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Crane Data released its February Money Fund Portfolio Holdings yesterday, and our latest collection of taxable money market securities, with data as of Jan. 31, 2016, shows a huge drop in (primarily Fed RRP) repo, and gains in Other (Time Deposits), CP, CDs, and Agencies. Money market securities held by Taxable U.S. money funds overall (tracked by Crane Data) increased by $6.0 billion in January to $2.612 trillion. MMF holdings decreased by $2.2 billion in December and $7.8 in November, increased by $61.8 billion in October, and decreased by $30.1 billion in September. Repos remained the largest portfolio segment, followed by Treasuries and Agencies. CDs were in fourth place, followed by Commercial Paper, Other (mainly Time Deposits) securities and VRDNs. Money funds' European-affiliated securities represented 27.0% of holdings, up dramatically from the previous month's 15.1%. Below, we review our latest Money Fund Portfolio Holdings statistics.
Among all taxable money funds, Repurchase Agreements (repo) plummeted at quarter-end, as they normally do, decreasing $182.2 billion (24.8%) to $553.2 trillion, or 21.2%, after increasing $176.6 billion in December, decreasing $49.9 billion in November, and falling $119.8 billion in October. (Treasury Repo decreased by a massive $222.0 billion to $283.6 billion.) Treasury securities fell $3.4 billion (0.7%) to $497.3 billion, or 19.0% of holdings, after dropping $33.2 billion in December and climbing $110.2 billion in November. Government Agency Debt increased $7.5 billion (1.65) to $491.3 billion, or 18.8% of holdings, after increasing $35 billion in December, decreasing $3.6 billion in November, and increasing $34.1 billion in October. The steady rise by Treasuries and Agencies reflects the shift of about $190 billion (so far) of Prime fund to Govt fund assets.
Certificates of Deposit (CDs) were up $33.0 billion (8.1%) to $442.9 billion, or 17.0% of holdings, after decreasing $51.8 billion in December, dropping $36.1 billion in November, and increasing $15.8 billion in October. Commercial Paper (CP) increased $36.3 billion (10.6%) to $379.7 billion, or 14.5%, while Other holdings, primarily Time Deposits, jumped $115.5 billion (99.2%) to $231.9 billion, or 8.9% of holdings. VRDNs held by taxable funds decreased by $600 million (3.6%) to $15.7 billion (0.6% of assets).
Among Prime money funds, CDs represent just under one-third of holdings at 31.0% (up from 29.1% a month ago), followed by Commercial Paper at 26.6% (up from 24.4%). The CP totals are primarily Financial Company CP (14.6% of total holdings), with Asset-Backed CP making up 8.1% and Other CP (non-financial) making up 3.9%. Prime funds also hold 7.2% in Agencies (down from 7.7%), 5.2% in Treasury Debt (down from 6.4%), 3.6% in Treasury Repo (down from 5.4%), 4.8% in Other Instruments, 4.9% in Other Instruments (Time Deposits), and 6.1% in Other Notes. Prime money fund holdings tracked by Crane Data total $1.427 trillion (down from $1.409 trillion last month), or 54.6% of taxable money fund holdings' total of $2.612 trillion.
Government fund portfolio assets totaled $683 billion, down from $687 billion in December, while Treasury money fund assets totaled $502 billion, down from $510 billion in December. Government money fund portfolios were made up of 56.9% Agency Debt, 19.2% Government Agency Repo, 8.0% Treasury debt, and 14.9% in Treasury Repo. Treasury money funds were comprised of 73.5% Treasury debt, 26.1% in Treasury Repo, and 0.4% in Government agency, repo and investment company shares. Government and Treasury funds combined total $1.185 trillion, or 45.4% of all taxable money fund assets.
European-affiliated holdings rose $312.1 billion in January to $704.3 billion among all taxable funds (and including repos); their share of holdings jumped to 27.0% from 15.1% the previous month. Eurozone-affiliated holdings rocketed $181.6 billion to $412.2 billion in January; they now account for 15.8% of overall taxable money fund holdings. Asia & Pacific related holdings increased by $1.0 billion to $285.9 billion (11.0% of the total). Americas related holdings decreased $306.0 billion to $1.619 trillion and now represent 62.0% of holdings. (The Americas drop and European jumps are both primarily the result of the reversal of a traditional quarter-end spike in Fed Repo and plunge in European bank debt.)
