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Money Fund Wisdom News

Sep 28

Below, we reprint our latest BFI profile, "Diversity Key at Dimensional: Discussion w/Dave Plecha".... This month, Bond Fund Intelligence interviews Dave Plecha, Global Head of Fixed Income at Dimensional Fund Advisors and manager of the DFA One-Year Fixed Income Portfolio. We ask Dave about Dimensional's history, strategies and presence in the ultra-short, and overall, bond market. We also discussed Dimensional's views about timing the market, ultra-short funds benefiting from money fund reforms and more. Our Q&A follows.(Contact us if you'd like to see the latest Bond Fund Intelligence.)

BFI: Give us a little bit of your history. Plecha: Dimensional was founded in 1981. We launched our first fixed income strategy in 1983 -- an ultra-short bond fund with a maximum average maturity of one year. So we've had 33 years of experience investing in short term fixed income. I joined the firm in 1989 and was involved in the One-Year Fixed Income Portfolio from my start, so it has been 27 years for me.

We have a large, experienced team of portfolio managers and traders. Our fixed income teams are in Santa Monica, Austin, and Charlotte in the US, as well as in London, Sydney, and Tokyo. The One-Year Fixed Income Portfolio team is based in the US. We employ a team-based approach, which we like because it helps establish clear responsibility and multiple levels of accountability without too much reliance on any one person. This helps ensure continuity for our investment process.

BFI: Is One-Year Fixed Income Portfolio Dimensional's biggest bond fund? Plecha: The fund was the largest for a number of years, and today it is still one of our biggest fixed income funds and is used widely by our clients. But we manage a lot of fixed income, almost $90 billion across strategies with different maturity and credit quality constraints, including European based UCITS and Australian based trusts for investors in those regions. What was appealing to our investors in 1983 is still appealing to investors today.

BFI: Talk about that fund's position relative to the other funds in the lineup. Plecha: In the US we have two funds that I would categorize as ultra-short bond funds. The One-Year is focused on U.S. dollar-denominated, short term and high quality bonds, and the average maturity is no more than one year. The fund can buy individual bonds with up to two years maturity, which has basically been the structure of the portfolio since inception. In 1996, we launched a global version, which is fully currency hedged and invests in high quality global bonds, as well as bonds with up to two years maturity. Dimensional has other U.S. and global taxable and non-taxable portfolios that seek higher expected returns while investing in a broader set of credit qualities and maturities.

BFI: What was the original impetus? Plecha: The strategy was designed to offer investors a premium over cash, while maintaining capital preservation. If you care about capital preservation then you probably want to focus on short duration, high quality issues, and you want to be diversified -- that lines up with how we position the portfolio. But within that universe, we can still pursue higher expected returns. So for investors who might otherwise still be in cash, the strategy offered them the ability to have a portfolio that extended duration and the premium that comes with taking that approach.

BFI: What are your biggest challenges? Plecha: We have no challenge finding the securities we want to execute our strategy. Today, we are in a low yield environment and some investors are tempted to reach for yield and extend duration in an attempt to get a bit more yield. But yield is not the only component of expected returns. Our approach of finding portions of the yield curve with higher expected capital appreciation, and our willingness to roll bonds instead of holding to maturity, adds an expected capital appreciation component of returns to the yield. As with any strategy, we believe it is critical to set the proper expectations with our clients -- in a low rate environment and otherwise -- to help them understand there are no free lunches and the importance of remaining disciplined.

BFI: What can and can't you do in the fund? Plecha: At Dimensional, we believe you can't time the market -- that markets are very difficult to outguess consistently. We believe in market prices and that new information is quickly reflected in prices. We believe we provide value to our investors by having a deep understanding of the relationship between the current term structure, the current yield curve, and expected return premiums. This is where we focus.

BFI: Do you adhere to pretty tight maturity guidelines? Plecha: We have a one-year maximum (for our average security). Our maturity guidelines are essentially a function of the shape of the yield curve and the term structure. When yield curves are upwardly sloped, on average we expect larger premiums for moving out towards the one-year limit. When yield curves are flat or inverted, we don't expect the same premium. The Fama research shows that there is a positive relationship between forward rates and term premiums. When yield curves are upwardly sloped, expected premiums are positive. So while our average maturity will vary between zero and one year, it will be near the upward limit in upwardly sloped curves and near the lower limit in flat or inverted curves.

