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The October issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Wednesday morning, features the articles: "Year to Go for Fund Changes; A Look at Floating NAV MMFs," which summarizes which large funds will have floating NAVs in October 2016; "Morgan Stanley Talks Growth, New Products," where we profile the money fund team at MS Investment Management; and "SEC Finalizes Ratings Removal from Rules," which recaps the recent SEC ruling on the removal of credit ratings from money funds. We have also updated our Money Fund Wisdom database query system with Sept. 30, 2015, performance statistics, and sent out our MFI XLS spreadsheet earlier. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our October Money Fund Portfolio Holdings are scheduled to ship Friday, October 9, and our October Bond Fund Intelligence is scheduled to go out Thursday, Oct. 15.
MFI's lead "Year to Go for Changes" article says, "With now just a year to go until the main piece of the SEC's 2014 Money Fund Reforms -- the floating NAV and emergency gates & fees for Prime and Municipal money funds -- goes into effect (Oct. 14, 2016), we wanted to again summarize some of the work done by fund companies to date. We also wanted to focus on the pending class of floating NAV money funds, Prime Inst in particular."
The piece continues, "First, while it's been a month since we've seen any major announcements from money market fund managers on reform-related changes, there have been a `flurry of smaller moves, including liquidations, name changes, share class launches, and changes in investment guidelines. PNC just merged its PNC Advantage Inst Govt MMF into PNC Govt MMF. Also, Dreyfus changed the names of several funds. (See the "`Changes" tab in our MFI XLS, and see our Oct. 5 News, "Lull in Major Announcements, But Minor Moves Continue: American, PNC") In addition, Goldman Sachs FS Federal Fund changed its name to Goldman Sachs FS Treasury Solutions on Oct. 1, 2015, and Fidelity recently provided another update to advisors on some previously announced fund mergers."
Our latest MFI "profile," "Morgan Stanley Talks Growth, New Products," reads, "The October issue of our flagship Money Fund Intelligence newsletter features an interview with the cash management team at Morgan Stanley Investment Management -- Managing Director Fred McMullen, Managing Director, Sr. Portfolio Manager Jonas Kolk, and Executive Director, Product Management Scott Wachs. Morgan Stanley, which has been managing money funds since 1975, is the 7th largest global institutional MMF manager with over $120 billion in MMF assets. McMullen, Kolk, and Wachs talk about Morgan Stanley's industry leading growth over the past 5 years and new product development."
MFI asks, "What is your biggest priority right now? McMullen: There are several priorities -- one is working with our clients to help them strategize around the impending rate and regulatory changes. Two is our focus on new product development. We're fortunate that we have a large retail fund money fund lineup as well as a large institutional fund lineup. Some in the marketplace have to create new retail funds to deal with the bifurcation the SEC created between institutional and retail investors. We don't have to worry about that so we're more freed up to focus on new product development. We've already announced some changes that we've made to our product lineup in response to the regulations and we've shared our views on several aspects of the regulations and the competitive landscape. A few months ago, we provided clients our perspectives on the announcements that several of our competitors had made to date. We'll soon post a more comprehensive update on our progress to date and on some of our key product development issues. Three, we are very focused on growing our European liquidity business."
The third article, "SEC Finalizes Ratings Removal from Rules," says, "The U.S. S.E.C. finalized one of two remaining supporting rules for its July 2014 Money Fund Reforms, the "`Removal of Certain References to Credit Ratings and Amendment to the Issuer Diversification Requirement in the Money Market Fund Rule." A press release says, "The Securities and Exchange Commission adopted amendments to remove credit rating references in the principal rule that governs money market funds and the form that money market funds use to report information to the Commission each month about their portfolio holdings. The Commission also adopted amendments that would subject additional securities to issuer diversification provisions in the money market fund rule." Thus, as expected, money funds' "First Tier" and "Second Tier" credit regime, which required (roughly) A-1, P-1, F-1 ratings (or A-2, P-2, F-2), will be replaced by a new "minimal credit risk" test that doesn't reference ratings."
