Journal adds, "Bank money-market accounts have some big advantages. While money funds pay a market rate based on securities yields, banks can pay "artificial rates based on funding needs and competitive factors," says Robert Deutsch, managing director at JP Morgan Asset Management, the largest U.S. money-fund manager. In the past, some banks have offered significantly higher yields because they were in trouble and needed to attract deposits."
This week's Barron's also writes "Regulation Worries Roil Money-Market Industry". It says, "As we explained in our Jan. 9 cover story, "Broken Forever?" the Securities and Exchange Commission has floated some fairly significant -- and, to most in the industry, highly alarming -- proposals for money-fund regulation. On the table, in brief: Ditching the steady $1-per-share convention in favor of a floating net asset value, mandating a capital reserve for each fund, and creating a "hold-back" that would mean you'd have to wait 30 days to receive a portion of your withdrawal."
This article adds, "The SEC hasn't announced anything publicly, but in informal talks with the Investment Company Institute and others, the agency has indicated that its timeline for releasing these new rules has moved up from "sometime in the first half of the year" to "could be March." This, of course, could change again. But the behind-the-scenes discussions we reported on a month ago are now much more public."
Crane Data' Peter Crane and State Street Global Advisors' Jeff St. Peters are scheduled to speak at The Treasury Management Association of New England's (TMANE's) 27th Annual "Sources of Education" Conference to be held May 16-18, 2012 at the Boston Marriott-Copley Place. Crane is President & Publisher of Crane Data LLC and St. Peters is a Managing Director of State Street Global Advisors and a Senior Portfolio manager within the Global Cash Management division. Their session, "The New Look of Money Funds and Cash Markets," is scheduled on 5/17/2012 from 3:45-5:00. The talk's description says, "Following many months of regulatory changes and market turmoil, money market mutual funds and investors continue to adapt to the new realities of the cash investment marketplace. Hear from money fund expert Peter Crane and portfolio manager Jeff St. Peters on how the money markets have changed, and what investors should be looking for in analyzing their money funds and cash investments. The two will review recent trends, regulations, and concerns in the money markets."
MarketWatch writes "Fed to savers: Cash is trash". The Chuck Jaffe piece says, "The Federal Reserve has telegraphed the future of interest rates and inflation, and here's the takeaway: "Money-market funds are the Stupid Investment of the Week." Stupid Investment of the Week showcases conditions and characteristics that make a security less than ideal for the average consumer, in the hope that spotlighting trouble in one case makes it easier to avoid trouble elsewhere. The column is not an automatic sell signal, which is particularly true for people who use money funds to park cash that they can plow into an investment strategy on a moment's notice. But most people don't use money funds that way, and that's part of the problem." Jaffe quotes Pete Crane, "There's no argument that cash is dumb in this environment. The question is, 'Is what you want to go to instead of cash even dumber?' If what's important is having your cash ready and at hand, then no return is the cost you pay for convenience." In other news, see also Bloomberg's "Federated Threatens to Sue SEC Over Planned Money-Fund Rules," which says, "Federated Investors Inc., the third- largest manager of U.S. money-market mutual funds, is planning legal action to block rule changes being contemplated by the Securities and Exchange Commission that the company said could destroy the $2.7 trillion cash-management industry."
Following the successful conclusion of our 2nd annual Crane's Money Fund University last week in Boston, we're preparing to focus on Crane Data's big annual show, Crane's Money Fund Symposium 2012. Our 4th annual Money Fund Symposium will be held June 20-22, 2012, at The Westin Convention Center in Pittsburgh. Crane Data's big event in Philadelphia last year attracted over 380 speakers, sponsors, and attendees, and we expect our Pittsburgh conference to be even bigger and better. Crane's Money Fund Symposium offers money market portfolio managers, investors, issuers, and service providers a concentrated and affordable educational experience, as well as an excellent and informal networking venue. Registration for Crane's Money Fund Symposium 2012 will (again) be $750; exhibit space is $3,000; and sponsorship opportunities are $4.5K, $6K, $7.5K, and $10K. Our mission is to deliver a better and less expensive conference alternative to money market fund professionals and investors, and we hope to see you in Pittsburgh this summer! Crane Data is also assisting German conference company IQPC with a new European Money Fund Summit, which is tentatively scheduled for November 14-16, 2012, in Frankfurt, Germany. Finally, mark your calendars for next year's Money Fund University, which is tentatively scheduled for Jan. 23-24 in New York City.
