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Money Fund Wisdom News

Jul 08

The IRS and the US Treasury Department issued a Final Rule on their proposal to simplify accounting and rules to accompany pending Money Fund Reforms. (See our July 30, 2014 News, "Reform Floating NAV Accounting Issues Addressed by Treasury Proposal.") The rule, "Method of Accounting for Gains and Losses on Shares in Money Market Funds," says, "This document contains final regulations that provide a simplified method of accounting for gains and losses on shares in money market funds (MMFs). The final regulations also provide guidance regarding information reporting requirements for shares in MMFs. The final regulations respond to [SEC] rules that change the amount for which certain MMF shares are distributed, redeemed, and repurchased. The final regulations affect MMFs and their shareholders." We discuss this last remaining piece of reforms below, and we also review the July issue of our flagship Money Fund Intelligence, which was sent to subscribers Friday morning.

The IRS/Treasury rule states, "This document contains amendments to 26 CFR part 1 (Income Tax Regulations) under sections 446 and 6045 of the Internal Revenue Code (Code). The regulations provide a method of accounting for gain or loss on shares in MMFs and are intended to simplify tax compliance for holders of shares in MMFs affected by SEC regulations that impose liquidity fees or change how certain MMF shares are priced. See Money Market Fund Reform; Amendments to Form PF ... (August 14, 2014) (SEC MMF Reform Rules)." (See also the IRS's new Revenue Procedure 206-39.)

It continues, "The Treasury Department and the IRS published a notice of proposed rulemaking and notice of public hearing (REG-107012-14) in the Federal Register on July 28, 2014 (79 FR 43694). The proposed regulations described a simplified method of accounting for gain or loss on shares in a floating-NAV MMF (the net asset value method, or NAV method). Under the NAV method, a taxpayer's gain or loss on shares in an MMF is based on the change in the aggregate value of the taxpayer's shares during a computation period selected by the taxpayer and on the net amount of the purchases and redemptions during the computation period. The proposed regulations also provided guidance regarding information reporting requirements for shares in MMFs."

Finally, the IRS rule adds, "After considering the comments, the Treasury Department and the IRS adopt the proposed regulations regarding the method of accounting as final regulations with the modifications described in this Treasury decision." (Note: Thanks to Stradley Ronon's Joan Swirsky and John Baker for pointing out the IRS notice.)

Our latest MFI newsletter features the articles: "Prime Outflows Turn Ugly: Totaling the Damage to Date," which charts the massive outflows from Prime funds YTD, and looks ahead to more; "BlackRock's Novick Keynotes Money Fund Symposium," which covers Barbara Novick's address at our recent Money Fund Symposium; and "Home-Stretch for Reforms; Gates & Outstanding Issues," which reviews a panel from Symposium on reform FAQs and operational obstacles. We have also updated our Money Fund Wisdom database query system with June 30, 2016, performance statistics, and sent out our MFI XLS spreadsheet Friday morning. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our June Money Fund Portfolio Holdings are scheduled to ship Tuesday, July 12, and our June Bond Fund Intelligence is scheduled to go out Friday, July 15.

MFI's lead "MMF Reform" article says, "The exodus from Prime and Tax Exempt money funds and flood into Govt MMFs picked up steam in June, as another $119.3 billion moved out of Prime and $14.7B moved out of Tax Exempt. Govt MMFs gained $120.3B, but overall assets were down $13.8B. Year-to-date, Prime funds are down by $259.3B, or -21.0%, and Tax Exempt MMFs are down by $60.0B, or -23.9%. Govt MMFs are up by $244.5B, or 20.5%. (See our June 30 News, "Prime Outflows, Spreads, and Liquidity Major Issues at MF Symposium.")

The article adds, "Over the past 12 months, Prime assets have fallen by a massive $378.2 billion, or 27.9%. Govt MMFs have increased by $509.1 billion during this same time while Tax Exempt MMFs have fallen by $47.3 billion. Government fund assets began surging in November 2015 as Fidelity Cash Reserves converted to Fidelity Govt Cash Reserves. Govt MMFs moved ahead of Prime assets in February 2016 for the first time ever, and haven't looked back. The shift has been fueled by over $300 billion in fund conversions, but we're now seeing the start of investor moves. (There have also been conversions of Prime into Ultra-Short Bond Funds and Tax-Exempt MMF liquidations.) We discuss this "Phase II" of asset movements below."