The overall taxable fund Repo totals were made up of: Treasury Repurchase Agreements, which plummeted $222.0 billion, or 43.9%, to $283.6 billion, or 10.9% of assets; Government Agency Repurchase Agreements (up $40.8 billion to $201.6 billion, or 7.7% of total holdings), and Other Repurchase Agreements ($68.0 billion, or 2.6% of holdings, down $1.0 billion from last month). The Commercial Paper totals were comprised of Financial Company Commercial Paper (up $17.1 billion to $208.6 billion, or 8.0% of assets), Asset Backed Commercial Paper (up $16.9 billion to $115.5 billion, or 4.4%), and Other Commercial Paper (up $2.2 billion to $55.6 billion, or 2.1%).
The 20 largest Issuers to taxable money market funds as of Jan. 31, 2016, include: the US Treasury ($497.3 billion, or 19.0%), Federal Home Loan Bank ($341.1B, 13.1%), Federal Reserve Bank of New York ($95.1B, 3.6%), BNP Paribas ($83.6B, 3.2%), Wells Fargo ($78.9B, 3.0%), Credit Agricole ($76.0B, 2.9%), Federal Home Loan Mortgage Co. ($67.1B, 2.6%), RBC ($60.4B, 2.3%), Bank of Tokyo-Mitsubishi UFJ Ltd ($56.4B, 2.2%), Societe Generale ($55.2, 2.1%), Federal Farm Credit Bank ($52.4B, 2.0%), Bank of Nova Scotia ($51.2B, 2.0%), JP Morgan ($48.8B, 1.9%), Bank of America ($47.0B, 1.8%), Credit Suisse ($43.9, 1.7%), Sumitomo Mitsui Banking Co ($40.4B, 1.5%), Toronto-Dominion Bank ($40.2B, 1.5%), Natixis ($36.1B, 1.4%), Citi ($36.0B, 1.4%), and HSBC ($35.3B, 1.4%).
In the repo space, the Federal Reserve Bank of New York's RPP program issuance (held by MMFs) remained the largest repo program with $95.1B, or 17.2% of money fund repo. The 10 largest Fed Repo positions among MMFs on 1/31 include: Fidelity Cash Central Fund ($7.2B in Fed RRP), Northern Trust Trs MMkt ($7.0B), UBS Select Treas ($6.3B), State Street Inst Lq Res ($5.5B), Fidelity Govt Money Market ($5.4B), Schwab Govt MMkt ($5.0B), Fidelity Govt Cash Reserves ($4.7B), Dreyfus Tr&Ag Cash Mgmt ($4.2B), BlackRock Lq T-Fund ($3.5B), and Franklin IFT MMP ($2.8B).
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 ($95.1B, 17.2%), BNP Paribas ($51.3B, 9.3%), Wells Fargo ($45.8B, 8.3%), Societe Generale ($45.7B, 8.3%), Bank of America ($36.5B, 6.6%), Credit Agricole ($33.7B, 6.1%), Credit Suisse ($31.3B, 5.7%), JP Morgan ($26.2B, 4.7%), RBC ($21.9B, 4.0%), and Citi ($21.8B, 3.9%).
The 10 largest issuers of "credit" -- CDs, CP and Other securities (including Time Deposits and Notes) combined -- include: Bank of Tokyo-Mitsubishi UFJ Ltd ($44.8B, 4.8%), Credit Agricole ($42.3B, 4.5%), Sumitomo Mitsui Banking Co ($40.4B, 4.3%), RBC ($38.5B, 4.1%), DnB NOR Bank ASA ($33.3B, 3.5%), Wells Fargo ($33.1B, 3.5%), Bank of Nova Scotia ($32.7B, 3.5%), BNP Paribas ($32.3B, 3.5%), Skandinaviska Enskilda Banken AB ($31.3B, 3.3%), and Svenska Handelsbanken ($30.2B, 3.2%).