As we wrote in the January issue of our flagship Money Fund Intelligence newsletter, online money fund trading portal Treasury Partners announced the launch of a "transparency" initiative late last week. The firm issued a press release saying, "HighTower's Treasury Partners has launched a proprietary tool designed to assist its Money Market Portal clients in rapidly assessing portfolio risk and responding to global credit exposure."
The announcement explains, "This new analytical tool, FundView, enables clients managing their own liquidity to perform rigorous due diligence on the more than 140 domestic and offshore funds available via Treasury Partners online Money Market Portal. With FundView, these clients can search their investment portfolios for exposure to individual securities, issuers, maturity dates, asset classes and CUSIPs by country. FundView also enables investors to run cross-fund analysis, improve diversification, and adjust portfolio risk, including counter-party and headline risk."
It adds, "FundView is the latest in a series of innovative, proprietary technology Treasury Partners has launched on its platform over the past three decades."
Jerry Klein comments, "Due to the increasing volatility in the global markets, identifying and reacting quickly to portfolio exposures is now more critically important than ever. And, judging from the extremely positive comments we've received since the FundView launch, our Portal clients obviously agree."
Treasury Partners is one of a number of money fund "portals" or supermarkets that are using Crane Data's Money Fund Portfolio Holdings series to power their transparency and analytics initiatives. Recently, Comerica Securities' online money market fund trading system, `Maestro, began providing clients access to money fund news, fund statistics and portfolio holdings information from Crane Data too. Maestro users may now view issuer, country and concentrations of fund holdings, as well as 'shadow' NAVs and performance statistics."
Barron's writes Money Funds are "Broken Forever". The piece says, "What's the difference between a piggy bank and a money-market fund? Not much. Neither is insured, and the returns are basically the same: nothing. The average money fund these days pays just two basis points, or 0.02%. A third of them pay nothing at all. Yet in November and December 2011, investors put more cash into money funds -- $91.7 billion -- than they had since December 2008 and January 2009, when $195 billion poured into the funds. Retail assets account for about a third of the $2.7 trillion held in domestic money-market funds. The reason for that is safety. And that's where the trouble begins -- both for the companies that run money-market funds and the individuals who stash their money there. There are three big reasons for this, starting with the Federal Reserve. The Fed has made clear that it plans to keep overnight rates at their historic lows, which means that the securities money funds buy are also yielding exceedingly low rates. And low rates make it exceptionally hard -- virtually impossible, in fact -- for the funds, and therefore investors, to make any money." It quotes Peter Crane, "We will undoubtedly see more consolidation, but less than people expect. Most of the consolidations or liquidations we've seen are from funds run by [funds like] AARP and PayPal. They were never really in the business in the first place." Barron's adds, "The notion of paying for safety, however, isn't far-fetched, Crane says. "Negative interest rates are nothing new. They used to be called checking accounts," he says. "For centuries, people have paid banks to hold money, not the other way around. There's always been a price for safety, and people are always willing to pay.""
Later this morning, Crane Data's January Money Fund Intelligence newsletter will be e-mailed to subscribers. The new edition contains articles entitled: "Outlook Bleak for 2012, But MMFs See Glimmers," which reviews recent asset and regulatory trends; "Interview w/Schwab MF Strategist Rick Holland," which quotes industry veteran Rick Holland; "Top MMFs of 2011; Our 3rd Annual MFI Awards," which announces the top-performing funds for 2011; and "Treasury Partners Enters Portal Transparency War;" which reviews the latest analytical tool offered to portal investors. We have also updated our Money Fund Wisdom database with December 31, 2011, performance information and are in the process of sending out our monthly Money Fund Intelligence XLS and Crane Index products.