Our coverage of Novick's keynote at Symposium reads, "Crane's Money Fund Symposium, which took place last week in Philadelphia, attracted 575 attendees -- shattering our record of 505 set last year in Minneapolis. One of the highlights of the 3-day conference was the keynote speech by `BlackRock Vice Chair Barbara Novick, who discussed "The New Look of Money Market Funds" and focused on adapting to money market fund reforms. We excerpt from her speech below. Novick, who delivered the keynote at our last Philadelphia Money Fund Symposium in 2011, began by discussing the history and evolution of money fund reforms. She then turned her focus to the two major aspects of the 2014 reforms -- the floating NAV, and fees and gates. On the floating NAV requirement she said, "Based on historical data, we would expect the NAV to wiggle around the dollar. We're not talking about big changes where you see it go up and down, it will wiggle -- very tight bands around that dollar."

It continues, "On the fees and gates rule, Novick added, "That's probably the most controversial ... because it's unknown and untested." She explained, "We don't really know what that will look like, and history does compel us to say we want to make sure we have access to our capital at all points in time. I tend to think about these a little bit differently. First, by having these triggers, the portfolio manager is incented to manage that fund very conservatively, and I think that's good. If there's anything we’ve learned, people taking risks in money market fund portfolios isn't the best idea for any of us. Second, if we had some extreme environment ... wouldn't you want boards to have the best toolkit available industry-wide to deal with a stress event?"

The article on the "Home Stretch for Reforms" explains, " Our recent Money Fund Symposium in Philadelphia also featured the sessions, "Money Fund Reform: Outstanding Issues," and "Reform Issues: Credit Ratings, Operations." The former, moderated by Joan Swirsky of Stradley Ronon, included panelists `Jack Murphy of Dechert; Sarah ten Siethoff of the Securities & Exchange Commission; and Jane Heinrichs of the Investment Company Institute. The latter, moderated by Pete Crane of Crane Data, featured Charles Hawkins of BNY Mellon Asset Servicing on operational challenges; Jimmie Irby of JP Morgan on credit ratings; and Sharon Pichler of the SEC.

It continues, "In the Outstanding Issues session, the panel addressed several issues with fees and gates. Swirsky said, "There are only two triggers in the rule -- if weekly liquid assets (WLA) fall below 30% then the board can impose a discretionary fee or gate, and if the WLA falls even lower to less than 10% there will be a mandatory fee unless the board decides otherwise. But funds can consider other triggers besides the two in the rule."

In a sidebar, we discuss, "UBS Sweeps; Changes." This brief says, "UBS Asset Management liquidated its entire lineup of RMA Money Market Funds and launched a new RMA Government Money Market Fund to hold its brokerage sweep cash." It also recaps other fund liquidations and changes. We also do a sidebar on "European MMF Regs," which says, "On June 17, the European Council adopted a Dutch compromise proposal on Money Market Fund Regulations. This now enables the European Council, European Parliament, and European Commission to "commence trilogue negotiations to finalize the regulations." Finally, as we do every month, we review all the important "Money Fund News."

Our July MFI XLS, with June 30, 2016, data, shows total assets decreased $13.8 billion in June to $2.612 trillion after decreasing $9.7 billion in May, $42.0 billion in April, and $20.3 billion in March. Our broad Crane Money Fund Average 7-Day Yield moved up 2 basis points to 0.13% for the month, while our Crane 100 Money Fund Index (the 100 largest taxable funds) increased 2 basis points to 0.24% (7-day).

On a Gross Yield Basis (before expenses were taken out), the Crane MFA ticked up 2 basis points to 0.44% and the Crane 100 was also up 2 bps to 0.48%. Charged Expenses averaged 0.32% (unchanged) and 0.25% (down one bps) for the Crane MFA and Crane 100, respectively. The average WAM (weighted average maturity) for the Crane MFA was 32 days (down 1 day from last month) and for the Crane 100 was 34 days (up 1 day). (See our Crane Index or craneindexes.xlsx history file for more on our averages. Note: We made some changes to our Crane 100 Money Fund Index to replace recently liquidated funds. See our MFI XLS for the latest components.)

