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Crane's 5th Annual Money Fund University, a two-day crash course in money market mutual funds, attracted nearly 100 attendees to the Stamford Marriott in Stamford, Conn., late last week. Our Day 1 recap features coverage of the History of Money Funds, the Federal Reserve, Interest Rates and Money Fund Math, and Fund Ratings, as well as sessions explaining the various Instruments of the Money Markets (including Repurchase Agreements, Commercial Paper, CDs, Tax-Exempt/VRDNs, CDs, Treasurys, and Time Deposits). Day 2, which we will report on in coming days (and in our February MFI), focused exclusively on Money Fund Regulations. "A day and a half is really not enough time to learn about a space as big as the money fund sector, but we're going to give you a crash course and try," said Peter Crane, President, Crane Data, as well as host and MC for the event. He opened the conference leading a session called "History and Current State of Money Funds. (Note: Crane Data's next conference will be our flagship Money Fund Symposium, June 24-26 in Minneapolis. The next European Money Fund Symposium will be Sept. 17-18 in Dublin and our next MF University will be Jan. 21-22, 2016, in Boston.)
"In 1994, when I started writing about money funds and when the Community Bankers Fund 'broke the buck,' the space was only about $500 billion. Money market funds were not this behemoth that they were when the Reserve Fund broke the buck in 2008 and almost took down the world economy with it. Money funds peaked at $3.9 trillion in January 2009 after Reserve broke the buck; money was still pouring in because money funds lagged the money markets." Since that time, money fund assets declined precipitously over the next few years, dropping by about 15% per year in 2010 and 2011, he explained. But then the last 3 years in a row, money fund assets have clawed higher despite a near zero interest rate environment. "The fact that money fund assets have gone up fractionally the last 3 years in a row is just mind boggling," he said, testament to the safety and stability of the funds, which were made even safer by recent reforms.
On the other hand, there is the question of how recent reforms will impact money funds going forward, particularly Prime Institutional, which will be subject to a floating NAV in October 2016. "Institutional investors say they are going to leave, but as Churchill said about America, institutional investors will do the right thing, and stay in prime institutional money funds, after they've exhausted every other possibility," quipped Crane. He believes that any outflows we do see from Prime Institutional MMFs will be "dwarfed by inflows from bank deposits and perhaps from bond funds as well."
In the session that followed, two of the leading strategists in the space discussed "The Federal Reserve and US Money Markets." Brian Smedley, US Rates Strategist at BofA Merrill Lynch Global Research, shared his thoughts on when interest rates will rise. "Our expectation is that the Fed will start to shift up the Fed Funds target range starting in September of this year and from there we see hikes proceeding every other meeting, so half as fast as what they pursued last time." He expects it will go up to the 0.25-0.50% range in September, then to 0.50-0.75% in December 2015. By December 2016, rates will reach the 1.50-1.75% range, he said.
"There's an old proverb that says, "May you live in interesting times," and I think that's a fairly accurate description of financial market conditions, certainly in money markets at the moment," said Joseph Abate, Senior Vice President, Liquid Market Research at Barclays Capital. He focused on 4 topics; 1) the ongoing shortage of government safe assets in the financial sector and how that effects behavior in money markets, 2) how the repo market is changing largely because of dynamics related to the Fed and regulation, 3) the Federal Reserves arsenal of tools, namely reverse repo and term deposits, and 4) market liquidity, especially in prime assets. Going forward, he said, "The next battle, if you will, is not going to show up on this front, it's going to come from somewhere else, and I think it's going to be liquidity."
In her overview of the "Instruments of the Money Markets," J.P. Morgan Securities' Teresa Ho, Vice President, Short Duration Strategy, talked about challenges related to supply. "At its peak (in 2007) total money market supply was around $11.5 trillion. If you exclude Treasurys, the peak was about $9.5 trillion" she said. "Fast forward to today, and that has fallen to $5.5 trillion (excluding Treasurys) so we've seen a drop of about $4 trillion in the sector. As you might expect, a lot of it was driven by banks.
Case in point, the commercial paper market peaked at about $2 trillion at the end of 2006; half of that was in ABCP, or asset-backed commercial paper. This was a very popular way back in the day for banks to fund on a short-term basis on behalf of their clients. This particular product has really fallen by the wayside. The economics for banks to participate in this market has really waned. So right now the ABCP market is at its all-time low, at $230 billion, and it is our expectation that this sector will continue to decline going forward because of other regulatory headwinds." Another sector that has declined is the repo sector. "This is a market that has also suffered from the liquidity crisis. It has shrunk almost by half since 2007 and will continue to shrink if you look at all the regulations out there.