BFI: What about quality guidelines? Plecha: In our opinion, one of the most important attributes of an ultra-short strategy with an objective of capital preservation is liquidity, and we take that very seriously. We stay broadly diversified on the very high end of the credit spectrum, investing primarily in double- and triple-A government and corporate securities.

BFI: What about diversification limits? Plecha: We put a lot of emphasis on diversification, not only to reduce volatility or minimize the risk of losses but also to enhance liquidity. We have tighter maximum allocation limits per issuer than what is allowed for credit issuers in money market regulations. So within a portfolio of very high quality issuers, triple-A and double-A issuers, we are highly diversified. We fix limits by issuer, by guarantor and by industry. Even though we are investing in U.S. dollar-denominated bonds, there are issuers from all over the world that come into the U.S. corporate bond market to issue debt. So we look at the country of issuer and put limits on that. We believe that diversification is important in all of the portfolios we manage -- fixed income and equity.

BFI: How about sectors in general? Plecha: We buy commercial paper which is a big market with new issues every single day. We also have floating rate notes in the portfolio which we often buy on new issue, as two-year issues of FRNs are not uncommon. We do not invest in mortgage-backed securities in the portfolio.

BFI: Do you have relatively stable cash flows? Plecha: Our client base is made up of institutional investors and financial advisors. We've been fortunate to see pretty steady inflows across our fixed income offering as more clients recognize the benefits of our approach. That being said, for the One-Year Fixed Income Portfolio we are talking about a highly liquid strategy -- stable cash flows are not a requirement for the strategy to be successful.

BFI: How about expenses? Plecha: There are a couple of aspects to think about when thinking about costs. Obviously the expense ratio of the strategy is important, but also important are the costs of executing the strategy, which some people forget about. The expense ratio for this portfolio is 17 basis points. We care a lot about the costs of executing the strategy, as anything we can do to reduce them can be passed along as higher returns for clients.

BFI: What about the regulatory environment? Plecha: As you know, the recent focus has been on money market fund reform. Money market funds have an opportunity cost due to the regulatory constraints in the way they need to be managed. Historically, they were able to provide stable NAVs as a benefit to investors. The reform in October and the switch to floating NAVs for prime money market funds take away that "main attraction" if you will. Without this benefit, I would expect that many investors who were or are in 2a-7 funds may be considering ultra-short portfolios.

BFI: Do you have an outlook on the Fed? Plecha: The whole market has an outlook on the Fed, and that outlook, together with all other information, is embedded in the term structure of interest rates. Rather than forecasting in the traditional sense, we use the broader information provided by the yield curve to assess difference in expected returns among different maturities when implementing our strategy, and we do this every day.

BFI: Any thoughts on the future? Plecha: We have 33 years of live history, and I think the One-Year Fixed Income Portfolio and its successful track record is a great example of our investment process at work. At all points during the last 33 years there have been investors who have found a favorable tradeoff to take some extra duration out of cash. And there's nothing that indicates that over the next 33 years, or the 33 years after, will be any different.

Sep 20

This month, MFI interviews several key members of Western Asset Management's Liquidity Business, including Client Service Executives John Bonczek and Zak Green, and Head of Liquidity Justin Rose. The three discuss the current cash environment, both in the U.S. and "offshore," and recent changes at Western, which is an affiliate of Legg Mason. Our discussion follows. (The interview below is reprinted from our Sept. Money Fund Intelligence.)

MFI: Give us a little bit of history. Green: Western has been involved in running cash in various products since its inception in 1971. We acquired Citi Asset Management in December 2005, [and] we still manage largely with the same team today. Those funds date back to around 1990. Bonczek: We always like to point out that for the most part, the investment and credit research team has been in place from the Citigroup days. [They have] an average tenure of 22 years.

MFI: How about your own histories? Bonczek: I came over in the CAM [Citi] acquisition and I've been with Western for over 10 years. Green: I have been working in the short duration space in various sales, product development, and management roles for more than 20 years. Rose: I was director at UBS on the short term interest rate desk for 18 years, and former head of money market funds at Standard Life Investments. Prior to coming to New York, I was a Client Service Executive in the Western Asset in London.

MFI: What is your biggest priority? Green: Without a doubt, our clients are always our biggest priority. Working with them to help ensure a smooth implementation of the SEC reforms has been the main focus of our time over the past several months. We're working to make sure that our clients are comfortable with the changes and understand what they entail. We're just trying to serve as a resource to them. Bonczek: Education is a big thing to our clients, making sure they understand everything that's involved and all of the ramifications.

