Dec 27

 

This month, Crane Data'​s flagship newsletter Money Fund Intelligence interviews Wells Capital Management Head of Money Markets Dave Sylvester, Wells Fargo Advantage Funds President Karla Rabusch, and Head of Money Fund Distribution Brad Marcus. In addition to being in the forefront among the regulatory debate, the Wells Fargo Funds Management Group has also set the bar high for shareholder openness and communication, publishing a monthly market update and recently revamping its website. Our Q&​A follows.

MFI: What'​s the biggest challenge in managing a money fund? Sylvester: In the late '​80'​s, we were getting into 9% treasury bills, double digit commercial paper rates, and virtually no risk. Defaults were very rare; the concept of systemic risk was fortunately far in the future. If you look at it now, it is a much different equation, because we have lots of risk and almost no return. So if we are thinking about portfolio management as analyzing the trade-​off between risk and return, the focus now has got to be almost exclusively on risk. I think the job of managing money fund portfolios has effectively changed from an investment-​related job almost exclusively to a risk management function.

Marcus: There is a lot of information in the marketplace and one challenge that we have is making sure that customers have the most current information so that they can make informed investment decisions. One of the ways that we do that is through a number of communications, including Dave Sylvester'​s monthly portfolio commentary. Another way that we provide transparency is through our daily portfolio holdings.... We introduced [​daily holdings] in November 2008 and we'​ve not wavered from providing that information to our customers. These and other useful resources are available through our redesigned web site, www.​wellsfargoadvantagefunds.​com.

Sylvester: The Wells Fargo Advantage Funds provide daily disclosure to our shareholders, which has broadened their access to information regarding their fund'​s holdings, allowing them to make more informed investing decisions for their liquidity needs. We have a very clear investment perspective that is demonstrated in our fund'​s investments and overall structure. As the fund manager, I am responsible for determining the portfolio'​s investments and positioning. The increase in transparency allows our shareholders to fully understand our positioning and allows them to select our funds as a representation of what they are seeking in the marketplace. Money funds can be criticized by different parties for extending or for not extending credit to parts of the markets, but what the transparency allows for is for shareholders to participate in that decision process through their investing.

MFI: What are you buying now? What aren'​t you buying? Sylvester: It seems like the list of what we are not buying gets longer every day, and the list of what we do buy gets shorter. We are certainly not alone in that. Like a lot of funds, we have to back away from European exposure to an increasing degree. What we have seen in the past is that headline risk can evolve pretty quickly into real risk. Even as short as money funds are structured in terms of the maturity of their investments, we really have to work to be in front of that. We can'​t simply react to credit events after they'​ve happened. We have to anticipate them. Credit risk in money funds has always been asymmetrically negative. By that I mean there is very little opportunity for price appreciation from the improvement in credit quality of a security held in money fund, but there has always been lots of room for price downside from credit deterioration. In this environment, the odds are stacked against us even more.

We have been trying to be cognizant of what headline risks can evolve into real risks, and, not surprisingly, the focus has been on the financial sector. As financials have come under increasing stress, we'​ve had to move to other areas of the market -- bricks and mortar industrial-​type companies, increasingly U.​S. Government securities -- areas that we might not have looked at necessarily in our prime funds four or five ago. We are all playing with the same deck, but we have a deck that is getting smaller and smaller. We are at a point now where the biggest card in the deck is a four, but we are all still in the game, and we all still have to play.

MFI: Has your composition changed? Sylvester: We came into all of this with a pretty conservative structure, so we haven'​t had that much structural change to the portfolio. If you look at our Heritage Money Market Fund, which is our largest prime fund, we have a weighted average maturity around 21 days, and a weighted average life of about 35 days. That is down five days or so over the last year. We'​re running over 50%, sometimes approaching 60%, in liquidity. We are also seeing industries in the portfolio that we wouldn'​t have seen a year ago -- food and beverage, drug companies, and others along those lines. We'​ve been big users of municipal variable rate demand notes in that portfolio all along, and our allocation to that sector has been growing.

MFI: You filed to liquidate some small municipal funds recently. Was this just a critical mass decision? Marcus: Yes, that is correct. Given the current and projected asset levels of the funds, it was difficult to implement the fund strategies at those levels. We believe that this decision was in the best interest of our shareholders. We remain actively engaged in the muni markets with our national and California funds, and continue to have nine investment professionals focused exclusively on this market.