On the other hand, investors still see money market funds as a good way to invest their cash on a short-term basis, so demand is strong. "When you think about what has happened with supply over the last couple of years and factor that in to what's happened with demand -- you have a situation where there's too much cash chasing too few assets. There's a huge gap between supply and demand, and it's the reason why we see the competition for assets right now.... [It's] so intense that's its driving rates very, very low in the front end market. There's a real concern that a lot of money will move out of bank deposits into money market funds because of regulations.... If indeed that is the case and cash moves from bank deposits to money market funds, then this supply/demand imbalance becomes even more acute in the absence of additional supply."
There are some bright spots, however. One is Collateralized CP, which is a small but growing sector of the market at about $30-$35 billion. "Investors have been very attracted to this product." (Rob Crowe, Director, Institutional Clients Group, and Jean Luc Sinniger, Director, Money Markets, both of Citi Global Markets, took a deeper dive into CP in their session later in the day on "Instruments: Commercial Paper and ABCP.") Another glimmer of hope is in the Treasury Bill market.
Ho commented, "We have heard from the U.S. Department of the Treasury that they intend to increase their operating cash balances. Right now they run an average of about $60 billion; the expectation is that that they want to raise it to $500 billion. I suspect if they do that, a lot of it would be funded in the bill [market]. If that is the case, we'll see about $400-$450B in T-Bill supply." She said in closing, "Regulations are going to alter and fundamentally change the landscape, but the markets will adapt and they will evolve and meet whatever needs are out there."
Finally, Day 1 ended with a session led by Adam Ackerman, Vice President and Portfolio Manager at J.P. Morgan Asset Management on "Portfolio Management & Credit Analysis." Ackerman said, "My presentation is about taking everything you've seen today and bringing it all together to give you some insight into how portfolio managers think -- how we assess risk and model a portfolio for our fundamental goal, which is to provide liquidity." He said his primary goal is the preservation of capital. After that, his goals are to provide adequate liquidity and competitive yield, in that order. "Yield is important but it doesn't drive our decision making as portfolio managers, primarily."
He added, "We are in the business of providing liquidity; cash right now. We need to provide any type of liquidity that's demanded, whether it's billions or millions. We need to manage well enough so that we can manage any type of flow risk at any time." In terms of credit analysis, "Generally, the way we think about it is, the higher the credit rating, the higher the liquidity. The better the credit quality, the more concentration I'm comfortable with. Conversely, with lower credit quality, you want to lower your risk through lower concentrations." J.P. Morgan employs a rigorous credit selection process that includes their own internal analysis, he explained. Finally, he said, the ultimate measure of success is how well you meet investors' demands of preservation of capital, liquidity, managing risk, and yield. Do that well, and the assets will come.... Stay tuned for coverage of Day 2 in coming days.
Crane Data published its latest Money Fund Intelligence Family & Global Rankings earlier this week, which rank the asset totals and market share of managers of money market mutual funds in the U.S. and globally. The January edition, with data as of Dec. 31, 2014, shows asset increases for a majority of money fund complexes in the latest month, with the largest players leading the way. Gains have also been solid over the past three months. Assets jumped by $86.2 billon, or 3.3%, in December; over the last 3 months, assets are up $115.4 billion, or 4.6%. For 2014, total assets inched up $25.7 billion, or 1.0%. Below, we review the latest market share changes and figures. These "Family" rankings are available to our Money Fund Wisdom subscribers. (Note: We also wanted to give readers a final reminder about next week's Crane's Money Fund University, which will take place Jan. 22-23 in Stamford, Conn. Registrations are still being accepted for our "basic training" event (see the agenda here), and we hope to see some of you in Stamford next week!)
Goldman Sachs, BlackRock, JP Morgan, Federated, and Fidelity, were the biggest gainers in December, rising by $14.7 billion, $12.9 billion, $11.3 billion, $10.9 billion, and $8.5 billion, respectively. BlackRock, JP Morgan, Goldman Sachs, Wells Fargo, and Federated led the increases over the 3 months through Dec. 31, 2014, rising by $30.5B, $21.4B, $17.1B, $10.1B, and $9.5B billion, respectively. The only complexes among the 25 largest seeing declines in December were: Invesco, RBC, T. Rowe Price, Reich & Tang, and BofA (according to our Money Fund Intelligence XLS).