Jun 30

Two of the most popular sessions at our 2016 Money Fund Symposium in Philadelphia last week were "Major Money Fund Issues 2016" and "Senior Portfolio Manager Perspectives," which featured some of the leading authorities from some of the largest players in the money fund industry. During the first session, panelists were asked about the questions they're getting most frequently of late. Fitch Ratings' Ian Rasmussen replied, "The questions usually fall within 3 main categories: They want to know about liquidity, they want to know about asset flows, and they want to know about yield." Indeed, these three topics dominated not just the conversations in these sessions, but the entire conference. (Note: Next year's Money Fund Symposium is scheduled for June 21-23 in Atlanta. Mark your calendars and watch for details late this fall. Also, see our "Money Fund Symposium 2016 Download Center" page for recordings and Powerpoints from the show.)

In the "Major Issues" session, Crane Data's Peter Crane asked, "How much is going to flow out of Prime?" Federated Investors' Deborah Cunningham said that, to date, there hasn't been a lot of movement by investors -- but she expects that to pick up over the next few months. She explained, "As we flipped the calendar into June we started to see some customers start to take action -- not many, but a few. We saw a few customers choose to leave prime and go into Govies. Government funds are actually picking up a lot of assets that are not necessarily coming from our prime funds, or others' Prime funds. I think they are coming from other market vehicles that are no longer as attractive or no longer open to them in the form they were before.... I would expect that in July we'll see a little pick up, then a lull in August, and then September [is] where everybody is making sure they're positioned properly."

Cunningham added, "Customers want to see what other customers are doing, and there is some herd mentality, if you will, to this industry. I think that will, to some degree, at least initially, solidify in people's mind where they want to be on October 14. It doesn't necessarily solidify where they want to be on October 17. `But on October 14 when the change occurs, they often want to be with others that are similar to themselves."

Panelist John Donohue of JP Morgan Asset Management concurs with the estimates floated by others that between $400 and $500 billion will move out of Prime by reform implementation. He stated, "But as long as we get through day one, the real thing is what happens on days 2, 3, and beyond. The opportunity for us is to work with them [clients] to segment their cash ... do an asset allocation around that liquidity, and hopefully they can decide what levers they want to pull to put the cash across a full spectrum of liquidity type solutions -- everything from a Govie fund to a Short Duration bond fund."

Regarding flows into Government funds, Cunningham said, "There are 4 main categories of Government funds -- Treasury only, Treasury with Repo, Government only, and Government with Repo. The Government with repo product is the one that's gaining the most." She also said it helps to have some yield now in Government funds, after having been near zero or 1 basis point for so long. "No more zero. That happened pretty much immediately with Fed lift off."

As for the trend of sweep funds going Government, she said it's an easy choice right now because Government funds have no fees and gates and they are actually earning a little yield. "But if we start to see spreads between Prime and Govie -- now about 20 basis points -- go to 30, 40, 50 basis points, there will be some solutions to figure out how to deal with the gates and fees side of that equation for even the sweep options."

On the yield differential between Prime and Government funds, Donohue explained, "The conundrum right now is, we keep talking about that yield differential between Prime and Govie being more attractive than ever at between 20-40 basis points. But over the next couple of months, that yield is going to compress. If you look at maturity profiles right now, all of the large players have anywhere from 95-100% of their fund maturing at the end of September in anticipation of large outflows. And given that the Fed is in the market giving a natural floor on Govie funds, that spread is going to collapse right on top of each other."

He added, "Some clients are going to look at that yield differential and say, 'Let me take a wait and see approach and just go into Govie <b:>`_.' So, we're going to spend a lot of time working with clients, telling them, 'If you're comfortable in Prime, stay in it, because that yield differential is going to snap back very quickly.' But that's the risk to the overall industry and the challenge we're all going to be facing."

That led to a discussion of liquidity. Said Cunningham, "For our institutional Prime funds, weekly liquid assets at this point are about 50%, and our WAMs are 35 days or less depending on the products." Rasmussen said that is on par with the trends across the industry. (Note: Our MFI Daily currently shows Prime Inst MMFs with 49.4% in WLA, or weekly liquid assets.) Added Rasmussen, "What we're concerned about are the outliers. There are certain funds that aren't building the same type of liquidity that we have seen across the industry.... Investors want to see a higher cushion." Donohue added, "Everyone is going to err on the side of having more than enough liquidity to meet even their worst case redemption analysis."