MFI: Talk about your recent changes? Rose: We have put out a couple of press releases on this subject. Last year was principally outlining where we thought our fund lineup would be for money market reform. We also terminated funds that we viewed as "sub-scale" and consolidated our Tax Exempt line-up. This year, we've done a further press release and made the required filings for our final fund line-up. However, the work is still ongoing [but we’ll be ready by] the 11th of October. Green: In anticipation of these reforms, we also looked to bolster our Government fund presence and launched the Treasury Obligations Fund, a dual, triple-A rated Treasury & Repo fund. Outside of the 2a-7 space we also launched two new Ultra Short Bond Funds.

MFI: Could you talk for a moment about your master feeder structure? Bonczek: Basically, under the hub and spoke, master feeder structure, you have one hub portfolio, and in that hub portfolio, we have assets that come in from both offshore and onshore.... The advantage is it's a 2-a7 regulated hub portfolio [and you have] economies of scale, diversification, and the ability for certain spoke funds to have investments that would not normally be available to them. Going forward, that master hub portfolio has to float because it is a 2-a7 regulated hub. (See our recent LOTD on for more.)

Rose: I also think in the offshore space our investors are very comfortable with our fund restructuring including our Cayman Island spokes. We also have a Dublin-domiciled, UCITS US Dollar Prime money market fund which follows ESMA guidelines, the European regulator on money market funds.

Bonczek: [The Cayman Islands-domiciled fund is for] offshore clients in general, whether it's Latin America or global clients.... If you have an interest in investing offshore (US) dollars, this is a perfect vehicle. The Cayman-domiciled funds ... have a 5 pm EST instead of other domiciles where you have a much earlier cut-off. So, that plays well for multinationals on the West Coast because they have time to invest their money.

MFI: What is your biggest challenge? Bonczek: I think it's been dealing with the low interest rate environment and money fund reforms. Rose: The low interest rate environment for money market fund has been an extremely important factor. I mean, two years ago nobody would have expected the US to still be at this low level of interest rates.... Thankfully, it's not negative like [much] of the G7.... There's always the constant challenge of making sure that we're providing a sufficient yield for investors and obviously paying our costs. It's an expensive business. We're having to always balance that.... Going forward, we're trying to anticipate change in regulation and in client wants and needs, and developing products that really service those needs and wants.

MFI: How defensive are the funds? Green: The Prime portfolios are definitely ready [for Oct. 14]. Our PMs, we think, have done a really terrific job in shortening the WAM gradually so as to maintain a very competitive prime fund yield with our peers. We see that our WAMs are shortened to largely the same levels as most of the industry ... in order to provide that ample of liquidity that clients are going to be looking for.

MFI: Any other customer concerns? Green: In general, all clients do have questions and concerns about gates and fees.... So that requires some additional education on our part to let clients know the scenarios that the SEC envisioned these potentially being used.... We stress and feel that there are very remote opportunities where fees would ever be implemented.

Bonczek: I'd add that clients have operational concerns. Things like earlier cut-off times. West coast clients realistically only have two cut-off times, because the 8 o'clock or 9 o'clock cut-off time is very early for them.... It's just a whole change of behavior in how they have to invest, if they're going to invest in institutional prime funds.

Rose: I would add, I deal a lot with the money fund boards. There's been a huge amount of work done to educate directors on their new responsibilities are going forward. I don't think that should be underestimated. The Fund Boards will have to make key decisions going forward and they are asking all the right questions.

MFI: What about fee waivers? Green: Generally speaking, I don't think we're alone in that we've certainly seen fee relief since the rate hike in December. Obviously, if we remember back before then, there was really no spread to speak of between Treasury and Prime funds. Now, there is a meaningful spread between the two. That's really what we would stress.

MFI: What do you have left to do? Rose: I think a lot of the work has really been done, operationally.... Don't underestimate how much this is actually going to cost at the end of the day. It's been a very expensive exercise to meet these new requirements. As I've said, I think most of the work has actually been completed. Investors should [benefit from] the data that the funds are providing on websites and the huge amount of transparency now in the product. We're in the home stretch, but there's still more to do.