Our latest domestic U.S. money fund Family Rankings show that Fidelity Investments remained the largest money fund manager with $413.9 billion, or 15.7% of all assets (up $8.5 billion in December, up $9.1B over 3 mos. and down $14.4B over 12 months), followed by JPMorgan's $259.5 billion, or 9.8% (up $11.3B, up $21.4B, and up $7.7B for the past 1-month, 3-months and 12-months, respectively). BlackRock remained in third with $221.9 billion, or 8.4% of assets (up $12.9B, up $30.5B, and up $13.7B). Federated Investors was fourth with $215.9 billion, or 8.2% of assets (up $10.9B, up $9.5B, and down $13.1B), and Vanguard ranks fifth with $173.7 billion, or 6.6% (up $1.3B, up $1.4B, and down $2.0B).
The sixth through tenth largest U.S. managers include: Dreyfus ($169.9B, or 6.4%), Schwab ($166.3B, 6.3%), Goldman Sachs ($160.4B, or 6.1%), Wells Fargo ($119.7B, or 4.5%), and Morgan Stanley ($107.3B, or 4.1%). The eleventh through twentieth largest U.S. money fund managers (in order) include: SSgA ($82.0B, or 3.1%), Northern ($80.5B, or 3.1%), Invesco ($59.9B, or 2.3%), BofA ($50.6B, or 1.9%), Western Asset ($46.6B, or 1.8%), First American ($42.4B, or 1.6%), UBS ($37.7B, or 1.4%), Deutsche ($34.5B, or 1.3%), Franklin ($21.5B, or 0.8%), and RBC ($17.1B, or 0.6%). Crane Data currently tracks 72 managers, the same number as last month.
Over the past year, calendar year 2014, Goldman Sachs showed the largest asset increase (up $18.7B, or 13.2%; followed by BlackRock (up $13.7B, or 6.6%), Morgan Stanley (up $10.3B, or 10.6%), JP Morgan (up $7.7B, or 3.1%), and Northern (up $5.5B, or 6.8%) <b:>`_. Other asset gainers in 2014 include: Western (up $4.6B, or 10.9%), First American (up $4.4B, or 11.6%), American Funds (up $2.8B, or 20.7%), Franklin (up $2.7B, or 14.3%), and SSgA (up $2.2B, or 2.8%). The biggest decliners over 12 months include: Fidelity (down $14.4B, or -3.4%), Federated (down $13.1B, or -5.7%), UBS (down $6.9B, or -15.5%), Invesco (down $6.9B, or -5.5%), and Wells Fargo (down $3.6B, or -2.9%). (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. 9. (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 ($420.2 billion), JPMorgan ($388.8 billion), BlackRock ($343.7 billion), Goldman Sachs ($244.6 billion), and Federated ($225.4 billion). Dreyfus ($196.7B), Vanguard ($173.7B), Schwab ($166.3B), Western ($137.5B), and Morgan Stanley ($125.7B) 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.
Also, our January 2015 Money Fund Intelligence and MFI XLS show that yields continue to inch up for the second straight month in December. Our Crane Money Fund Average, which includes all taxable funds covered by Crane Data (currently 838), remained at 0.02% for the 7-Day Yield, but moved up a tick to 0.02% for the 30-Day Yield (annualized, net) Average. (The Gross 7-Day Yield was unchanged at 0.13%.) Our Crane 100 Money Fund Index shows an average 7-Day Yield of 0.03%, same as last month, but the 30-Day Yield went up to 0.03% from 0.02% last month. (The Gross 7- and 30-Day Yields for the Crane 100 also inched up to 0.17%, from 0.16%.) For the 12 month return through 12/31/14, our Crane MF Average returned a record low of 0.01% and our Crane 100 returned 0.02%.
Our Prime Institutional MF Index yielded 0.03% (7-day), while the Crane Govt Inst Index moved back down to 0.01% (from 0.02%). 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 Yields for these indexes were: Prime 0.20% (up from 0.19%), Govt 0.10% (up from 0.09%), Treasury 0.06%, and Tax Exempt 0.11% in December.) The Crane 100 MF Index returned on average 0.00% for 1-month, 0.00% for 3-month, 0.02% for YTD, 0.02% for 1-year, 0.04% for 3-years (annualized), 0.05% for 5-year, and 1.56% for 10-years.