Donohue discussed the two major elements of the October reforms: fees & gates, and the floating NAV. "The gates and fees are something clients are very concerned about. It's important for everyone to educate our clients, our collective client base, on what that actually means. I believe there's a very little probability of that, but when and if it does happen, maybe it's not the worst thing that could happen. If there were gates and fees back in 2008, maybe Reserve would have survived it, and we wouldn't all be here right now."

On FNAVs, he added, "Once clients get comfortable with the FNAV concept, I personally believe they are going to look at the Ultra-Short bond fund space." Donohue continued, "If you accept the floating NAV, you go a step out of money market funds, and maybe the NAV is a little more volatile, but still very low, and you get a very attractive return, historically, versus what you have gotten. And prime funds are going to hold a ton of liquidity, so that will cause yields to not be as high as they otherwise may be. This is why I think the Ultra-Short space is the opportunity coming out of reform."

Many of the same themes were explored in the "Senior Portfolio Manager" session, moderated by Barclays' Stewart Cutler and featuring Kevin Gaffney of Fidelity Investments; Laurie Brignac of Invesco; and Peter Yi of Northern Trust Asset Management. Cutler began the conversation with the overarching trend in the industry the past two years. "Since the beginning of 2015, Prime portfolios, which had been a little over $1.4 trillion, have slid down towards about $1.1 trillion and Government funds have increased from approximately $1 trillion to $1.4 trillion."

As the reform deadline approaches, panelists discussed how they are positioning their portfolios for the likelihood of Prime outflows. All three said they were being cautious and conservative with their Prime funds, bringing in their durations, shortening WAMs, shortening WALs, and running higher weekly liquid assets. Brignac said the WLA of her funds is in the mid-40% range, which is on par with the industry average for institutional prime funds." Later in the session, Brignac said she expects those weekly liquid asset averages to go even higher. "I would think it would be closer to 60% to 70% in September."

An audience member asked, "If WLA is at 70% in September, what does that mean for the yield differential?" Answered Yi, "That's the predicament we're in. We're going to be part of this unilateral liquidity in these next few months, and it's going to destroy where yields potentially could be. We, like many in this room, believe there will be a meaningful spread between credit strategy and Government strategy. But the next 3 months, it's going to be hard to see."

Fidelity's Gaffney was asked about communicating with clients. "They know the deadline is in October, and they know they have until then to make a decision. One of the reasons why it's difficult to pin down the number of how much is going to be moving out of institutional Prime is a lot of these institutional investors have not made that decision yet. They are still thinking about their alternatives: What other options are out there? What the funds are going to look like in October? [And, what will be] the spreads between Prime and Government funds? So there are a lot of variables to think about."

On the floating NAV, Yi said, "I don't think a variable NAV is going to move very often -- when it does, it's going to be pretty small. Interest rate movements, movements from the Fed, getting caught off-sides from the Fed. You'll see some movement in the NAV, but we don't think it's going to be meaningful. Now, if there's a credit event -- an impaired asset, a distressed asset, that’s where you're going to see movements that are meaningful -- even in a constant NAV. We need to step a step back sometimes and say, 'What are the big factors that are going to move an NAV?' ... It always ends up being a credit event."

On new product launches, Brignac said one of the outcomes of reforms is that it has "changed the cash discussion that we're having with clients. We're talking about bucketing different types of cash, what is the right vehicle -- and it's going to be different for different clients. The panel yesterday was talking about ultra-short bond funds, and this is a strategy that's gaining a lot of traction and a lot of attention. Initially, a lot of clients will hit that 'easy' button and probably just move into Government funds. But I think we'll see a lot more pickup in some of these other products going into next year."

Finally, Yi added, "Ultra-Short is the real opportunity here. We have the full product suite within the money market fund space. But outside of that, we think there will be a lot of new flavors, depending on where there is investor need. We have an ultra-short fixed income business that's really been growing exponentially in this low interest rate environment... It's a great opportunity to talk about cash segmentation strategies, and we think that's resonated very well."