MFI: How about customer concerns with Europe, etc. Are you getting calls? Marcus: Our customers' questions seem to track news articles pretty closely, so their concerns reflect what is in the news at the time. I think that customers really want to understand the issues and implications, if any, and are really looking for information. We'​re not getting a lot of questions on yield. Clients understand the yield environment and are looking for safety and liquidity, which we feel our funds clearly offer.... We do a particularly good job in providing customers with an overall view of our holdings and [​European] exposure, which is underweighted to the rest of the market.

Dec 22

 

While Crane Data is busy preparing for its second annual Money Fund University, a "​basic training" conference for money market professionals January 19-​20 at the Boston Hyatt, we'​re also busy preparing for our 4th annual Crane'​s Money Fund Symposium. Mark your calendars for our 2012 Money Fund Symposium, which will be June 20-​22, 2012, at The Westin Convention Center Pittsburgh. Our Symposium in Philadelphia last summer attracted almost 400 speakers, sponsors, and attendees, and we expect our 4th annual money fund conference to be even bigger and better. Our 2012 keynote speakers include: Chris Donahue, CEO & Chairman of Federated Investors and Karen Dunn Kelley, CEO of Invesco Worldwide Fixed Income. (See the full preliminary agenda here.) Crane'​s Money Fund Symposium offers money market portfolio managers, investors, issuers, and service providers a concentrated and affordable educational experience, as well as an excellent and informal networking venue. Registration for Crane'​s Money Fund Symposium 2012 will (​again) be $​750; exhibit space is $​3,​000; and sponsorship opportunities are $​4.​5K, $​6K, $​7.​5K, and $​10K. Our mission continues to be to deliver a better and less expensive conference alternative to money market fund professionals and investors. We look forward to seeing you in Pittsburgh!

Dec 12

 

In just over a month, we will host our second annual Crane'​s Money Fund University at The Hyatt Regency Boston, Jan. 19-​20, 2012. Money Fund University was designed to offer attendees an affordable and comprehensive two day, "​basic training" course on money market mutual funds, educating attendees on the history of money funds, interest rates, Rule 2a-​7, ratings, rankings, money market instruments such as commercial paper and repo, and portfolio construction and credit analysis. With our Boston, we will expand the focus on regulations, adding a second session on recent Money Market Fund Reforms. Please note that this Friday (​12/​16) is the last day that our discounted hotel rate is available.

Day One of the 2012 MFU agenda includes: Welcome to Money Fund University, History & Current State of Money Market Mutual Funds with Peter Crane, President & Publisher, Crane Data and Sean Collins, Sr. Economist, Investment Company Institute; Interest Rate Basics & Money Fund Math with Brian Smedley, U.​S. Rates, Bank of America Merrill Lynch; The Federal Reserve & Money Markets with Joseph Abate, Director F-​I Strategy, Barclays Capital and Michael Cloherty, Head of Rates Strategy, RBC Capital Markets; Money Fund Regulations: 2a-​7 Basics & History with John Hunt, Partner, McLaughlin & Hunt LLP and Joan Swirsky, Of Counsel, Stradley Ronan; Regulations II: Interpretations & Recent Changes with Stephen Keen, Partner, Reed Smith and Joan Swirsky; and, Operations: Fund Admin & The Board'​s Role with Brian Curran, Vice President, BNY Mellon and Susan Wyderko, Exec. Director, Mutual Fund Directors Forum.

Day Two'​s agenda includes: Instruments of the Money Markets Intro with Alex Roever, Managing Director, J.​P. Morgan Securities; Instruments: Repurchase Agreements with Ellie Boldenow, Executive Director, J.​P. Morgan Securities; Instruments: Treasuries & Govt Agencies with Sue Hill, Senior Portfolio Manager, Federated Investors and Sal Ursida, Partner, G.​X. Clarke & Co.; Instruments: Commercial Paper & ABCP with Rob Crowe and Jean-​Luc Sinniger of Citi Global Markets; Instruments: CDs, TDs & Bank Debt with Garret Sloan, F-​I Strategist, Wells Fargo Securities and Dave Lummis, President, J.​M. Lummis & Co.; Instruments of the Money Markets: Tax-​Exempt Securities, VRDNs, TOBs & Muni Bonds with James Randazzo, Senior PM, Wells Capital Management and Ben Schuler, Structured Muni Analyst, Fidelity Investments; Portfolio Management Strategies & Basics with Jeff St. Peters, Portfolio Manager, SSgA and Michael Markowitz, MD & Head STFI, Guggenheim Partners; Credit Analysis & Approved Lists with Bob Piepenburg, Director/​Credit Analyst, BofA Global Capital and Jacob Weinstein, Sr. Portfolio Analyst, Fidelity; and, Ratings, Monitoring & Risk with Joel Friedman, Senior Director, Standard & Poor'​s Viktoria Baklanova, Senior Director, Fitch Ratings and Crane Data'​s Peter Crane.