The 10 largest CD issuers include: Bank of Tokyo-Mitsubishi UFJ Ltd ($29.1B, 6.6%), Sumitomo Mitsui Banking Co ($28.8B, 6.6%), Toronto-Dominion Bank ($25.7B, 5.9%), Wells Fargo ($25.0B, 5.7%), Bank of Nova Scotia ($20.0B, 4.7%), Mizuho Corporate Bank Ltd ($19.8B, 4.5%), Bank of Montreal ($19.4B, 4.4%), RBC ($17.9B, 4.1%), Sumitomo Mitsui Trust Bank ($17.6B, 4.0%), and Canadian Imperial Bank of Commerce ($17.1B, 3.9%).
The 10 largest CP issuers (we include affiliated ABCP programs) include: BNP Paribas ($18.2B, 5.7%), JP Morgan ($17.7B, 5.5%), Commonwealth Bank of Australia ($17.5B, 5.5%), RBC ($16.8B, 5.3%), Westpac Banking Co ($13.4B, 4.2%), Bank of Tokyo-Mitsubishi UFJ Ltd ($12.9B, 4.0%), Sumitomo Mitsui Banking Co. ($11.3B, 3.5%), Bank of Nova Scotia ($11.1B, 3.5%), HSBC ($10.4B, 3.2%), and Australia & New Zealand Banking Group Ltd ($9.7B, 3.0%).
The largest increases among Issuers include: Credit Agricole (up $38.7B to $76.0B), BNP Paribas (up $38.3B to $83.6B), Societe Generale (up $27.9B to $55.2B), DnB NOR Bank ASA (up $25.8B to $33.3B), Skandinaviska Enskilda Banken AB (up $23.0B to $31.3B), Natixis (up $21.5B to $36.1B), Credit Suisse (up $19.5B to $43.9B), Federal Home Loan Bank (up $18.1B to $341.1B), Swedbank AB (up $17.4B to $23.8B), and Svenska Handelsbanken (up $14.9B to $30.2B).
The largest decreases among Issuers of money market securities (including Repo) in January were shown by: Federal Reserve Bank of New York (down $313.4B to $95.1B), Bank of NY Mellon (down $11.7B to $10.1B), Federal National Mortgage Association (down $7.0B to $27.4B), Bank of Montreal (down $5.0B to $30.2B), Federal Home Loan Mortgage Co. (down $3.7B to $67.1B), US Treasury (down $3.4B to $497.3B), Canadian Imperial Bank of Commerce (down $2.8B to $20.7B), Goldman Sachs (down $2.7B to $12.4B), National Australia Bank Ltd. (down $1.9B to $15.2B), and DBS Bank Ltd. (down $1.4B to $7.4B).
The United States remained the largest segment of country-affiliations; it represents 53.5% of holdings, or $1.396 trillion (down $301.0B). France jumped to second from fourth (11.0%, $285.9B), while Canada (8.5%, $220.9B) fell to third. Japan (7.0%, $182.0B) dropped to fourth, while Sweden (4.2%, $110.1B) jumped to fifth from eighth. The United Kingdom (3.5%, $90.6B) remained sixth, while Australia (3.0%, $78.8B) dropped to seventh from fifth. The Netherlands (2.4%, $62.0B), Switzerland (2.1%, $54.7B), and Germany (1.9%, $48.4B) 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 Jan. 31, 2016, Taxable money funds held 27.9% (down from 33.9%) of their assets in securities maturing Overnight, and another 13.5% maturing in 2-7 days (up from 9.4%). Thus, 41.4% in total matures in 1-7 days. Another 23.7% matures in 8-30 days, while 12.0% matures in 31-60 days. Note that over three-quarters, or 75.1% 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 10.8% of taxable securities, while 9.8% matures in 91-180 days, and just 2.3% 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.
The January issue of our flagship Money Fund Intelligence newsletter features a profile of the liquidity management team at RBC Global Asset Management in the U.S., including Brandon Swensen, Senior Portfolio Manager and Co-Head of U.S. Fixed Income; John Donohue, Head of Liquidity Management; and, Matthew Appelstein, Head of U.S. Sales and Distribution. They discuss RBC's decision to no longer offer the RBC Prime Money Market Fund, the firm's growth in the U.S., and the opportunities that exist in the new liquidity management landscape. Below, we reprint the Q&A from our January issue. (Note: Thanks too for all those attending our Money Fund University in Boston, which concludes at noon on Friday. We hope you had a great show, and safe travels home!)
