Money market fund assets jumping by $1.0 trillion-plus to a record $6.2 trillion was no doubt the biggest story of the year in 2023. With still almost a month to go, money fund asset growth will likely even surpass 2020's Covid-driven record jump of $1.1 trillion. Last year, rising yields were the big news, and yields continuing to rise and breaking 5% were also among the top stories of this year. Other major headlines of the past year included: the long-awaited passage of the SEC's Money Fund Reform Proposal, the continued growth of Social MMFs and the increase in assets and yields in European and worldwide markets. Below, we excerpt from a number of our biggest and most representative news stories of 2023 to highlight the major trends of the past year. (Note: As a reminder, register ASAP for our Money Fund University, Dec. 18-19 in Jersey City, New Jersey, at the Westin Jersey City Newport. Clients and friends are also welcome to stop by Crane Data's Holiday Cocktail Party at MFU on 12/18 from 5-7:30pm!)
Crane Data's Top 10 Stories of 2023 include (in chronological order): "Schwab's Crawford Comments on Cash Sorting, Purchase Money Funds" (2/2/23); "FT on Cash Pouring Into MMFs; MFs Record $5.4T; $9.2 Trillion Uninsured" (3/20/23); "Fed Hikes Rates 10th Time to 5.0-5.25%; Vanguard Newsletter on Cash" (5/4/23); "SEC's Money Market Fund Reforms: Swing Pricing Out, More Liquidity In" (7/14/23); "Money Fund Assets Resume Record Run, Up 20% in 12 Months; Repo Dip" (7/28/23); "Crane 100 Money Fund Index Breaks 5.0%; WSJ Editorial on MF Reforms" (8/1/23); "European Money Fund Assets Hit Record E1.5 Trillion; Yields Hit 5.15%" (8/22/23); "Fund Companies Prep for Liquidity Fees Via Filings, Discretionary Fees" (10/26/23); "HSBC Launches "P" Purpose Share Class; Cavu Paper on DEI Money Funds" (11/2/23); and, "Money Fund Assets Hit Record $6.2 Trillion; Weekly Holdings; Moomoo" (11/29/23).
Our Feb. 2 story, "Schwab's Crawford Comments on Cash Sorting, Purchase Money Funds," discusses the shift from brokerage FDIC-insured sweeps into money funds, and tells readers, "Late last week, Charles Schwab hosted its 'Winter Business Update Agenda,' a week after releasing its Q4'22 earnings the previous week. (See the release, 'Schwab Reports Record Full-year Earnings Per Share.') CFO Peter Crawford <p:>_ comments in the earnings release, '`Net interest revenue reached $10.7 billion, an increase of 33% versus the prior year, as higher interest rates more than offset the impact of balance sheet contraction due to client cash sorting. Lower market valuations throughout the year pushed asset management and administration fees down slightly to $4.2 billion, or 1% year-over-year.'"
Our March 20 story describes cash pouring into money funds after the failure of SVB Bank. The piece, "FT on Cash Pouring Into MMFs; MFs Record $5.4T; $9.2 Trillion Uninsured." It says, "We continue to see a flurry of articles on money market funds and the flight from uninsured bank deposits. The Financial Times published, 'Cash pours into US money market funds as investors flee bank turmoil.' The FT article states, "Investors have funneled cash to US money market funds over the past week amid concerns over the safety of some bank deposits after the collapse of two large lenders. The funds had more than $120bn of net inflows in the week to Wednesday, according to data from the Investment Company Institute, the largest net weekly inflow since June 2020. The bulk of them poured into money market funds backed by government securities, according to the ICI. The cash moved into money market funds -- a type of mutual fund that invests in cash and safe securities -- during a week unsettled by the collapse of Silicon Valley Bank and Signature Bank. On Sunday federal regulators stepped in to protect all depositors from losses at the two lenders.'" See also our March 17 story, "Money Fund Assets Hit Record $5.0 Trillion, Says ICI; Bloomberg on MFs."
In May, we published, "Fed Hikes Rates 10th Time to 5.0-5.25%; Vanguard Newsletter on Cash," which reviews the next to last Fed hike of 2023. It starts, "The Federal Reserve's Open Market Committee raised short-term interest rates for the 10th straight time Wednesday, bringing its Federal funds rate target up a quarter-point to a range of 5.0-5.25%. The release, entitled, 'Federal Reserve issues FOMC statement,' tells us, 'Economic activity expanded at a modest pace in the first quarter. Job gains have been robust in recent months, and the unemployment rate has remained low.... The Committee remains highly attentive to inflation risks.'"
Our July 14 news discussed the latest round of MMF reforms in, "SEC's Money Market Fund Reforms: Swing Pricing Out, More Liquidity In." This piece says, "We continue wading through the SEC's 424-page 'Money Market Fund Reforms' final rules, which were published Wednesday, and we continue to like what we see. (See the MMF Reforms press release here and the Fact Sheet here.) The rule's summary explains, 'The Securities and Exchange Commission is adopting amendments to certain rules that govern money market funds under the Investment Company Act of 1940. These amendments are designed to improve the resilience and transparency of money market funds. The amendments will revise the primary rule that governs money market funds to remove the ability for a fund board to temporarily suspend redemptions if the fund's liquidity falls below a threshold. In addition, the amendments will remove the tie between liquidity thresholds and the potential imposition of liquidity fees. The amendments will also require certain money market funds to implement a liquidity fee framework that will better allocate the costs of providing liquidity to redeeming investors. In addition, the Commission is increasing the daily liquid asset and weekly liquid asset minimum requirements to 25% and 50%, respectively.'"