We also briefly recap two sessions from our recent, European Money Fund Symposium, which was held September 17-18 in Dublin. One story, "Irish Funds' CEO on CNAV: Legitimate Reason to Exist," features commentary from Irish Funds' CEO Pat Lardner and Regulatory Affairs Head Patrick Rooney. The other, "French MMFs Have 'Continuum of Strategies'," says, "As the US money market fund industry braces for Floating or Variable NAV funds, it can look to France, for some insights into VNAV funds. France, with $329 billion in MMF assets, is almost entirely made up of VNAV funds."
Our October MFI XLS, with Sept. 30, 2015, data, shows total assets declining by $9.4 billion in September, after rising $7.2 billion in August, $52.4 billion in July, and $15.2 billion in June. YTD, MMF assets are down by $64.7 billion, or 2.5% (through 9/30/15). 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) remained at 0.04% (7-day).
On a Gross Yield Basis (before expenses were taken out), funds averaged 0.17% (Crane MFA, up from 0.16% last month) and 0.21% (Crane 100, up from 0.20% from last month). Charged Expenses averaged 0.15% (up from 0.14% last month) and 0.16% (unchanged) for the two main taxable averages. The average WAMs (weighted average maturities) for the Crane MFA was 34 days (up one day from last month) and for the Crane 100 was 35 days (down one day). (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
The September issue of our flagship Money Fund Intelligence newsletter features an interview with the new Chair of the Institutional Money Market Funds Association, Reyer Kooy. Kooy, the Head of Institutional Liquidity Management, EMEA and Asia business for Deutsche Asset & Wealth Management, replaces Jonathan Curry, who served as IMMFA Chair for the past three years. Kooy comes aboard in a challenging environment for money funds in Europe, as the industry faces negative yields and the likelihood of substantial reforms. But he remains optimistic about the future. We excerpt from our interview below. (Note: Kooy will also give the opening speech at this morning's European Money Fund Symposium, which takes place Thursday and Friday in Dublin, Ireland at the Conrad Hotel.)
MFI: When did you become Chair? Kooy: I was elected to become Chairman of IMMFA in June of this year for a two year term. Previously I was an IMMFA board member and Treasurer of the association for the preceding three years. IMMFA has been around for more than 15 years and is focused on the European CNAV money market fund industry specifically. I've personally been involved with the money fund industry twelve years.
MFI: What has been IMMFA's main focus? Kooy: Regulation has been the main focus of the association over the last two to three years. We focus on making the case for money market funds in general, but also for constant NAV. We are keen to share our knowledge and insights with the decision makers of the European regulatory process. Regulations will be a prime focus going forward as well as the yield environment. These two key items are of crucial importance to our members and therefore to IMMFA.
MFI: Given the potential for regulatory changes, will IMMFA expand its focus? Kooy: For now the focus of the association is on constant net asset value money market funds and, hopefully, carving out a future for constant net asset value money market funds in Europe. That's really the sole focus at this point. As the regulation becomes clear, we can start to speculate about what that means not only for money market funds but also their users, the providers, and IMMFA. But at this point it's too early to say. Currently, European providers of constant NAV money market funds are members of IMMFA as are service providers, which include fund administration companies, rating agencies, and accounting firms. There are about thirty members in total. It's very much a committee based structure. The elected board is the main driving force, along with our full time staff, of the association's activities.
MFI: How are members dealing with negative yields? Kooy: Negative yield is a challenge for our clients as well as our members. IMMFA money market funds are highly transparent in their holdings and in their activities, so if the short term euro money markets are negative then money market funds must be too. So clients are accepting that to be invested in highly secure, highly liquid Euro denominated securities comes at a cost. The negative yield in a money market fund may be better than what's on offer in banks in the same liquidity bucket. Even though we have seen some reduction in the assets under management in euro CNAV money market funds, we still see actually quite a strong demand for euro denominated money market funds. Providers have been able to operate in this negative yield environment. Most if not all providers have implemented a share cancellation structure whereby a very small number of shares is cancelled on a daily basis to reflect the negative yield in the fund. We are also seeing a broadening of use of accumulating share classes, which gives the same economic gap impact but just in a different format.
