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The May issue of our new Bond Fund Intelligence publication features Goldman Sachs Asset Management's John Olivo, head of GSAM's short duration strategies within the firm's Global Liquidity Management group. A GSAM veteran of nearly 20 years, John is responsible for overseeing the management of approximately $45 billion in short duration strategies. Our discussion covers the challenges of a low-yield environment, the opportunities for short duration strategies going forward, product development and more. Below, we rerun the first half of the Q&A that first appeared in the latest BFI.
BFI: How long have you been running short term bond funds? Olivo: It's been almost 25 years since we launched our first short duration mutual fund, the Short Duration Government Fund. Today, we offer a range of innovative strategies and support our clients with deep insight, robust risk management and an extensive liquidity management platform. As one of our flagship products, we believe the Short Duration Government Fund offers a very clear illustration of all these features and of the strength of our platform overall. In addition to our funds, GSAM has been running separately managed accounts (SMAs) in the short duration space for more than two decades.
BFI: Are you looking at launching new products? Olivo: GSAM continually reviews its short duration product suite. Over the years, we have adapted our offerings according to investor demand. We've also sought out product gaps which we think we can fill. In both cases, GSAM's goal has been to provide the right solutions for clients, and to strive to meet investor needs in every type of environment. For example, GSAM recently launched an ultra-short duration mutual fund in preparation for money market fund regulatory reform. That was a case where both investor demand and changes in the marketplace convinced us to act.
We also run short duration strategies which derive their primary sources of alpha in innovative ways -- for instance, from a variety of sectors, specifically corporate or securitized products, and in multiple currencies. That was a case of meeting client needs. Another example is the High Quality Floating Rate Fund. This is one of the few floating rate funds that does not take any credit risk, focusing primarily on floating rate securitized products. GSAM believes this approach will resonate with investors in a rising rate environment.
BFI: Any plans for ETFs? Olivo: ETFs have seen explosive growth, and we think they are one of the more innovative product types to come onto the scene the last couple of years. We are always watching the short duration and money market space across product types. At this point, however, we have yet to launch anything.
BFI: What is the biggest challenge for short duration funds today? Olivo: Achieving yield continues to be the major challenge. As you know, today's low interest rate environment is a persistent, pervasive feature of the market. Short duration mutual funds do offer some flexibility as they can invest in longer dated securities and hedge away the unwanted duration risk, but our strategies are subject to the same interest-rate constraints which face every investor. What's more, the funds invest primarily in high quality, short duration assets, which aren't known for their high yields. As a result, offering an attractive yield has been the biggest issue for the entire short duration universe.
BFI: How do short duration investment strategies differ from money funds? Olivo: Generally, there's enough differentiation between short duration funds and money market funds. The duration on some of the short duration strategies are shorter than a year, but you're buying more traditional fixed income securities. For example, in the High Quality Floating Rate fund, we are purchasing longer duration floating rate products in both the agency mortgage and asset backed securities area. In the Enhanced Income fund, we are purchasing high quality corporates -- with a final maturity no greater than 5 years. That is the primary source of excess return in that strategy. Therefore, there is enough differentiation that you are not crossing over into the 2a-7 world very often. (Watch for the second half of our interview tomorrow, or contact us for the latest issue of our Bond Fund Intelligence.)
Crane Data's latest Money Fund Intelligence Family & Global Rankings, which rank the asset totals (and break out by type of fund) and market share of managers of money market mutual funds in the U.S. and globally, were sent out to subscribers late last week. The May edition, with data as of April 30, 2015, shows asset decreases for almost all of money fund complexes in the latest month. The vast majority of managers also show losses over the past three months. Assets declined by $89.0 billion overall, or 3.6%, in April; over the last 3 months, assets are down $112.5 billion, or 4.3%. But for the past 12 months through March 31, total assets are flat -- down just $1.3 billion, or 0.1%. Below, we review the latest market share changes and figures. (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.)
The only gainers in April were First American and Oppenheimer, rising by just $261 million and $713 million, respectively. American Funds was flat, and everyone else was down. Morgan Stanley, Franklin, Vanguard, Oppenheimer, and Northern had the only increases over the 3 months through April 30, 2015, rising by $5.9B, $6.1B, $262M, $214M,and $58M, respectively.