Jun 07

The June issue of our flagship Money Fund Intelligence newsletter, which was sent to subscribers Tuesday morning, features the articles: "MMF Reform Countdown: 4 Months to Go; Sorting, Bracing," which looks at changes, trends, and question marks leading up to the October reform deadline; "T. Rowe Price's Lynagh on Lineup; Do No Harm," which profiles Joe Lynagh, Portfolio Manager and Head of Cash Management at T. Rowe Price; and "MMF Managers Set Variety of Strike Time Models," which reviews firms that have announced strike times for their floating NAV funds. We have updated our Money Fund Wisdom database query system with May 31, 2016, performance statistics, and also sent out our MFI XLS spreadsheet Tuesday morning. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our June Money Fund Portfolio Holdings are scheduled to ship Thursday, June 9, and our June Bond Fund Intelligence is scheduled to go out Tuesday, June 14.

MFI's lead "MMF Reform" article says, "With just four months to go before Money Market Reforms are finalized, fund managers continue to make announcements, tweaks to their lineups and funds and to prepare for the great unknown -- what investors will do come October. The total of funds converting from Prime to Government has now broken over $300 billion (it's over $340 billion when Prime to Ultra-short conversions are included), and the exodus from Tax Exempt funds continues. We review the latest moves below."

The article adds, "Most of the major players have announced their lineup changes, but filings continue to surface. The most recent batch is from Northern Trust, which announced plans for its Prime and Tax-Exempt money funds. The $9.1 billion Northern Institutional Diversified Assets fund will be "going Government," the $3.8 billion Northern Inst Prime Obligations will remain Prime Institutional and adopt a floating NAV, and the $7.4 billion Northern Trust Money Market Fund has been declared a (prime) Retail fund. Also, Northern Inst Tax-Exempt Fund and Northern Trust CA Muni MMF will be liquidated; Northern Municipal MMF has been declared "Retail," and Northern Inst Municipal MMF will be "Institutional." (See our June 2 News for more.)

Our latest fund manager interview reads, "This month, MFI profiles Joe Lynagh, Fixed Income Portfolio Manager and Head of the Cash Management team at T. Rowe Price, in charge of all the firm's money market and ultra short funds. Lynagh discusses the changes that T. Rowe Price has made to its money fund lineup as the firm prepares for reforms, based on the mandate of "do no harm to existing shareholders." T. Rowe Price plans to offer a range of options, including a Prime Institutional fund. Lynagh also talks about why retail investors will stay with Prime funds, why Ultra-Short Bond funds will grow in popularity, and why differentiation will return to the market."

MFI asks, "How long have you been running money funds? Lynagh says, "`T Rowe Price's history with money funds goes way back. Our first money fund -- Prime Reserve Fund -- was launched in January of 1976.... Our first tax exempt money fund was launched in 1981 and our California and New York tax exempt money funds followed in 1986. We launched our Summit series of funds in 1993, starting with Summit Cash Reserves Fund and Summit Municipal Money Fund. Three years after that we launched our Maryland tax exempt money fund. So ... it's been a steady progression building out our product line-up."

He adds, "As our mutual fund business grew, we launched two internal money funds -- the Reserve Investment Fund and our Government Reserve Fund. These funds serve as cash sweeps for our other mutual funds, primarily our stock and bond funds. They are internal money funds, but they have the lion's share of the money fund assets. In all, we manage about $45 billion in money fund assets."

The article on the "Strike Times" explains, " While it's not a mandated requirement of the SEC money market fund reform, money fund managers are adopting multiple intra-day "strike," or pricing, times for some of their floating NAV funds to try and preserve the same-day liquidity that Prime funds have always had. As Wells Fargo Securities' strategists Garret Sloan and Eric Vos explain in a recent report, "To facilitate same day (cash) settlement and intraday investor liquidity, funds will be required to set a specific market value at least once a day during market hours and likely multiple times a day. Actual 'strike times' are slowly being communicated by the fund companies as lineups are announced, but we do not believe that the announced times are set in stone as funds seek the sweet spot for pricing and investor risk appetite. In the past month we have seen several managers announce their intra-day pricing times including: Dreyfus, BlackRock, Federated and First American."

In a sidebar, we discuss, "Fitch on Liquidity Profiles." This brief says, "Fitch Ratings issued a press release, "`U.S. Money Funds' Liquidity Profiles Vary Ahead of Reform," which states, "Liquidity levels of U.S. institutional prime money funds vary ahead of upcoming reforms, suggesting some funds will need to increase their liquidity cushions."