MFI: What about Europe? Rose: They're a long way behind the U.S. and still have not completed their final reforms. We have a very sizeable offshore money market fund business [in] U.S. dollars specifically. We closed a number of funds last year.... [It's] still a key part of our business, we're watching it with interest.... It looks like European regulations are going to allow, at least for the next couple of years, CNAV prime funds albeit in a low volatility form. [But] there is a disconnect between [these regulations and] the SEC, and that's never a good thing in markets.

MFI: Tell us about your clients. Bonczek: We have a diverse client base of large corporate clients, hedge funds, municipalities and endowments. Rose: I would say hedge funds are an increasing user base, because they're obviously being pushed off bank balance sheets. So there's definitely a growth area there. But again, obviously because of the floating NAV and gates and fees, prime money market funds will lose their eligibility for margin, etc. So there are some funds where investors have reduced [their usage].

Green: The relationship is very, very important. It's one of the ways that clients can differentiate between products.... One of the things clients appreciate is who can understand their needs, who can understand their business, who can serve as a true consultant for them and be a resource as well as a trusted partner, providing them with information not only on their funds but on the industry as a whole.

MFI: How about the future of MMFs? Green: We think the money fund industry has really demonstrated remarkable resilience despite the changes the pending reforms require. We've been impressed with the way providers have really banded together, worked to educate their clients and fostered them through the unchartered waters of these reforms. We're confident that money funds are here to stay and we believe they will continue to play a really vital and necessary role in client investment strategies. There really is no other solution that is their equal when it comes to providing safety and liquidity.

Bonczek: I think that some of our clients are sitting on the sidelines and they want to see what happens as October 14th comes and goes. In regard to institutional prime funds, they want to see how the assets of the portfolio hold up, how the NAV fluctuates, if it does fluctuate, and investors want to make sure they're compensated for moving back in or staying in institutional prime funds.

Rose: I think if you look back at what money market funds set out to give investors, it was preservation of capital, liquidity, and yield, those three key cornerstones. But the rule changes have made sure that you can't get access to all three in one product, so the investor has to make a choice. We believe whatever choice our clients have to make, we have the full range of funds to meet their needs.

Sep 13

Crane Data released its September Money Fund Portfolio Holdings yesterday, and our latest collection of taxable money market securities, with data as of August 31, 2016, shows big increases in Repo and Treasuries, and big decreases in CDs and CP. Money market securities held by Taxable U.S. money funds overall (tracked by Crane Data) increased by $75.9 billion to $2.668 trillion last month, after increasing by $47.9 billion in July, decreasing by $59.7 billion in June, and increasing by $24.6 billion in May. Repos remained the largest portfolio segment, followed by Treasuries and Agencies. "Credit" instruments continued to shrink dramatically as the shift from "Prime" to "Government" money funds accelerated in August. CDs were in fourth place, followed by Commercial Paper, Other/Time Deposits and VRDNs. Money funds' European-affiliated securities fell to 24.9% of holdings, down from the previous month's 26.7%. Below, we review our latest Money Fund Portfolio Holdings statistics.

Among all taxable money funds, Repurchase Agreements (repo) leapt by $102.6 billion (24.4%) to $735.4 billion, or 24.4% of holdings, after falling $13.3 billion in July, and increasing $71.4B in June and $32.6B in May. Funds dramatically shortened their WAMs (weighted average maturities) in August and continue to shorten in September. Government Agency Debt increased $23.9 billion (4.2%) to $595.7 billion, or 22.3% of all holdings, after increasing $27.0B in July, $37.4B in June, and $34.4B in May. Treasury securities rose $79.4 billion (14.2%) to $640.5 billion, or 24.0% of holdings, after rising $38.8 billion in July, falling $12.8B in June and $3.8B in May. The rise in Repo, Treasuries and Agencies is being driven by the shift of over $650 billion of Prime MMF assets and another $100 billion in Tax Exempt MMF assets (since late 2015) into Government MMFs (so far). The total move by the time the mid-October reforms kick in could top $1 trillion.

CDs and CP both dropped to their lowest levels since Crane Data began tracking these in early 2011. Certificates of Deposit (CDs) were down $55.4 billion (-17.4%) to $262.6 billion, or 9.8% of taxable assets, after declining $37.6 billion in July, $53.6 billion in June, $4.6 billion in May and falling $17.0 billion in April. Commercial Paper (CP) was down $71.8 billion (-26.2%) to $202.1 billion, or 7.6% of holdings, while Other holdings, primarily Time Deposits, fell $14.5 billion (7.0%) to $191.4 billion, or 7.2% of holdings. VRDNs held by taxable funds increased by $11.8 billion (41.1%) to $40.4 billion (1.5% of assets).