Our latest domestic U.S. money fund Family Rankings show that Fidelity Investments remained the largest money fund manager with $394.7 billion, or 15.9% of all assets (down $8.7 billion in April, down $10.2 billion over 3 mos., and down $13.9B over 12 months), followed by JPMorgan's $240.5 billion, or 9.7% (down $7.4B, down $15.5B, and up $156M for the past 1-month, 3-months and 12-months, respectively). BlackRock remained in third with $199.3 billion, or 8.0% of assets (down $16.3B, down $17.2B, and up $7.3B). Federated Investors was fourth with $196.1 billion, or 7.9% of assets (down $9.6B, down $14.5B, and down $14.5B), and Vanguard ranked fifth with $172.3 billion, or 6.9% (down $1.4B, up $262M, and up $191M).
The sixth through tenth largest U.S. managers include: Dreyfus ($165.3B, or 6.6%), Schwab ($153.7B, 6.2%), Goldman Sachs ($140.2B, or 5.6%), Morgan Stanley ($115.3B, or 4.6%), and Wells Fargo ($105.5B, or 4.2%). The eleventh through twentieth largest U.S. money fund managers (in order) include: Northern ($82.6B, or 3.3%), SSgA ($78.0B, or 3.1%), Invesco ($53.7B, or 2.2%), BofA ($46.2B, or 1.9%), Western Asset ($43.3B, or 1.7%), First American ($41.3B, or 1.7%), UBS ($35.3B, or 1.4%), Deutsche ($29.0B, or 1.2%), Franklin ($24.8B, or 1.0%), and RBC ($15.4B, or 0.6%).
Crane Data currently tracks 71 managers, down one from last month. Alpine Funds, with $106 million in assets, liquidated its lone money fund, Alpine Municipal Money Market Fund. See our April 14 "News", "Fidelity Operational Update Details More Changes; Alpine Liquidates."
Over the past year through April 30, 2015, Morgan Stanley showed the largest asset increase (up $16.4B, or 16.6%), followed by Goldman Sachs (up $11.9B, or 9.2%), Dreyfus (up $7.4B, or 4.7%), BlackRock (up $7.3B, or 3.8%), Northern Trust (up $7.2B, or 9.5%), and Franklin (up $6.3B, or 33.7%). Other asset gainers for the year include: First American (up $3.4B, or 9.0%), Western (up $2.3B, or 5.5%), BofA (up $2.2B, or 5.1%), HSBC (up $1.9B, 17.4%), and SEI (up $746M, or 6.3%). The biggest decliners over 12 months include: Federated (down $14.5B, or -6.9%), Fidelity (down $13.9B, or -3.4%), Invesco (down $7.4B, or -12.2%), Schwab (down $6.9B, or -4.3%), Deutsche (down $5.4B, or -15.8%, UBS (down $3.8B, or -9.8%), RBC (down $3.8B, or -19.6%), SSgA (down $2.1B, or -2.7%), and T. Rowe Price (down $1.5B, or -9.1%). (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, 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 ($401.2 billion), JPMorgan ($368.5 billion), BlackRock ($308.3 billion), Goldman Sachs ($217.2 billion), and Federated ($203.8 billion). Dreyfus/BNY Mellon ($189.4B), Vanguard ($172.3B), Schwab ($153.7B), Morgan Stanley ($133.5B), and Western ($122.1B) 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. (Note that big moves in the dollar have recently caused volatility in Euro and Sterling balances, which are converted back into USD.)
Finally, our May 2015 Money Fund Intelligence and MFI XLS show that yields remained largely unchanged in April. Our Crane Money Fund Average, which includes all taxable funds covered by Crane Data (currently 858), remained at 0.02% for both the 7-Day Yield and the 30-Day Yield (annualized, net) Average. The Gross 7-Day Yield went up to 0.15% from 0.14%. Our Crane 100 Money Fund Index shows an average 7-Day Yield and 30-Day Yield of 0.03%, the same as last month. Also, our Crane 100 shows a Gross 7-Day Yield of 0.18% (unchanged) and a Gross 30-Day Yield of 0.18% (up from 0.17%). For the 12 month return through 4/30/15, our Crane MF Average returned 0.01% (down from 0.02%) and our Crane 100 returned 0.02% (unchanged).
Our Prime Institutional MF Index (7-day) yielded 0.04% (unchanged), while the Crane Govt Inst Index was at 0.02% (unchanged). The Crane Treasury Inst, Treasury Retail, Govt Retail 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 0.22% (up from 0.21%), Govt Inst 0.12% (unchanged), Treasury 0.07%, and Tax Exempt 0.12% (up from 0.09%) in April. The Crane 100 MF Index returned on average 0.00% for 1-month, 0.01% for 3-month, 0.01% for YTD, 0.02% for 1-year, 0.03% for 3-years (annualized), 0.05% for 5-year, and 1.48% for 10-years. (Contact us if you'd like to see our latest MFI XLS or Crane Indexes file.)
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."