MFI: How long have you been running money funds? Swensen: In 1991, RBC GAM in the U.S. launched money market funds as sweep vehicles for the brokerage and wealth management business. Since that time money funds have been a significant part of our asset management offerings. We consider this a core capability and a focus of our U.S. asset management lineup, one we expect to grow going forward. We feel like we have differentiated ourselves in this business in a few ways, the most notable being that during the financial crisis our funds did not need any capital. We are one of the few fund families that can say we never invested in a SIV and we have never experienced a default in our money market portfolios. It's a track record we're very proud of.
MFI: What is your biggest priority? Appelstein: A strategic priority for the bank is to grow the U.S. asset management business. The good news is in the last four years, RBC's U.S. business, revenue-wise, has more than doubled. We just added 8,000 square feet of space in Boston and have plans to add more square footage in Minneapolis. We are investing in the U.S. business with people, resources, and products right now to grow this business. Obviously, a big component of that is the liquidity business, where we've also been adding resources. We have a 31-member Sales and Distribution team to which we continue to add resources. Swensen: To Matthew's point, the growth of our liquidity business is a natural extension of RBC's growth in the U.S. overall. The money market fund and liquidity business has always been about two things: Rule number one: preserve principal, and rule number two: never forget rule number one.
MFI: Tell us about your recent changes. Why are you getting out of prime? Donohue: The decision was driven by conversations with our clients -- they just don't feel the need to be involved in a variable rate NAV product. What we've seen is that the majority of our clients are considering a move to our government money market fund, while also evaluating our ultrashort products. In addition, clients continue to explore customized separate account strategies for their core cash positions. We have approximately $30 billion of short duration assets, which enables us to be large enough in the market, but remain flexible. We believe clients will scrutinize their cash investing practices more than ever before.
Swensen: While we're not predicting the demise of prime funds, we are in the camp that believes they have been fundamentally changed and are less desirable in terms of delivering the liquidity solution our clients are looking for. Prime funds now exhibit liquidity characteristics that aren't quite the same as what a liquidity investment should look like. We think government funds are still a pure play liquidity product, but prime funds have this baggage associated with it. Fundamentally, we feel that clients that are looking for yield should be in something other than a prime fund, and that's where our separately managed accounts will come in to fill that void. The government funds are there to provide that pure play liquidity with no strings attached.
MFI: What is your biggest challenge? Swensen: Yield is obviously a challenge. It's been very painful for our clients. The challenge is not just about us trying to manage a portfolio that delivers a yield that is 'X', it's about meeting our client's goals, and unfortunately the market just hasn't been there. So, we were over-the-moon thrilled about the Fed deciding to hike rates. It's been so long overdue in our view. For them to breathe a little bit of oxygen into the front end of the yield curve has just been fantastic for our clients.
Our fees in this business are very low and they're not expected to rise anytime soon. So our clients really experience this first rate increase in their portfolio. It has been coming through for two months as the market started to price in a very high probability of the rate increase occurring. Then, there's the challenge of the regulatory environment. We think the [recent] round of reforms has fundamentally altered the liquidity landscape. That's unfortunate on the one hand, but on the other hand, it's a once in a lifetime opportunity for investors and for asset managers to position themselves for the new reality in liquidity.
MFI: Have you seen yields rise already? Swensen: Yes. The historical relationship has held up very well when you look at the Prime to 'Govie' spread. Historically, the spread is plus or minus 10 basis points and that's right where we sit today. About a month ago our institutional government fund finally broke through the expense ratio and started providing more than a basis point of yield. And we're not raising fees or raising expenses to recapture past waivers in our money market funds, so clients are experiencing the full benefit of that increase. It remains to be seen how things progress in 2016 as market dynamics change. We are hoping for more Fed increases, albeit at probably a slower pace than we've experienced in past recoveries. That's going to be of great benefit for money market funds and liquidity investors.
MFI: What are you buying? Swensen: Probably the biggest thing for money market funds from the Fed release in December was the essentially unlimited cap on the reverse repo program (RRP) -- and when I say essentially unlimited, it's actually limited at $2 trillion. When you look at the size of the overall money market space, they've got it covered -- the whole thing can get put to the Fed if need be.... We think this will be a benefit to the market in the short term. The longer term question is: How long does the Fed want to be such a big factor in money markets? Also, how does the Fed then pull away from the repo market if they become such a large share of it for money market funds? It will be interesting to follow.