A July 28 story, "Money Fund Assets Resume Record Run, Up 20% in 12 Months; Repo Dip," also discuss the asset surge. It states, "The Investment Company Institute's latest 'Money Market Fund Assets' report shows MMF assets jumping back to record levels after declining for 3 weeks in a row. ICI's asset series is now poised to break $5.5 trillion and is up $666.4 billion, or 13.8%, over the past 22 weeks. ICI shows assets up by $752 billion, or 15.9%, year-to-date in 2023, with Institutional MMFs up $396 billion, or 13.0% and Retail MMFs up $356 billion, or 21.2%. Over the past 52 weeks, money fund assets have risen $897 billion, or 19.5%, with Retail MMFs rising by $557 billion (37.7%) and Inst MMFs rising by $340 billion (10.9%)."
Our August 1 update, "Crane 100 Money Fund Index Breaks 5.0%; WSJ Editorial on MF Reforms," explains, "Money fund yields rose over the past week, breaking the 5.0% level on average for the first time since August 2007. We expect them to keep rising in coming day and weeks following last Wednesday's 25 basis point hike by the Federal Reserve. Our Crane 100 Money Fund Index (7-Day Yield) was up 8 bps to 5.04% in the week ended Friday, 7/28, after increasing by just 1 bp the past week. Yields are up from 4.94% on June 30, 4.90% on May 31, 4.64% on April 30, 4.61% on March 31, 4.39% on Feb. 28, 4.15% on Jan. 31 and 4.05% on 12/31/22. Almost three-quarters of money market fund assets now yield 5.0% or higher and one fund hit the 5.5% level on Friday."
Later in August, we wrote about a jump in MMF Assets outside the U.S in, "European Money Fund Assets Hit Record E1.5 Trillion; Yields Hit 5.15%." This piece says, "The European Central Bank published, 'Euro area investment fund statistics: second quarter of 2023,' which shows that total European money market mutual fund assets hit a record 1.5 trillion EUR in Q2'23. The statistical release says, 'For shares/units issued by money market funds the outstanding amount was 18 billion EUR higher than in the first quarter. This increase was accounted for by 11 billion EUR in net issuance of shares/units and 8 billion EUR in other changes (including price changes). The annual growth rate of shares/units issued by money market funds, calculated on the basis of transactions, was 11.9% in the second quarter of 2023.'" (See also our Sept. 25 News, "ICI: Worldwide MF Assets Jump in Q2'23 to Almost $10 Trillion; US Leads.")
Our October 26 News piece, "Fund Companies Prep for Liquidity Fees Via Filings, Discretionary Fees," starts off, "Now that the previous regime of emergency gates and liquidity fees has been removed from money market mutual funds (effective Oct. 2), advisors have begun changing disclosures and filing updates to prepare for the new round of pending regulations. As we mentioned in our Oct. 23 Link of the Day, 'Dreyfus Recaps 2a-7 Changes for AFP,' discretionary liquidity fees will become live on April 2, 2024 and mandatory liquidity fees for Prime Institutional MMFs will become active on Oct. 2, 2024. Below, we excerpt from a batch of the latest SEC filings, which shed more light on the rules and how fund managers are handling disclosures. (See the latest filings containing the term 'discretionary liquidity fee' here.)"
We covered the continued growth in Social or D&I share classes (and decline in ESG funds in our November 2 story, "HSBC Launches 'P' Purpose Share Class; Cavu Paper on DEI Money Funds." It states, "HSBC Global Asset Management launched new 'P' share classes for its HSBC US Government Money Market Fund (HGPXX) and US Treasury Money Market Fund (HTPXX), adding them to a growing list of 'D&I' or 'Social' money market fund share class options. A brochure for the funds, entitled, 'Diversity, Equity and Inclusion - The 'P' Share Class,' tells us, 'Our 'P' share class is designed to help investors align their day-to-day cash investment activities with their social ambitions. The share class is dedicated to charitable giving, with a focus on addressing issues at the intersection of gender, racial, and ethnic inequality in our societies. We allocate a proportion of the share class fee to go to select non-profit partners on your behalf.'"
Finally, we cover the year-end surge in MMF assets in "Money Fund Assets Hit Record $6.2 Trillion; Weekly Holdings." This article says, "Money fund assets jumped $22.3 billion on Monday, breaking the $6.2 trillion level for the first time ever and hitting a record $6.200 trillion, according to Crane Data's Money Fund Intelligence Daily series (as of November 27). Money fund assets have risen by $63.2 billion over the past week and by $159.0 billion in the first 27 days of November. Assets fell by $31.9 billion in October after rising by $93.9 billion in September, $98.3 billion in August and $34.7 billion in July. Year-to-date (through 11/27), money fund assets have increased by $1.009 trillion, or 19.4%." (See also our Dec. 1 piece, "ICI Shows MMFs Surge to Record $5.8 Trillion; ICI Trends: Treasuries Up.")
For more 2023 (and soon 2024) News (and prior years going back to 2006), see Crane Data's News Archives. We'll continue to provide daily updates on the money fund marketplace in the coming year, so keep reading our News and Link of the Day commentaries in 2024. Let us know if you need web access (unlimited access is for subscribers only), or if you'd like to see our latest Money Fund Intelligence, Bond Fund Intelligence or MFI Daily publications. Thanks to all of our readers and subscribers for your support in 2023, and we wish you all the best in the coming year. Merry Christmas, Happy Holidays and Happy New Year!