MFI: What is the status of money fund regulations in Europe? Kooy: The regulatory debate in Europe continues. It has been rightly identified as a very important and technical file. The general consensus on the European side of things is still to be reached. The European Commission and the European Parliament have made their recommendations, and now it's time for the Council of Ministers also to review the file. Progress depends also on the presidency. The Latvians didn't look at this file because of resource constraint, and Luxembourg is under some pressure to do so. But it is not clear yet whether the file will progress under their presidency. Whatever the timing, as an industry we are hoping for a healthy transition timeframe to allow the clients, ourselves as providers, but also the whole European money markets to prepare themselves fully for whatever changes may ensue. All the parties need to look at the file and there is then a "tri-logue" process which effectively draws together the European Commission, the European Parliament, and the Council of Ministers to agree at final compromise. Until all of the steps are taken, it's unclear what the final outcome will be.
MFI: What's the position on fund ratings? Kooy: The most recent drafts we have seen do not specifically address the point <b:>`_. It seems like the banishment of fund ratings have been withdrawn, so it looks as though there will be a possibility to continue to use ratings. It's important to point out that in general terms, the rating agencies are actually very important to the users of money market funds perhaps more so than the providers of money market funds. A good money market fund house will be in the business of providing independent and primary research to support its investment decision process. It is an additional comfort to the users of money market funds to see the outcome of that process results in the purchasing of highly rated securities, which allow the fund to get an AAA rating.
MFI: Who are the users of IMMFA money market funds? Kooy: The answer actually is anyone who has cash. The nice thing about money market funds and IMMFA-style money market funds is that the user base is extremely broad. Corporates, insurance companies, pension plans, local governments, hedge funds, asset managers, private wealth, and, in some cases, possibly even retail through intermediaries are all making use of money market funds. As far as what they are looking for, capital preservation and liquidity are the key drivers for the users and often yield is a lesser consideration.
MFI: Bank deposits are facing challenges, too, right? Kooy: This is a very important point. If you ask money market fund investors what they worried about today, they will talk about regulation and they will talk about yield. But these issues are not only prevalent in money market funds, because bank regulations are impacting, in some cases, the ability for these banks to take balances from customers and impacting their ability to pay yields. Banks and investors therefore have a keen interest in solutions to help them with their liquidity needs. The European Commission's Capital Markets Union initiative is actually discussing promoting alternative sources of financing to the economy and money market funds should be an important part of the story.
MFI: Are providers facing fee pressures? Kooy: In general I would say that there is still an element of fee waiving taking place in most AAA-rated euro-denominated funds. This has been the case during the ultra-low yield environment which preceded the now negative yield environment. But waiving is less prevalent in the other currency funds to which we alluded, namely Sterling and U.S. dollar, where the rates are a little higher.
MFI: Have U.S. MMF reforms had an influence on European regulations? Kooy: Of course. There's a lot of activity on fund restructuring in the U.S. arena as providers prepare themselves and their clients for the effective date of S.E.C. reforms in October of 2016. However, money market fund reform and European money market fund reform are quite different, mainly because these are very different markets and quite different client bases. I hope and expect the European process will take account of the unique perspectives of the European market. For example retail uses of constant net asset value funds in the U.S. would have been a big consideration in the setting of U.S. rules. In Europe, it should not be as big a factor, so I'd expect this to be taken less into consideration in any final law making in Europe.
MFI: What's your outlook in general for CNAV money market funds? Are you optimistic about the future? Kooy: Yes, I'm fundamentally optimistic. Regulation and low yields are posing some challenges for investors and providers of money market funds alike, but I do believe that there is a strong role for CNAV funds, specifically. I'm hopeful that this will be recognized in the final lawmaking in Europe. But more generally, money market funds have a vital role to play in the capital preservation of liquid balances through diversification and it is important that the services remain accessible to investors, particularly in the context of more broad based banking regulation.