MFI: Tell us about the demand for Government securities. Swensen: Some concerns that have been raised -- even at your conference here in June [our 2015 Money Fund Symposium was held in Minneapolis], about supply for government funds and how are they going to manage the big inflow -- are alleviated by the Fed's RRP. Being a significant but not gigantic player in the money fund space, we can be more selective. We are able to participate in auctions at a different degree as well as be able to access some other parts of the market that the bigger funds avoid. Outside of just discount notes and Treasury bills, we are able to invest in some of those other sectors where there is potentially value. We've always been big buyers of agency floaters and they continue to make a difference in our strategies. Their performance was really driven by our positioning in floaters and some other subsectors of the market that bigger funds aren't as active in.
MFI: Are customers more averse to floating NAVs, or gates & fees? Donohue: Over the last four years, I've probably visited about 300 institutions, and almost every one of them, with the exception of five, said they're not dealing with a variable rate NAV. The ones that felt comfortable with the variable NAV said their biggest hurdle with the CFO and senior treasury leadership are the gates and fees.
MFI: Tell us about your other offerings. Swensen: We have Ultra Short and Short Duration bond funds that we launched in anticipation of money market reform in December 2013. In our view, they are a strong component of what liquidity investors should be thinking about going forward in terms of buckets of liquidity. Government funds should be used for your pure play liquidity and, beyond that, a short duration solution other than a prime fund should be used to earn some income. We feel that those funds are natural extensions of our prime fund capabilities -- very high quality funds managed in a way that is about preserving principal, but also capturing additional income that is available when you free yourself up from the money fund space. By no means are they money market fund surrogates, because they have variable NAVs. But in our view, the extra income you pick up by moving out just a little bit on the duration curve is a nice value proposition for risk-averse investors.
MFI: What is your outlook for 2016? Swensen: The rate environment certainly gives reason to be optimistic. Earning something other than a basis point in your cash is a welcome development. The future of money funds is going to be very interesting because nobody knows exactly what it's going to look like in October. We see the general trend of fund families converting Prime funds to Government funds, and investors being concerned about variable NAVs and fees and gates. But when do they actually start to move money? That hasn't really occurred yet in significant size, other than these fund closures and conversions that have occurred already. We believe 2016 is an unprecedented opportunity for investors to rethink their liquidity strategies. So, as much as we may be disappointed about prime fund reform, we're even more optimistic about the opportunity.... It's going to be an extremely exciting year and we're looking forward to it.
The January issue of our flagship Money Fund Intelligence newsletter, which was sent to subscribers Friday morning, features the articles: "Money Fund Highlights of '15; More Changes Ahead in '16," which looks at the major trends and stories from 2015; "RBC Global on Going Govt; Rethinking Liquidity," where we talk to RBC's money market fund management team on their view of the markets; and "Top Money Funds of 2015; 7th Annual MFI Awards," which honors the best performing MMFs in a variety of categories. We have also updated our Money Fund Wisdom database query system with Dec. 31, 2015, performance statistics, and sent out our MFI XLS spreadsheet this morning. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our December Money Fund Portfolio Holdings are scheduled to ship Tuesday, January 12, and our January Bond Fund Intelligence is scheduled to go out Friday, January 15.
MFI's lead article, "Money Fund Highlights of '15,” says, "Between 2014, when Money Market Fund Reforms were passed, and 2016, when those reforms go into effect, 2015 was a year of transition. Ahead of the Oct. 14, 2016 implementation date, money fund managers tweaked, revamped, and even scrapped their money fund lineups. The most notable trend we saw was managers converting Prime funds to Government funds to maintain the stable NAV."
The piece adds, "It was also the year that the Federal Reserve finally raised interest rates; its first hike in almost 10 years. The long-awaited Fed move was a welcome relief for money fund managers, and investors, as we head into 2016. In just the few weeks since the Dec. 16 rate hike, yields have already increased, though by far less than 25 bps. (Part of the move was no doubt absorbed by fund managers unwinding fee waivers.)"