Prime money fund holdings tracked by Crane Data fell below $1 trillion to $913 billion (down from $1.074 trillion last month), or 34.2% (down from 41.4%) of taxable money fund holdings' total of $2.668 trillion. Among Prime money funds, CDs represent under one-third of holdings at 28.8% (down from 29.6% a month ago), followed by Commercial Paper at 22.2% (down from 25.5%). The CP totals are comprised of: Financial Company CP, which makes up 13.9% of total holdings, Asset-Backed CP, which accounts for 5.4%, and Non-Financial Company CP, which makes up 2.9%. Prime funds also hold 3.9% in US Govt Agency Debt (same as last month), 6.6% in US Treasury Debt (up from 5.3%), 4.1% in US Treasury Repo (down from 4.6%), 1.6% in Other Instruments, 18.9% in Non-Negotiable Time Deposits, 5.7% in Other Repo, 3.9% in US Government Agency Repo, and 3.8% in VRDNs.

Government money fund portfolios totaled $1.143 trillion, up from $962 billion in July, while Treasury money fund assets totaled another $612 billion, up from $556 billion the prior month. Government money fund portfolios were made up of 49.0% US Govt Agency Debt, 18.2% US Government Agency Repo, 11.7% US Treasury debt, and 20.7% in US Treasury Repo. Treasury money funds were comprised of 72.9% US Treasury debt, 26.8% in US Treasury Repo, and 0.2% in Government agency repo, Other Instrument, and Investment Company shares. Government and Treasury funds combined now total $1.755 trillion, or almost 2/3 (65.8%) of all taxable money fund assets, up from 58.6%.

European-affiliated holdings decreased $27.8 billion in August to $663.3 billion among all taxable funds (and including repos); their share of holdings decreased to 24.9% from 26.7% the previous month. Eurozone-affiliated holdings decreased $1.5 billion to $422.8 billion in August; they now account for 15.9% of overall taxable money fund holdings. Asia & Pacific related holdings decreased by $53.2 billion to $195.3 billion (7.3% of the total). Americas related holdings increased $157.1 billion to $1.807 trillion and now represent 67.7% of holdings.

The overall taxable fund Repo totals were made up of: US Treasury Repurchase Agreements, which increased $91.6 billion, or 26.4%, to $438.6 billion, or 16.4% of assets; US Government Agency Repurchase Agreements (up $19.6 billion to $244.8 billion, or 9.2% of total holdings), and Other Repurchase Agreements ($52.0 billion, or 2.0% of holdings, down $8.6 billion from last month). The Commercial Paper totals were comprised of Financial Company Commercial Paper (down $36.9 billion to $126.6 billion, or 4.7% of assets), Asset Backed Commercial Paper (down $21.5 billion to $49.0 billion, or 1.8%), and Non-Financial Company Commercial Paper (down $13.3 billion to $26.5 billion, or 1.0%).

The 20 largest Issuers to taxable money market funds as of August 31, 2016, include: the US Treasury ($640.5 billion, or 25.5%), Federal Home Loan Bank ($433.6B, 17.3%), Federal Reserve Bank of New York ($146.7B, 5.8%), BNP Paribas ($100.8B, 4.0%), Credit Agricole ($78.6B, 3.1%), Wells Fargo ($67.4B, 2.7%), Societe Generale ($67.2B, 2.7%), Federal Home Loan Mortgage Co. ($61.8B, 2.5%), Federal Farm Credit Bank ($56.3B, 2.2%), RBC ($50.6B, 2.0%), Mitsubishi UFJ Financial Group Inc. ($41.2B, 1.6%), Federal National Mortgage Association ($39.3B, 1.6%), Credit Suisse ($36.9B, 1.5%), Bank of Nova Scotia ($36.8B, 1.5%), Natixis ($36.5B, 1.5%), Bank of America ($35.5B, 1.4%), HSBC ($32.5B, 1.3%), Citi ($32.4B, 1.3%), JP Morgan ($30.1B, 1.2%), and Svenska Handelsbanken ($27.6B, 1.1%).