The latest MFI says, "The coming year looks bleak for money market mutual funds, but things are not nearly as challenging as they appeared to be just one month ago. Sure, zero yields and the threat of radical regulatory change are even more threatening than they've been the previous three years. But glimmers of hope and relief appeared on both fronts late in the year, and money fund investors and providers have reason for optimism in 2012."
In our regular fund family article, we write, "Money Fund Intelligence's latest monthly fund family "profile" features Charles Schwab Investment Management's Rick Holland, Schwab's new portfolio strategist for money market funds. We discuss Schwab's history with money funds, current portfolio tactics, recent customer concerns, and the outlook for the money market mutual fund business in general. Our Q&A follows." Look for these product shortly, or watch www.cranedata.com for more excerpts in coming weeks.
In other news, Sunday's New York Times featured the article, "Money Funds Could Face More Changes". It discusses Norwegian lender Eksportfinans and potential pending regulatory changes. The piece says, "About 20 American money market mutual funds -- those trusted staples of institutional and individual cash management -- were caught holding notes issued by the bank, Eksportfinans of Norway. The downgrade put the notes well below the quality threshold set by fund regulators."
The Times explains, "What happened next? The answer depends on whether you're talking to mutual fund executives or to their regulators -- and the gap between the answers explains the regulatory fight that the $2.6 trillion money fund industry faces in 2012. Ask a mutual fund industry executive and you'll hear that the affected funds were quietly bailed out by their sponsors. In fact, fund industry executives say the Eksportfinans episode simply proved that the money fund industry is much safer and resilient because of the reforms put in place after 2008, when the Lehman Brothers bankruptcy set off a panic. But ask a federal regulator about the Eksportfinans event and you'll hear that the financial system dodged a bullet that could have started another ruinous stampede. As regulators see it, the episode is a worrisome reminder that, despite the new rules already in place, money funds still pose too big a risk to the nation's financial stability."
It adds, "The commission is expected to propose steps early in the year that would change the kind of money funds available to individual and institutional investors, and comments are already being filed from all sides. But industry executives and analysts contend that there doesn't seem to be a strong empirical link between the risks the regulators are trying to address and some of the changes they want to make.... Ms. Schapiro has confirmed that some combination of these ideas is likely to be proposed in the first three months of this year, but the fight over what is eventually adopted will be long and loud. Regulators seem to be betting that money funds are so strategically important to big mutual fund families that even the sweeping changes on the drawing board will not kill the funds."
While Crane Data is busy preparing for its second annual Money Fund University, a "basic training" conference for money market professionals January 19-20 at the Boston Hyatt, we're also busy preparing for our 4th annual Crane's Money Fund Symposium. Mark your calendars for our 2012 Money Fund Symposium, which will be June 20-22, 2012, at The Westin Convention Center Pittsburgh. Our Symposium in Philadelphia last summer attracted almost 400 speakers, sponsors, and attendees, and we expect our 4th annual money fund conference to be even bigger and better. Our 2012 keynote speakers include: Chris Donahue, CEO & Chairman of Federated Investors and Karen Dunn Kelley, CEO of Invesco Worldwide Fixed Income. (See the full preliminary agenda here.) Crane's Money Fund Symposium offers money market portfolio managers, investors, issuers, and service providers a concentrated and affordable educational experience, as well as an excellent and informal networking venue. Registration for Crane's Money Fund Symposium 2012 will (again) be $750; exhibit space is $3,000; and sponsorship opportunities are $4.5K, $6K, $7.5K, and $10K. Our mission continues to be to deliver a better and less expensive conference alternative to money market fund professionals and investors. We look forward to seeing you in Pittsburgh!
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