Our latest MFI "profile" reads, "This month, Money Fund Intelligence profiles the liquidity management team at RBC Global Asset Management in the U.S., including Brandon Swensen, Senior Portfolio Manager and Co-Head of U.S. Fixed Income; John Donohue, Head of Liquidity Management; and, Matthew Appelstein, Head of U.S. Sales and Distribution. They discuss RBC's decision to no longer offer the RBC Prime Money Market Fund, the firm’s growth in the U.S., and the opportunities that exist in the new liquidity management landscape."
We ask, "Tell us about your recent changes. Why are you getting out of prime?" Donohue answers, "The decision was driven by conversations with our clients -- they just don't feel the need to be involved in a variable rate NAV product. What we've seen is that the majority of our clients are considering a move to our government money market fund, while also evaluating our ultra-short products. In addition, clients continue to explore customized separate account strategies for their core cash positions. We have approximately $30 billion of short duration assets, which enables us to be large enough in the market, but remain flexible. We believe clients will scrutinize their cash investing practices more than ever before."
Swensen continues, "While we're not predicting the demise of prime funds, we are in the camp that believes they have been fundamentally changed and are less desirable in terms of delivering the liquidity solution our clients are looking for. Prime funds now exhibit liquidity characteristics that aren't quite the same as what a liquidity investment should look like. We think government funds are still a pure play liquidity product, but prime funds have this baggage associated with it. Fundamentally, we feel that clients that are looking for yield should be in something other than a prime fund, and that's where our separately managed accounts will come in to fill that void. The government funds are there to provide that pure play liquidity with no strings attached."
The "7th Annual MFI Awards" article says, "In this issue, we once again recognize some of the top‐performing money funds, ranked by total returns, for calendar year 2015, 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, 2015, in each of our major fund categories -- Prime Institutional, Government Institutional, Treasury Institutional, Prime Retail, Government Retail, Treasury Retail, and Tax‐Exempt. (Watch for the full Awards story in coming days.)
We also review the latest Prime to Govie moves in a sidebar entitled, "More Funds Go Govie." It says, "Money market fund conversion announcements have accelerated in the final weeks of the year -- 7 additional fund managers have filed recently to change their Prime MMFs into Government funds since our last update. The recent batch of Prime to Govie conversions include: Cavanal Hill, John Hancock, Prudential, SunAmerica, Thrivent, TIAA-CREF, and Voya." We also have a sidebar called, "Goldman Sachs AM Details More MMF Changes."
Our January MFI XLS, with Dec. 31, 2015, data, shows total assets increasing $44.2 billion in December after increasing $3.5 billion in November, jumping $56.5 billion in October, declining by $9.4 billion in September, and rising $7.2 billion in August. In 2015, MMF assets rose by $39.4 billion, or 1.5%. Our broad Crane Money Fund Average 7-Day Yield doubled, rising by 3 bps to 0.06% for the month, while our Crane 100 Money Fund Index (the 100 largest taxable funds) jumped 8 basis points to 0.13% (7-day).
On a Gross Yield Basis (before expenses were taken out), funds averaged 0.26% (Crane MFA, up 6 basis points) and 0.32% (Crane 100, up 10 bps). Charged Expenses averaged 0.20% (up 4 bps) and 0.19% (up 2 bps) for the two main taxable averages. The average WAM (weighted average maturity) for the Crane MFA was 34 days (up 1 day from last month) and for the Crane 100 was 34 days (down 1 days). (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
The December issue of our flagship Money Fund Intelligence newsletter, which was sent to subscribers Monday morning, features the articles: "Assets Flat 4th Year in a Row; Prime Exodus Begins, Lineups," which says MMF assets are flat again in 2015 and discusses the latest Prime to Govt moves; "BlackRock's Henderson & Erbeck on Tax-Exempt MMFs," where we interview BlackRock's Muni money market team; and "Tax Exempt MFs Hit by Ultra-Low Yields; Will Any Go Inst?," which reviews recent trends in the municipal money market. We have also updated our Money Fund Wisdom database query system with Nov. 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 December Money Fund Portfolio Holdings are scheduled to ship Wednesday, December 9, and our December Bond Fund Intelligence is scheduled to go out Monday, December 14.