As we mentioned Thursday when we released the January issue of our flagship Money Fund Intelligence newsletter, each year Crane Data recognizes the top-performing money funds, ranked by total returns, for calendar year 2014, as well as the top-ranked funds for the past 5‐year and past 10-year periods. We present the following funds with our annual Money Fund Intelligence Awards. These include the No. 1-ranked funds based on 1-year, 5-year and 10-year returns, through Dec. 31, 2014, in each of our major fund categories -- Prime Institutional, Government Institutional, Treasury Institutional, Prime Retail, Government Retail, Treasury Retail and Tax‐Exempt. Below, we reprint the MFI article announcing the winners. (We mentioned the 1-year winners on the website Thursday -- see our Jan. 8 News "Dec. MFI Features Awards, JPM's Donohue & Linton; Fed Shelves CSAs". We repeat them here, but we also review the 5-year and 10-year top-performers below.)
The Top-Performing Taxable fund overall in 2014 and top among Prime Institutional funds was BlackRock Cash Inst MMF (BGIXX), which returned 0.11%. (We excluded BlackRock Cash's SL class due to its limited availability.) Among Prime Retail funds, Invesco Money Market Cash Reserve (AIMXX) and Schwab Cash Reserve (SWSXX) had the best return in 2014 (0.06%). BofA Govt Plus Reserve Capital (GIGXX), Morgan Stanley Inst Liquid Govt Inst (MVRXX), and Western Asset Inst Govt MM Inst (INGXX) were the Top Government Institutional funds over a 1-year period with returns of 0.04%, while BofA Govt Plus Reserve Investor (BOPXX) and Morgan Stanley Inst Liq Govt Cash Mgmt (MSGXX) won the MFI Award for Government Retail Money Funds (based on 1-year return). Morgan Stanley Inst Liq Treasury Inst (MISXX) and Western Asset Inst US Treasury Obligation MMF Inst (LUIXX) were No. 1 in the Treasury Institutional class, and Morgan Stanley Inst Liq Treasury Cash Mgmt (MREXX) ranked tops among Treasury Retail funds.
For the 5-year period through Dec. 31, 2014, BlackRock Cash Inst MMF Inst (BGIXX) and Fidelity Inst MM Portfolio (FNSXX) took top honors for the best performing Prime Institutional money fund with returns of 0.18%. Meeder Money Market Fund Retail (FFMXX) once again ranked No. 1 among Prime Retail with an annualized return of 0.11%. American Beacon US Govt Select (AAOXX) ranked No. 1 among Govt Institutional funds, while Davis Government MMF (RPGXX) ranked No. 1 among Govt Retail funds over the past 5 years. BlackRock Cash Treasury MMF Inst (BRIXX) ranked No. 1 in 5-year performance among Treasury Inst money funds, and Northern Trust Treasury Money Market (NITXX) ranked No. 1 among Treasury Retail funds.
The highest‐performers of the past 10 years included: Touchstone Inst MMF (TINXX), which returned 1.82% (it was No. 1 overall and first among Prime Inst, though this fund will be liquidating -- see our Dec. 26 News "Touchstone to Liquidate Money Funds, Victim of SEC's MMF Reforms"); Fidelity Select MM Portfolio (FSLXX), which returned 1.67% (the highest among Prime Retail); American Beacon US Govt Select (AAOXX) and Goldman Sachs FS Govt Inst (FGTXX), which returned 1.61%, (No. 1 among Govt Inst funds); and Vanguard Federal Money Market Fund (VMFXX), which ranked No. 1 among Govt Retail funds (1.57%). BlackRock Cash Treasury MMF Inst (BRIXX) returned the most among Treasury Institutional funds over the past 10 years; and, Morgan Stanley Inst Liq Treasury Inv (MTNXX) ranked No. 1 among Treasury Retail money funds.
We're also giving out awards for the best-performing Tax‐Exempt money funds. Fidelity AMT Tax Free Money Fund (FIMXX) and Invesco Tax Exempt Cash Fund A (ACSXX) ranked No. 1 for the 1-year period ended Dec. 31, 2014, with returns of 0.11%. Over the last 5 years, BMO Tax Free MMF I (MFIXX) was the top performer with a return of 0.21%. BMO Tax Free MMF I also was the top-ranked fund for the 10-year period ended Dec. 31, with a return of 1.37%. See our latest Money Fund Intelligence XLS for more detailed rankings. Winners will receive a letter and certificate stating their No. 1 ranking , the number of funds in their category, and the criteria used.