In the repo space, the 10 largest Repo counterparties (dealers) with the amount of repo outstanding and market share (among the money funds we track) include: Federal Reserve Bank of New York ($146.7B, 19.9%), BNP Paribas ($76.6B, 10.4%), Societe Generale ($54.6B, 7.4%), Wells Fargo ($53.9B, 7.3%), Credit Agricole ($48.5B, 6.6%), RBC ($35.1B, 4.8%), Bank of America ($28.6B, 3.9%), Credit Suisse ($26.7B, 3.6%), HSBC ($24.0B, 3.3%) and JP Morgan ($22.6B, 3.1%). The `10 largest Fed Repo positions among MMFs on 8/31 include: JP Morgan US Govt ($13.7B), Morgan Stanley Inst Lq Gvt ($10.0B), BlackRock Lq T-Fund ($7.1B), Goldman Sachs FS Gvt ($6.4B), Federated Gvt Oblg ($5.5B), Goldman Sachs FS Treas Sol ($5.5B), Wells Fargo Gvt MMkt ($5.5B), BlackRock Lq FedFund ($5.3B), Fidelity Inst MMkt Gvt ($5.2B), and Fidelity Cash Central Fund ($4.5B).

The 10 largest issuers of "credit" -- CDs, CP and Other securities (including Time Deposits and Notes) combined -- include: Credit Agricole ($30.1B, 5.1%), Mitsubishi UFJ Financial Group Inc. ($28.0B, 4.8%), Svenska Handelsbanken ($27.6B, 4.7%), Natixis ($23.7B, 4.0%), BNP Paribas ($23.5B, 4.0%), Swedbank AB ($23.0B, 3.9%), DnB NOR Bank ASA ($21.9B, 3.7%), Skandinaviska Enskilda Banken AB ($21.0B, 3.6%), Nordea Bank ($19.7B, 3.4%) and Credit Mutuel ($18.4B, 3.1%).

The 10 largest CD issuers include: Mitsubishi UFJ Financial Group Inc. ($18.5B, 7.1%), Bank of Montreal ($16.3B, 6.2%), Sumitomo Mitsui Banking Co ($15.4B, 5.9%), Canadian Imperial Bank of Commerce ($12.0B, 4.6%), Sumitomo Mitsui Trust Bank ($11.9B, 4.6%), Toronto-Dominion Bank ($10.7B, 4.1%), Wells Fargo ($10.7B, 4.1%), Svenska Handelsbanken ($9.7B, 3.7%), Bank of Nova Scotia ($8.6B, 3.3%) and Credit Agricole ($8.6B, 3.3%).

The 10 largest CP issuers (we include affiliated ABCP programs) include: BNP Paribas ($14.1B, 8.0%), Societe Generale ($11.4B, 6.5%), Commonwealth Bank of Australia ($7.8B, 4.4%), Credit Agricole ($7.0B, 4.0%), JP Morgan ($6.7B, 3.8%), ING Bank ($5.9B, 3.3%), Bank of Nova Scotia ($5.8B, 3.3%), Natixis ($5.6B, 3.2%), Australia and New Zealand Banking Group Ltd. ($5.5B, 3.1%) and Mitsubishi UFJ Financial Group Inc. ($5.3B, 3.0%),

The largest increases among Issuers include: US Treasury (up $79.4B to $640.5B), Federal Reserve Bank of New York (up $65.9B to $146.7B), Federal Home Loan Bank (up $25.9B to $433.6B), BNP Paribas (up $11.6B to $100.8B), Canadian Imperial Bank of Commerce (up $9.0B to $24.2B), Societe Generale (up $7.9B to $67.2B), Goldman Sachs (up $5.2B to $17.8B), Nomura (up $4.0B to $18.8B) and Deutsche Bank AG (up $3.9B to $17.8B).

The largest decreases among Issuers of money market securities (including Repo) in July were shown by: Mitsubishi UFJ Financial Group Inc (-$10.8B to $41.2B), Mizuho Corporate Bank Ltd (-$10.8B to $19.9B), Sumitomo Mitsui Banking Co (-$10.4B to $18.3B), Wells Fargo (-$8.6B to $67.4B, DnB NOR Bank ASA (-$6.0B to $21.9B), Australia & New Zealand Banking Group Ltd -$5.4B to $14.7B), Federal Home Loan Mortgage Co (-$5.1B to $61.8B), Barclays PLC (-$4.1B to $24.8B), DZ Bank AG (-$4.1B to $7.9B), Citi (-$3.7B to $32.4B) and Rabobank (-$3.6B to $7.4B).