We also do a sidebar on "OCC Guidance on MMFs," which says, "The Office of the Comptroller of the Currency issued "Compliance With SEC Money Market Fund Rules by Bank Fiduciaries, Deposit Sweep Arrangements, and Bank Investments," which "describes how the SEC's MMF rules are likely to affect banks, addresses the product and process changes that affected banks should consider, and highlights potential compliance, liquidity, operational, and strategic risks." Finally, as we do every month, we review all the important "Money Fund News."

Our June MFI XLS, with May 31, 2016, data, shows total assets decreased $9.7 billion in May to $2.626 trillion after decreasing $42.0 billion in April, dropping $20.3 billion in March, and increasing $37.4 billion in February. Our broad Crane Money Fund Average 7-Day Yield remained unchanged at 0.11% for the month, while our Crane 100 Money Fund Index (the 100 largest taxable funds) increased 1 basis point to 0.22% (7-day).

On a Gross Yield Basis (before expenses were taken out), the Crane MFA was unchanged at 0.43% and the Crane 100 was up 1 bp to 0.47%. Charged Expenses averaged 0.31% and 0.25% for the Crane MFA and Crane 100, respectively. The average WAM (weighted average maturity) for the Crane MFA was 33 days (down 2 days from last month) and for the Crane 100 was 32 days (down 3 days). (See our Crane Index or craneindexes.xlsx history file for more on our averages.)

May 06

The May issue of our flagship Money Fund Intelligence newsletter, which was sent to subscribers Friday morning, features the articles: "Crane Data Celebrates 10th Birthday; Happy to Be Here," which looks at where Crane Data has been, where we are, and where we are going; "Goldman's Fishman Talks MMF Reforms, Growth," which profiles Dave Fishman, Head of Liquidity Solutions at Goldman Sachs Asset Management; and "ICI Fact Book Shows Money Funds Hung Tough in 2015," which reviews trends from the just-released "2016 Investment Company Fact Book." We have updated our Money Fund Wisdom database query system with April 30, 2016, performance statistics, and also sent out our MFI XLS spreadsheet Friday morning. (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 ship Tuesday, May 10, and our May Bond Fund Intelligence is scheduled to go out Friday, May 13. Below, we also review a release entitled, "First American Funds Announce Strike Times For Prime Fund, Share Class Name Changes."

MFI's lead "10th Birthday" article says, "Crane Data hits a milestone this month, celebrating our 10th birthday. Given the wild and crazy events of the past decade in the money markets, we consider ourselves lucky to have made it this far. 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 expanding the types of data we track and extending our coverage beyond money market funds. Our company, run by money fund expert Peter Crane and technology guru Shaun Cutts, was launched in May 2006 to bring faster, cheaper and cleaner information to the money fund space. We began by publishing our flagship Money Fund Intelligence newsletter, and we've grown to offer a full range of daily and monthly spreadsheets, news, database query systems and reports on U.S. and "offshore" money funds."

It continues, "Just as money market fund complexes have been busy the past year preparing for the 2016 MMF reform deadlines, so have we at Crane Data. In reaction to the new rules on website disclosure that went into effect April 14, we’ve begun publishing Daily Liquid Assets, Weekly Liquid Assets, and Daily MNAVs -- all of which money fund firms are now required to post on their websites to comply with the new regulations. Given the stresses of the zero yield environment and massive regulatory changes, we have evolved and expanded our coverage beyond money funds. In early 2015, we officially launched our Bond Fund Intelligence monthly newsletter, which tracks the bond fund universe with a focus on the ultra-short and short-term bond fund sector."

Our profile of GSAM's Dave Fishman reads, "This month, MFI profiles Dave Fishman, Head of Liquidity Solutions at Goldman Sachs Asset Management. Fishman discusses GSAM's reform plans, its fund lineup, and the industry shift from Prime to Government. Says Fishman on their recent growth, "For the past several years, we've been investing in our business, and we've been staying in front of clients, working to educate them on the coming regulatory reforms and their investment options. I think clients have responded, and our growth is simply the result of staying in front of people and investing in a business we believe in."

Responding to the question, What is your biggest priority? Fishman answers, "Our biggest priority is meeting or exceeding our clients' needs. Obviously, money fund reform has made that a bigger job compared to the past. Reform is creating significant change in a product that was basically unchanged for 40 years and has offered many features and functions that people came to rely on. So our priority is to make sure we offer the right mix of products to meet clients' needs. With this in mind, we have made some significant changes to our product line-up over the last two years, which we think set us up well for October of this year when we'll implement the final changes."