MFI: Has IMMFA had an influence in the regulatory debate? Kooy: We certainly think that we have. We have maintained an extremely consistent story throughout the entire process in terms of feeding the process with information to help with the decision making process. We're also very proud as an association to have been able to get a good consensus around those positions within the membership. I think those two items have allowed us to be very strong in informing the regulatory debate.
Crane Data's latest Money Fund Intelligence Family & Global Rankings, which rank the market share of managers of money market mutual funds in the U.S. and globally, were sent out to shareholders last week. The September edition, with data as of August 31, 2015, shows asset increases for the majority of US money fund complexes in the latest month, as well as over the past 3 months. Assets increased by $7.4 billion overall, or 0.3%, in August; over the last 3 months, assets are up $74.1 billion, or 3.0%. For the past 12 months through August 31, total assets are up $92.2 billion, or 3.0%. Below, we review the latest market share changes and figures. (Note: Crane Data's September Money Fund Intelligence and our latest Money Fund Portfolio Holdings were released last week too.)
The biggest gainers in July were Fidelity, Schwab, BlackRock, SSgA, and Morgan Stanley, rising by $6.8 billion, $4.8B, $2.7B, $2.5B, and $2.5B, respectively. Fidelity, Federated, Morgan Stanley, BlackRock, and JP Morgan had the largest increases over the 3 months through August 31, 2015, rising by $18.9 billion, $12.1B, $11.0B, $8.0B, and $7.8B, respectively. (Our domestic U.S. "Family" rankings are available in our MFI XLS product, our global rankings are available in our MFI International product, and the combined "Family & Global Rankings" are available to our Money Fund Wisdom subscribers.)
Our latest domestic U.S. money fund Family Rankings show that Fidelity Investments increased its lead as the largest money fund manager with $417.1 billion, or 16.1% of all assets (up $6.8 billion in August, up $18.9 billion over 3 mos., and up $7.1B over 12 months). Fidelity was followed by JPMorgan with $257.3 billion, or 9.9% market share (up $106M, up $7.8B, and up $18.8B for the past 1-month, 3-months and 12-months, respectively). BlackRock remained the third largest MMF manager with $212.2 billion, or 8.2% of assets (up $2.7B, up $8.0B, and up $23.8B). Federated Investors was fourth with $205.7 billion, or 7.9% of assets (down $602M, up $12.1B, and up $3.3B), and Vanguard ranked fifth with $174.7 billion, or 6.7% (down $668M, up $1.5B, and up $2.7B).
The sixth through tenth largest U.S. managers include: Dreyfus ($167.5B, or 6.5%), Schwab ($160.8B, 6.2%), which moved ahead of Goldman Sachs ($151.6B, or 5.9%), Morgan Stanley ($127.7B, or 4.9%), and Wells Fargo ($108.4B, or 4.2%). The eleventh through twentieth largest U.S. money fund managers (in order) include: Northern ($80.8B, or 3.1%), SSgA ($79.7B, or 3.1%), Invesco ($52.7B, or 2.0%) which moved ahead of BofA ($49.5B, or 1.9%), Western Asset ($43.5B, or 1.7%), First American ($41.8B, or 1.6%), UBS ($37.0B, or 1.4%), Deutsche ($30.4B, or 1.2%), Franklin ($24.7B, or 1.0%), and American Funds ($15.2B, or 0.6%). Crane Data currently tracks 68 U.S. MMF managers, one fewer than last month.
Over the past year through August 31, 2015, BlackRock showed the largest asset increase (up $23.8B, or 12.6%), followed by Morgan Stanley (up $21.5B, or 20.3%), JP Morgan (up $18.8B, or 7.9%), Goldman Sachs (up $18.3B, or 13.7%), and Dreyfus (up $10.5B, or 6.7%). Other asset gainers for the year include: Fidelity (up $7.1B, or 1.7%), First American (up $5.7B, or 15.9%), Northern (up $4.6B, 6.0%), Franklin ($4.0B, 19.4%), and Federated (up $3.3B, or 1.7%). The biggest decliners over 12 months include: Invesco (down $6.7B, or 11.3%), Wells Fargo (down $3.6B, or 3.2%), SSgA (down $3.5B, or 4.2%), RBC (down $3.3B, or 18.0%), Deutsche (down $1.9B, or 5.8%), and BofA (down $1.2B, or 2.5%). (Note that money fund assets are very volatile month to month.)