The United States remained the largest segment of country-affiliations; it represents 61.4% of holdings, or $1.638 trillion. France (11.7%, $310.8B) remained in second while Canada (6.3%, $168.1B) remained in 3rd. Japan (4.7%, $125.6B) stayed in fourth, while Sweden (3.4%, $91.7B) held fifth. The United Kingdom (3.0%, $80.5B) remained sixth, while Germany (2.0%, $53.4B) ranked seventh. Australia (1.8%, $47.3B) was eighth and The Netherlands (1.7%, $44.2B) were ninth. Lastly, Switzerland (1.6%, $43.9B) held tenth place 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 August 31, 2016, Taxable money funds held 33.8% (up from 31.1%) of their assets in securities maturing Overnight, and another 15.2% maturing in 2-7 days (same as last month). Thus, 49.0% in total matures in 1-7 days. Another 19.3% matures in 8-30 days, while 9.0% matures in 31-60 days. Note that more than three-quarters, or 77.3% of securities, mature in 60 days or less (same as last month), the dividing line for use of amortized cost accounting under the new pending SEC regulations. The next bucket, 61-90 days, holds 9.6% (up from 9.0%) of taxable securities, while 10.0% matures in 91-180 days (up from 8.7%), and just 3.2% matures beyond 180 days (up from 2.2%).

Crane Data's Taxable MF Portfolio Holdings (and Money Fund Portfolio Laboratory) were updated Monday, and our Tax Exempt MF Holdings and MFI International "offshore" Portfolio 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.

Sep 09

Crane Data's latest Money Fund Market Share rankings show slight asset increases for a majority of U.S. money fund complexes in August as money market fund assets grew $18.4 billion, or 0.7%. Overall assets continue to be relatively flat, rising by $15.1 billion, or 0.6%, over the past 3 months, but over the past 12 months through August 31, they are up $54.3 billion, or 2.1%. The biggest gainer in August was again JP Morgan, whose MMFs rose by $10.2 billion, or 4.4%. Morgan Stanley, First American, Vanguard, Wells Fargo and Fidelity also saw assets increase, rising by $6.9 billion, $4.1 billion, $3.2 billion, $3.2 billion, and $2.7 billion, respectively. AB (Alliance) also jumped $7.0 billion due to the addition of its AB Govt MM Fund to our listings. (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 Money Fund Wisdom subscribers.) We review these below, and we also look at money fund yields the past month, which were flat to mixed.

Fidelity, MS, Vanguard, JP Morgan, PNC and Dreyfus had the largest money fund asset increases over the past 3 months, rising by $10.4 billion, $8.6B, $8.6B, $6.7B, $5.6B and $5.6B, respectively. Over the past year through August 31, 2016, Fidelity was the largest gainer (up $39.4B, or 9.4%), followed by Goldman Sachs (up $35.1B, or 23.1%), BlackRock (up $32.1B, or 15.1%), Vanguard (up $18.4B, or 10.5%), SSGA (up $10.4B, or 13.0%), and PNC (up $7.0B, or 147%). BlackRock was buoyed by its acquisition of BofA's money funds -- a deal which closed in April.

Other asset gainers for the past year include: Wells Fargo (up $6.5B, 6.0%), Invesco (up $6.1B, or 11.5%), Morgan Stanley (up $4.5B, 3.5%), First American (up $2.0B, 4.9%), Northern (up $1.9B, 2.3%) and UBS (up $1.3B, 3.4%). The biggest decliners over 12 months include: Dreyfus (down $14.5B, or -8.6%), JPMorgan (down $13.2B, or -5.1%), Deutsche (down $9.2B, or -30.3%), RBC (down $5.3B, or -35.7%), and SEI (down $4.1B, or -29.5%).

Our latest domestic U.S. Money Fund Family Rankings show that Fidelity Investments remains the largest money fund manager with $456.4 billion, or 17.3% of all assets (up $2.7 billion in August, up $10.4 billion over 3 mos., and up $39.4B over 12 months). BlackRock is second with $244.3 billion, or 9.2% of assets (down $389M, down $7.8B, and up $32.1B for the past 1-month, 3-mos. and 12-mos., respectively). JPMorgan is third with $244.1 billion, or 9.2% market share (up $10.2B, up $6.7B, and down $13.2B for the past 1-month, 3-mos. and 12-mos., respectively). Federated Investors remained fourth with $203.0 billion, or 7.7% of assets (down $1.3B, up $1.1B, and down $2.2B).