The article on the "Fact Book" explains, "ICI's just-released "2016 Investment Company Fact Book" reports that while equity and bond funds experienced outflows in 2015, money market funds had modest inflows last year. The annual guide looks at institutional and retail money fund demand and the effects of the SEC's money market fund reforms. Overall, money funds assets were $2.755 trillion at year-end, comprising 18% of the $15.7 trillion in mutual fund assets."

On "Demand for Money Market Funds," ICI says, "In 2015, money market funds received a modest $21 billion in net inflows. Money market funds experienced outflows in the first four months of 2015, with investors redeeming $162 billion, on net. Tax payments by corporations in mid-March and individuals in mid-April were likely key drivers behind these redemptions. Outflows abated and money market funds received net inflows of $183 billion over the last 8 months of the year."

In a sidebar, we discuss, "More Changes Afoot." This brief says, "The latest month-end saw 23 funds, totaling $28.4 billion, converted from Prime to Government. With these changes, $242.1 billion has now already shifted from Prime to Govt, 83.6% of the $289.7 billion slated to convert by October 14. Deutsche was by far the largest chunk of it, converting 8 funds totaling $18.8 billion on May 2."

Also, we do a sidebar on "Fee Waivers Keep Dropping," which says, "Federated, Schwab, BNY Mellon, T. Rowe Price, and Northern Trust all released their Q1 earnings this month and a common thread throughout was reduced MMF fee waivers.... BNY Mellon said in its earnings release that "roughly half of money market fee waivers have been recovered following the Fed's December rate increase." Finally, as we do every month, we review all the important "Money Fund News."

Our May MFI XLS, with April 30, 2016, data, shows total assets decreased $42.0 billion in April to $2.636 trillion, after decreasing $20.3 billion in March, increasing $37.4 billion in February, and decreasing $22.4 billion in January. Our broad Crane Money Fund Average 7-Day Yield dropped by 1 bps to 0.11% for the month, while our Crane 100 Money Fund Index (the 100 largest taxable funds) decreased 1 basis point to 0.21% (7-day). It is the first time since the beginning of the year that these indexes have declined.

On a Gross Yield Basis (before expenses were taken out), the Crane MFA was up 3 bps to 0.43% and the Crane 100 was down 1 bps to 0.46%. Charged Expenses averaged 0.31% (up 2 bps) and 0.29% (up 4 bps) for the Crane MFA and Crane 100, respectively. The average WAM (weighted average maturity) for the Crane MFA was 35 days (down 1 day from last month) and for the Crane 100 was 35 days (down 2 days). (See our Crane Index or craneindexes.xlsx history file for more on our averages.)

In other news, First American Funds' release says, "The First American family of mutual funds today announced that it intends to offer intraday liquidity for shareholders in its planned institutional prime obligations fund. As previously announced, the current First American Prime Obligations Fund will be renamed First American Institutional Prime Obligations Fund (Institutional Prime). First American plans to offer three intraday pricings for Institutional Prime at 9:00 a.m., 12:00 p.m. and 3:00 p.m. (Eastern Time) beginning October 14, 2016. Institutional Prime will be subject to a floating net asset value and the possibility of liquidity fees and redemption gates beginning October 14, 2016."

It adds, "Also as previously announced, on July 18, 2016 First American plans to launch a new fund for retail investors only, First American Retail Prime Obligations Fund (Retail Prime). Retail Prime will seek to maintain a stable $1.00 per share NAV and will price once daily at 4:30 p.m. (Eastern Time). Beginning October 14, 2016, Retail Prime will be subject to the possibility of liquidity fees and redemption gates. First American also announced today that it intends to change several share class names across its family of funds ... effective October 14, 2016."

The share class name changes are as follows: First American Govt Obligs Institutional Investor Share will be V shares; FA Inst Prime Obligs I Shares will be T shares and Institutional Investor shares will be V shares; FA Treasury Obligs Reserve Shares will be G shares and Institutional Investor shares will be V shares; FA Tax Free Obligs Institutional Investor shares will be V shares; and FA US Treasury MMF Institutional Investor Shares will be V shares.