When European and "offshore" money fund assets -- those domiciled in places like Dublin, Luxembourg, and the Cayman Islands -- are included, the top 10 managers match the U.S. list, except for Goldman moving up to No. 4 (dropping Vanguard to 7), and Western Asset appearing on the list at No. 10 (displacing Wells Fargo from the Top 10). Looking at the largest Global Money Fund Manager Rankings, the combined market share assets of our MFI XLS (domestic U.S.) and our MFI International ("offshore"), the largest money market fund families are: Fidelity ($424.1 billion), JPMorgan ($382.3 billion), BlackRock ($309.8 billion), Goldman Sachs ($235.6 billion), and Federated ($213.9 billion). Dreyfus/BNY Mellon ($191.5B), Vanguard ($174.7B), Schwab ($160.8B), Morgan Stanley ($146.9B), and Western ($121.8B) round out the top 10. These totals include offshore US Dollar funds, as well as Euro and Pound Sterling (GBP) funds converted into US dollar totals.
Finally, our September 2015 Money Fund Intelligence and MFI XLS show that yields went up for many indexes in August. Our Crane Money Fund Average, which includes all taxable funds covered by Crane Data (currently 840), remained at 0.02% for both the 7-Day Yield and the 30-Day Yield (annualized, net) Average. The Gross 7-Day Yield and 30-Day Yield were 0.16% (unchanged). Our Crane 100 Money Fund Index shows an average 7-Day Yield of 0.04%, same as last month, and a 30-Day Yield of 0.05%, up a basis point from last month. Also, our Crane 100 shows a Gross 7-Day and 30-Day Yield of 0.20% (same as last month). For the 12 month return through 8/31/15, our Crane MF Average returned 0.02% and our Crane 100 returned 0.03%.
Our Prime Institutional MF Index (7-day) yielded 0.06% (up a basis point), while the Crane Govt Inst Index was at 0.02% (unchanged). The Crane Treasury Inst, Treasury Retail, Crane Govt Retail Index, and Prime Retail Indexes all yielded 0.01%. The Crane Tax Exempt MF Index also yielded 0.01%. The Gross 7-Day Yields for these indexes were: Prime Inst 0.24% (same as last month), Govt Inst 0.12% (down from 0.13%), Treasury Inst 0.08% (same), and Tax Exempt 0.11% (down from 0.12%) in August. The Crane 100 MF Index returned on average 0.00% for 1-month, 0.01% for 3-month, 0.02% for YTD, 0.03% for 1-year, 0.03% for 3-years (annualized), 0.04% for 5-year, and 1.39% for 10-years. (Contact us if you'd like to see our latest MFI XLS or Crane Indexes file.)
The September issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Tuesday morning, features the articles: "Bad News Good News for MFs; More Prime Changing to Govt," which discusses a confluence of forces that may be driving MMF assets higher; "New IMMFA Chair Reyer Kooy on European MMFs," where we discuss regulations, negative yields, and all things euro money funds with the new Chair of IMMFA; and "MFI International Review: Negative Yields, Regs Loom," an annual look at the largest funds and current trends in European money funds. We have also updated our Money Fund Wisdom database query system with August 31, 2015, performance statistics, and sent out our MFI XLS spreadsheet shortly. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our September Money Fund Portfolio Holdings are scheduled to ship Thursday, Sept. 10, and our September Bond Fund Intelligence is scheduled to go out on Tuesday, Sept. 15. (Note: We also look forward to seeing those of you planning to attend Crane's European Money Fund Symposium, which will take place Sept. 17-18 in Dublin.)