In others news, management consulting firm Beacon Consulting Group released a white paper, entitled, "Getting Ready for Money Market Reform last week. BCG Principal Gerry Healy writes, "The Securities and Exchange Commission's (SEC) money market reform imposes new operational requirements on institutional money market funds and provides retail money market fund boards with new tools should certain market events occur. Now is the time for asset managers and service providers to organize a readiness assessment program in anticipation of potential operating model changes, new procedures, technology modifications and new data flows that may be required in order to meet the operational requirements and regulatory filing deadlines,"
The paper explains, "Money market reform readiness activities generally consist of working with all affected functions to ensure that: Systems and processes are capable of handling the requirement for institutional funds to use a floating NAV out to four decimal places; Data and processes are established to comply with SEC filings (new data on Form NMFP and new Form N-CR) that may be required; and, Investor liquidity requirements (e.g. intraday dealing) are met."
On Accounting and NAV Dissemination, it says, "Fortunately, most fund accounting systems currently in use appear to be able to calculate the floating NAVs to the four decimal place requirement. Where firms will likely spend the most time during this phase is ensuring that the extracts and reports delivered to internal and external interested parties are retrofitted to accommodate the dissemination of the four decimal place NAV. All reports currently used to support money market funds, including hard copy reports, data extracts, management reporting, should be analyzed to ensure compliance. The reports will drive the development of business requirements that may be required to close any gaps related to NAV dissemination."
On the subject, Regulatory Filings - Data, the paper explains, "A trigger event that may require a filing occurs in one of two ways: via market activity or through board approved measures such as redemption gates or redemption fees. Once a trigger event is approved by the board or occurs within the portfolio due to market activity, a Form N-CR filing requirement results. A "sources and uses" data matrix for the N-CR and NMFP filings is useful in developing requirements for any data or reporting gaps and tracks key inputs required to complete the new forms."
Finally, the paper says, "Complying with money market reform requirements will require a significant collaboration between asset managers and service providers. The asset manager's role in orchestrating this coordination is critical. An approach that includes a sound analysis of process changes and data requirements, followed by a comprehensive action plan to remediate any gaps can ensure a successful compliance process."
The January issue of Crane Data's Money Fund Intelligence was sent out to subscribers Friday morning. The latest edition of our flagship monthly newsletter features the articles: "Money Fund Highlights of '14; Looking for Daylight in 2015," a review of the top MMF stories of the year, asset totals, highlights, and a look ahead to 2015; "JPMAM's Donohue & Linton Discuss Gates & Fees," an interview with J.P. Morgan Asset Management's John Donohue and Andrew Linton, who discuss gates and fees; and, "Top MMFs of 2014; Our 6th Annual MFI Awards," where we name the top-performing MMFs for the year. We also updated our Money Fund Wisdom database query system with Dec. 31, 2014, 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 go out on Monday, Jan. 12. (Note: ICI also just announced a workshop on the new Money Market Fund Reforms scheduled for Feb. 4 in Washington.)
The latest MFI's "Money Fund Highlights of '14; Looking for Daylight in 2015" article comments, "Money market mutual funds endured not only sweeping regulatory reform in 2014, but another year of near zero interest rates -- their 6th in a row. And yet, MMFs not only survived, assets grew (slightly) for the third straight year. Modest consolidation continued and fee waivers remained a fact of life, but looking ahead, there is reason for hope. Banks are also feeling the regulatory squeeze, which could lead to outflows from bank deposits, and at long last, it finally appears that interest rate hikes will, in fact, be a reality in 2015. Never have so many worked so hard for so little, is the way we sum up the past few years. But maybe, just maybe, that hard work will pay off a little bit more in 2015."
It continues, "News coverage last year was dominated by the SEC's long-awaited and much-debated Money Market Fund Reforms, which were adopted in July. In short, the big change was that the SEC adopted the floating NAV and fees and gates for prime institutional and municipal MMFs only, both taking effect in 2016. However, reforms were not the only big story of 2014." It goes on to list the top 10 stories of 2014 from cranedata.com and explain how MMF assets surged in the latter half of 2014.
In our monthly MFI profile, we interview JP Morgan's John Donohue and Andrew Linton on the topic of gates and fees. We asked: How big a concern are gates and fees? Are they a bigger issue than the floating NAV? "Donohue: Clients are telling us that fees and gates are potentially more problematic than a floating NAV. That's simply because they are aware that if and when a gate actually happens it will be during a stressed market, which is precisely when they would most want access to their liquidity. Many investors use money market funds for liquidity, so to the extent that they think that a gate is potentially going to be utilized, there is a risk that they will look to move earlier than they otherwise may have to get money out of funds. So, at least initially, I think there is some risk of unintended consequences in the form of large outflows."