New portfolio managers, analysts, investors, issuers, service providers, and anyone interested in expanding their knowledge of "​cash" investing should benefit from our comprehensive program. Even experienced professionals should enjoy a refresher course and the opportunity to interact with peers in an informal setting. Attendee registration for Crane'​s Money Fund University is $​500. Exhibit space is $​2,​000 and sponsorship opportunities are $​3K, $​4.​5K, and $​5K. A small block of rooms have been reserved at the Hyatt Regency Boston. The conference negotiated rate of $​189 plus tax (​14.​45% currently) is available through December, 16th.

We'​d like to thank our current sponsors -- Fitch Ratings, G.​X. Clarke & Co., Fidelity Investments, Invesco, Investortools, and Standard & Poor'​s -- for their support, and we look forward to seeing you in Boston next month. E-​mail Pete for the latest brochure or visit http://​www.​moneyfunduniversity.​com to register or for more details.

Crane Data has also published the preliminary agenda and is accepting registrations for its largest Money Fund Symposium conference, which will be held June 20-​22, 2012, at the Westin in Pittsburgh, Pa.. (​See http://​www.​moneyfundsymposium.​com for details.) Finally, we also plan on joining forces with German conference producer IQPC to support the launch of European Money Fund Summit, an event focusing on money fund regulations, trends and standards in Europe tentatively scheduled for Nov. 14-​16, 2012, in Frankfurt, Germany. Watch for more details in coming months.

Nov 07

 

The November issue of Crane Data'​s Money Fund Intelligence newsletter was sent to subscribers on Saturday along with our October 31 performance data, rankings and indexes. (​Our 10/​31 Money Fund Portfolio Holdings will be published on Nov. 14.) The latest publication includes the articles, "Banks, Bonds Continue Drawing Cash From MFs," which discusses the outflows from money funds and big inflows into bank savings and bond funds; "State Street'​s Fortuna on Fund Connect Portal," our monthly fund "​profile" which again features one of the large online money market trading "​portals"; and, "Fund CEOs on Regulations Say Squam Out, Buffer In," which reviews recent comments on possible regulatory changes for money funds. (​Note that we published over the weekend because several of our staff will be at the Association for Financial Professionals Annual Conference in Boston Sunday, Nov. 6 through Wed., Nov. 9. Look for us at Booth #​1805 and see Pete Crane present on "Under The Cash Hood: Looking Beyond Yield at Money Market Mutual Fund Holdings" Monday at 4pm.)

Our lead article says, "Money market mutual fund assets were down moderately (-$​18.​7 billion) in October, though assets remain above $​2.​6 trillion -- the same level they rebounded to the week following the resolution of the debt ceiling crisis (​8/​10). But competitors on both sides -- banks and bonds -- continue to attract assets at a strong pace." Two charts in MFI show asset changes year-​to-​date (​through 9/​30/​11) in money funds, bank money market deposit accounts (​MMDAs), and bond funds; and a longer term view of asset changes in money funds vs. bank MMDAs."

The November issue also comments, "​This month we feature another online money market trading "​portal" in our "​profile" interview. Money Fund Intelligence interviews Greg Fortuna, Managing Director at State Street Global Markets, and Peter McHugh, Vice President for the company’​s Fund Connect platform in Europe. Fund Connect is announcing the rollout of its Transparency Connect analytics module at this week'​s Association for Financial Professionals' (​AFP) annual conference. Our Q&​A follows."

Finally, we write, "While there'​s no official word on the next round of money fund regulations, a couple of fund industry heavyweights weighed in recently on the topic. On recent quarterly earnings call, both BlackRock and Federated'​s management made comments regarding possible future regulatory changes. We reprint and excerpt them here."

Our monthly Money Fund Intelligence XLS, which contains a host of performance statistics on money funds, rankings and our Crane Indexes, has already been uploaded to the website and e-​mailed to clients, and our Money Fund Wisdom database has been updated with October 31, 2011 data. Watch for more excerpts from our latest MFI in coming weeks, or e-​mail info@​cranedata.​us to request the latest issue.