The lead "Bad News Good News” article in MFI says, "It was a pretty good summer for money market mutual funds, all things considered. Assets increased for the 4th month in a row, climbing back to almost $2.7 trillion for the first time since January 2015. With the market turmoil, it even felt a little like the pre-crisis good old days, when bad news for the rest of the world was good news for money funds."
The piece continues, "However, changes ahead of next year's Money Fund Reforms continue, as small and even mid-sized fund companies either announce that their prime funds are "going government" or that they're exiting the space entirely. We review flows and the latest fund reform-related changes below. (See our Link of the Day on the latest liquidations, Forward Funds and Eaton Vance.)"
Our latest "profile," "New IMMFA Chair Reyer Kooy," reads, "This month, we profile the new Chair of the Institutional Money Market Fund Association, Reyer Kooy. Kooy, the Head of Institutional Liquidity Management, EMEA and Asia business for Deutsche Asset & Wealth Management, replaces Jonathan Curry who served as IMMFA Chair for the past three years. Kooy comes aboard in a challenging environment for money funds in Europe, as the industry faces negative yields and the likelihood of substantial reforms. But he remains optimistic about the future."
MFI asks, "When did you become Chair?" Kooy responds, "I was elected to become Chairman of IMMFA in June of this year for a two year term. Previously I was an IMMFA board member and Treasurer of the association for the preceding three years. IMMFA has been around for more than 15 years and is focused on the European CNAV money market fund industry specifically. I've personally been involved with the money fund industry twelve years."
We also ask, "What has been IMMFA's main focus?" Kooy says, "Regulation has been the main focus of the association over the last two to three years. We focus on making the case for money market funds in general, but also for constant NAV. We are keen to share our knowledge and insights with the decision makers of the European regulatory process. Regulations will be a prime focus going forward as well as the yield environment. These two key items are of crucial importance to our members and therefore to IMMFA."
The third article, "MFI International Review," says, "The European money market fund industry is in the midst of extreme challenges and major changes as it endures a negative yield environment and braces for a regulatory overhaul. With Crane's 3rd annual European Money Fund Symposium taking place next week (Sept. 17-18) in Dublin, we thought it would be a good time to take a look at the latest trends in Europe -- including assets, largest funds and fund managers, WAMs, yields, and others. The two big themes are -- assets are down and yields have gone negative, and continue to drop, in Europe."
It adds, "Total international or "offshore" money market fund assets in US dollar, euro, and sterling stand at USD $686 billion through August 31, according to our Money Fund Intelligence International -- down $69 billion since the end of 2014. The bulk of that total, $372 billion, is in USD denominated funds, while L147 billion is in Sterling, and E76 billion is in Euros. Year-to-date through 8/31, USD MMFs are down $12B, Sterling MMFs are down $5B, and Euro MMFs are down E15B. In the second quarter, assets dropped sharply among Euro funds. Sterling funds fell 10.3% in Q2, while USD funds were relatively stable."
We also write in MFI's "News" briefs about "Yet More Money Fund Liquidations," saying, "Forward Funds (US Govt MMF) and Eaton Vance are the latest managers to give up on the money fund space. (See today's Link of the Day for details.) Municipal fund liquidations also continue with Dreyfus Basic Muni MMF liquidating and Western Asset Institutional AMT Free Municipal MMF merging into Western Asset Inst Tax Free Reserves. (Dreyfus Basic NY Muni MMF and Dreyfus NY AMT-Free Muni MMF will also liquidate 10/28/15.)
Our September MFI XLS, with August 31, 2015, data, shows total assets rising by $7.2 billion in August, after rising $52.4 billion in July and $15.5 billion in June. YTD, MMF assets are down by $55.2 billion, or 2.1% (through 8/31/15). 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) remained at 0.04% (7-day). On a Gross Yield Basis (before expenses were taken out), funds averaged 0.16% (Crane MFA, same as last month) and 0.20% (Crane 100, unchanged from last month). Charged Expenses averaged 0.14% and 0.16% (unchanged) for the two main taxable averages. The average WAMs (weighted average maturities) for the Crane MFA and the Crane 100 were 33 and 36 days, respectively, both down 3 days from last month. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)