We asked: How do these issues differ from the current rules? "Linton: Ordinarily, U.S. open-end funds may not suspend the right of redemption, and may not postpone the payment of redemption proceeds for more than seven days following receipt of a redemption request. However, under the 2010 money market fund reforms, Rule 22e-3 permits money market funds to suspend redemptions and postpone payment of redemption proceeds in an orderly liquidation of the fund if, subject to other requirements, the fund's board determines that the deviation between the fund's amortized cost per share and its current net asset value per share may result in material dilution or other unfair results to investors or existing shareholders. Basically, under Rule 22e-3 you have to move to liquidate the fund. Under the new rule, you can suspend redemptions for up to 10 business days in a 90 day period. Also, you don't have to move to liquidation. We should point out, while we just went through the reasons why maybe there are some hidden dangers in the use of a gate, at the end of the day, the gates themselves can be a shareholder friendly protection."
The January MFI article on the MFI Awards says, "In this issue, we once again recognize some of the top‐performing money funds, ranked by total returns, for calendar year 2014, as well as the top-ranked funds for the past 5-year and past 10-year periods. We present the following funds with our annual Money Fund Intelligence Awards. These include the No. 1-ranked funds based on 1-year, 5-year and 10-year returns, through Dec. 31, 2014, in each of our major fund categories -- Prime Institutional, Government Institutional, Treasury Institutional, Prime Retail, Government Retail, Treasury Retail and Tax‐Exempt."
It continues, "The top-performing Taxable fund overall in 2014 and top among Prime Institutional funds was BlackRock Cash Inst MMF (BGIXX), which returned 0.11%. Among Prime Retail funds, Invesco Money Market Cash Reserve (AIMXX) and Schwab Cash Reserves Fund <b:>`_(SWSXX) had the best return in 2014 (0.06%). `BofA Govt Plus Reserve Capital (GIGXX), Morgan Stanley Inst Liquid Govt Inst (MVRXX) and Western Asset Inst Govt MM Inst (INGXX) won the Top Government Institutional fund award over a 1-year period with a return of 0.04%, while BofA Govt Plus Reserve Investor (BOPXX) and Morgan Stanley Inst Liq Govt Cash Mgmt (MSGXX) won the MFI Award for Government Retail Money Funds (1-year return). Morgan Stanley Inst Liq Treasury Inst (MISXX) and Western Asset Inst US Treasury Obligation MMF Inst (LUIXX) were No. 1 in the Treasury Institutional class, and Morgan Stanley Inst Liq Treasury Cash Mgmt (MREXX) ranked tops among Treasury Retail funds." Watch for more on our MFI Awards in coming days, or see the January MFI.
Crane Data's December MFI XLS with Dec. 31, 2014, data shows total assets increasing for the fifth straight month, rising $86.2 billion in December to $2.644 trillion, after rising $21.0 billion in November, $10.2 billion in October, $27.5 billion in September, and $34 billion in August. 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 0.13% (Crane MFA, unchanged) and 0.17% (Crane 100, up from 0.16%) on an annualized basis for both the 7-day and 30-day yield averages. Charged Expenses averaged 0.12% and 0.14% for the two main taxable averages, up one bps from last month. The average WAM for the Crane MFA and the Crane 100 were 40 and 43 days, respectively. The Crane MFA WAM is down 4 days from last month while the Crane 100 WAM is down 3 days from the prior month. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
In other news, the Federal Reserve Board released the Minutes from its December 16-17 FOMC meeting (which we covered on Dec. 18 in our News, "Fed Takes Baby Steps Towards Hikes; Fed Funds Headed Higher in 2015). One of the more notable points relates to the Fed shelving previous talk of creating segregated cash accounts.
The minutes say, "The manager also provided an update on staff work related to potential arrangements that would allow depository institutions to pledge funds held in a segregated account at the Federal Reserve as collateral in borrowing transactions with private creditors and which could potentially provide an additional supplementary tool during policy normalization. After further review, staff analysis suggested that such accounts involved a number of operational, regulatory, and policy issues. These issues raised questions about these accounts' possible effectiveness that would be difficult to resolve in a timely fashion. It was therefore decided that further work to implement such accounts would be shelved for now."