MFI's lead "Assets Flat 4th Year" article says, "As the year winds down, money fund assets continue their second half rebound. For the fourth year in a row, MMFs fell by about 5% in the first half of the year, then recovered all of the deficit to end the year slightly positive. Assets are now flat YTD in 2015. Meanwhile, changes continue as more managers announce lineup tweaks and assignments, and a major chunk of assets shifts from Prime to Government. We review 2015 and the latest reform-related moves below."
It continues, "Following a surge in October, money fund assets inched higher in November, up $3.5 billion. Assets have increased in 9 out of the last 11 weeks, hitting their highest levels of 2015. Below, we show assets over the past 5 years, and on page 2 we show historical MMF asset levels. Overall, assets have increased in five of the last 6 months. The only month that showed a decline was September, when assets were down $5.1 billion. Assets are currently at their highest levels of 2015 and appear poised to move higher in December, particularly if the Federal Reserve raises interest rates at its Dec. 15-16 FOMC meeting, as expected."
Our latest MFI "profile," reads, "This month, Money Fund Intelligence interviews BlackRock’s William Henderson, Managing Director & Lead Portfolio Manager on the Municipal Liquidity Portfolio Team, and Jack Erbeck, Managing Director & Municipal Credit Analyst. BlackRock manages about $9.2 billion in Tax-Exempt money fund assets, including the $2.5 billion BIF Tax Exempt MF and the $1.4 billion BlackRock MuniFund. (BlackRock is also poised to almost double its Tax-Exempt MMF assets once it acquires BofA’s cash business in April 2016.) Henderson has been running Tax-Exempt money funds for BlackRock since 1993, and Erbeck has been a credit analyst supporting Tax-Exempt funds since 1999. We discuss recent events in the Tax-Exempt or Municipal money markets below."
We ask, "MFI: How long has BlackRock been running Tax-Exempt cash? Henderson: Our flagship Tax Exempt money market fund, the BlackRock Muni Fund, began operations in 1980. We have a variety of Tax-Exempt funds -- the BlackRock Liquidity Funds, the BlackRock Institutional Funds, and the BlackRock retail funds. They are all managed here in Princeton, where we conduct tax-exempt fund portfolio management and credit research. It’s all part of Blackrock’s $110 billion municipal platform. MFI: What is your biggest priority currently? Henderson: My number one priority is to keep the client and fiduciary responsibility front-and-center for the team."
The "Tax-Exempt MMF" article says, "While Taxable money fund assets have held steady the past 5 years, Tax Exempt MMFs have not fared as well. Tax-Exempt MMFs total $244.6 billion, down almost 50% from Dec. 2008 when the zero yield environment began, and down 23% over the past 5 years. (Assets peaked at over $500 billion in Aug. 2008.) We briefly review this sector below, and we discuss recent designations fund companies have made in the Tax-Exempt space. Also, though taxable MMFs have seen some relief of late, yields in the Municipal money markets continue making record lows. Crane’s Tax Exempt MF Index remains at 0.01%, down from 0.91% at year-end 2008."
We also review the month's lineup change announcements in a sidebar entitled, "Managers Firm Up Lineups." It says, "BlackRock, Federated, Dreyfus, and Invesco all made announcements recently that provide a clearer picture of how their money fund lineups will look after MMF reforms take effect in October 2016. Federated further laid out its Institutional offerings, designating four -- Federated Money Market Management, Prime Obligations, Prime Value Obligations, and Tax-Free Trust."
Our December MFI XLS, with Nov. 30, 2015, data, shows total assets increasing $3.5 billion in November after increasing $56.5 billion in October, declining by $9.4 billion in September, rising $7.2 billion in August, and jumping $52.4 billion in July. YTD, MMF assets are flat, down by just $8.4 billion, or 0.3% (through 11/30/15). Our broad Crane Money Fund Average 7-Day Yield rose by one bps to 0.03%, while our Crane 100 Money Fund Index (the 100 largest taxable funds) remained at 0.05% (7-day).
On a Gross Yield Basis (before expenses were taken out), funds averaged 0.18% (Crane MFA, same as last month) and 0.22% (Crane 100, up one bps). Charged Expenses averaged 0.16% (up one bps) and 0.17% (unchanged) for the two main taxable averages. The average WAMs (weighted average maturities) for the Crane MFA was 33 days (down 3 days 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.)