Vanguard was in 5th place with $193.0 billion, or 7.3% of assets (up $3.2B, up $8.6B, and up $18.4B). Goldman Sachs held onto sixth place with $186.6 billion, or 7.1%, (up $1.3B, down $3.2B, and up $35.1B). Schwab ($158.6B, 6.0%) was in seventh place, followed by Dreyfus in eighth place with $153.0B (5.8%), Morgan Stanley was in ninth place with $132.2B (5.0%), and Wells Fargo was in tenth place with $114.9B (4.3%).

The eleventh through twentieth largest U.S. money fund managers (in order) include: SSGA ($90.1B, or 3.4%), Northern ($82.6B, or 3.1%), Invesco ($58.8B, or 2.2%), First American ($43.9B, or 1.7%), Western Asset ($42.7B, or 1.6%), UBS ($38.2B, or 1.4%), Franklin ($22.3B, or 0.8%), Deutsche ($21.1B, or 0.8%), American Funds ($16.2B, or 0.6%), and T. Rowe Price ($15.2B, or 0.6%). The 11th through 20th ranked managers are the same as last month, except: First American moved ahead of Western and Franklin moved ahead of Deutsche. Crane Data currently tracks 64 U.S. MMF managers, the same number as last 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 Sachs moving up to #4 ahead of Federated.

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 ($464.7 billion), JPMorgan ($377.1B), BlackRock ($364.0B), Goldman Sachs ($271.5B), and Federated ($211.1B). Vanguard ($193.0B) was sixth, followed by Dreyfus/BNY Mellon ($177.0B), Schwab ($158.6B), Morgan Stanley ($156.9B), and Wells Fargo ($115.9B), which round out the top 10. These totals include "offshore" US Dollar money funds, as well as Euro and Pound Sterling (GBP) funds converted into US dollar totals.

Finally, our September Money Fund Intelligence and MFI XLS show that yields were flat to mixed in August across most of our Crane Money Fund Indexes. The Crane Money Fund Average, which includes all taxable funds covered by Crane Data (currently 742), was flat at 0.12% for the 7-Day Yield (annualized, net) Average, while the 30-Day Yield was also flat at 0.12%. The MFA's Gross 7-Day Yield inched higher to 0.45% (up one bps), while the Gross 30-Day Yield was also 0.45% (unchanged).

Our Crane 100 Money Fund Index shows an average 7-Day (Net) Yield of 0.23 (flat) and an average 30-Day Yield of 0.23% (flat). The Crane 100 shows a Gross 7-Day Yield of 0.48% (flat), and a Gross 30-Day Yield of 0.48% (flat). For the 12 month return through 8/31/16, our Crane MF Average returned 0.09% (up 1 bp) and our Crane 100 returned 0.1% (up 1 bps). The total number of funds, including taxable and tax-exempt, fell to 998, down 25 from last month. There are currently 742 taxable and 256 tax-exempt money funds.

Our Prime Institutional MF Index (7-day) yielded 0.24% (flat) as of August 31, while the Crane Govt Inst Index was 0.16% (up 1 bps) and the Treasury Inst Index was 0.11% (down 1 bps). Thus, the spread between Prime funds and Treasury funds is 13 basis points, down from 15 bps 2 months ago but up one bps from last month. The Crane Prime Retail Index yielded 0.11% (up 2 bps), while the Govt Retail Index yielded 0.03% (unchanged) and the Treasury Retail Index was 0.02% (unchanged). The Crane Tax Exempt MF Index yielded 0.15% (up 8 bps).

The Gross 7-Day Yields for these indexes in July were: Prime Inst 0.54% (unchanged), Govt Inst 0.42% (up 1 bps), Treasury Inst 0.36% (down 1 bps), Prime Retail 0.55% (up 2 bps), Govt Retail 0.39% (down 1 bp), and Treasury Retail 0.35% (up 1 bp). Also, the Crane Tax Exempt Index jumped 9 basis points to 0.52%. The Crane 100 MF Index returned on average 0.02% for 1-month, 0.06% for 3-month, 0.14% for YTD, 0.16% for 1-year, 0.08% for 3-years (annualized), 0.06% for 5-years, and 0.95% for 10-years. (Contact us if you'd like to see our latest MFI XLS, Crane Indexes or Market Share report.)