In years past when new money market fund regulations were pending, we wrote about the major shifts and changes fund managers made ahead of the new rules. But 2023 has seen very few exits from Prime MMFs or other shifts in preparation of the latest round of Money Fund Reforms (though the year was eventful due to record assets and 5% yields). Two years ago, we wrote "Rolling w/Reform Changes IV: Recap of '21 Exits & Entries, ESG & News" (1/4/22), and three years ago, we wrote "Rolling w/Reform Changes III: Recap of '20 Prime Exits, News & Moves" (1/7/21), which explained, "In January 2016, money market mutual funds were in the midst of a series of dramatic changes ahead of October 2016's Money Fund Reforms, the biggest changes to money fund regulations since their introduction in October 1970. Eight years ago, we ran the story, "Rolling w/Reform Changes II: Recap of '15 Announcements, '16 Plans," which reviewed a number of major changes among the largest managers that took place during 2015. As in the past year, exits from Prime MMFs and fund repositioning were notable trends." Today, we review the changes over the past year, though few and far between, as money funds prepare for yet another round of regulatory changes and possible fund lineup shifts in the New Year. (See also our "Dec. 4, 2023 News, "Top 10 Stories of 2023: Assets Surge $1 Trillion to $6.2T; Yields Over 5%. Note: Readers may also review "Crane Data's News," "Link of the Day" and "Money Fund Intelligence Archives" for more stories from the past year, 5 years and decade-plus.)
While we haven't seen as many lineup shifts and big exits from Prime as in 2015-6 or in 2020-2, we continued to see a steady stream of minor liquidations and lineup changes in 2023. In November, we wrote, "WSJ on Record Cash Sums: Bullish or Not? BlackRock Liquidating CA, NY" (11/28/23) and in October, we wrote, "UBS Latest to Abandon ESG Money Funds; JNL Liquidates Money Fund" (10/13/23). The theme was continued gradual lineup consolidation with Tax Exempt, ESG and very small funds, as opposed to Prime MMFs, being the ones most likely to get liquidated. See also our September, August and July articles, "Morgan Stanley Liquidates Tax-Exempts" (9/21/23), "JPMorgan Liquidates E*Trade Shares" (9/7/23), "Morgan Stanley Latest to Abandon ESG MMFs" (8/16/23) and "Goldman Liquidating Resource Shares" (7/19/23). Finally, we wrote the briefs "Cavanal Hill Liquidates $71M U.S. Treasury Service Class, Added to Fed RRP List" (5/22/23), "Invesco Liquidating T-F Cash Reserves" (1/26/23) and "Harbor Money Market Fund Liquidates" (1/5/23) in the first half of 2023.
While very minor, we also wrote about asset manager moves and changes in the updates, "USAA Changes Name to Victory Funds" (5/4/23) and "Money Fund Mergers Continue; WSJ Touts Cash (Again), Blasts Sweeps" (2/6/23). the latter explains, "Money market mutual fund complexes continue to gradually merge away tiny funds and fine-tune their fund lineups. A Prospectus Supplement filing for JPMorgan Prime Money Market Fund, JPMorgan Liquid Assets Money Market Fund and JPMorgan U.S. Treasury Plus Money Market Fund (Class C Shares) describes the "Conversion of Class C Shares to Reserve Shares." It says, "The Board of Trustees of the J.P. Morgan Funds approved the automatic conversion of each Fund's Class C Shares into Reserve Class Shares, effective as of the close of business on January 31, 2023. Beginning January 31, 2023, Class C Shares of the Fund will no longer be available for purchase."
In addition to the sporadic exits and shifts, we saw continued new fund launches in the D&I and Social space (and exits in the ESG fund space). We wrote: "Ramirez Asset Management Launches Government MMF; Federated on 24 (1/3/24), "Nov. MFI: D&I Shares All the Rage; Portal News; Liquidity Fee Filings (11/7/23), "HSBC Launches 'P' Purpose Share Class; Cavu Paper on DEI Money Funds (11/2/23), "Allspring Launches Roberts & Ryan Class; ICD's New Portfolio Analytics" (10/24/23), "UBS Latest to Abandon ESG Money Funds; JNL Liquidates Money Fund" (10/13/23), "Morgan Stanley Latest to Abandon ESG MMFs" (8/16/23) and "ESMA, FSB Push European Money Fund Reforms; New HSBC ESG Euro MF" (3/27/23).
Waiting for, and then digesting the new MMF regulations was also a major theme in 2023. On the European front (where we're still waiting for a proposal), we wrote: "U.K. Financial Conduct Authority's Consultation Paper on MMF Reforms" (12/20/23), "FCA Posts U.K. MMF Consultation" (12/07/23), "ESMA Paper on Reform Options Downplays Liquidity; Yields Flat at 5.16%" (9/6/23), "European Commission Posts Report on EU MMF Regulations; LVNAVs Okay" (7/21/23) and "ESMA, FSB Push European Money Fund Reforms; New HSBC ESG Euro MF" (3/27/23).
Discussing the mid-year release of U.S. MMFs Reforms, we wrote: "SEC Adopts Money Mkt Fund Reforms" (7/13/23), "SEC's Money Market Fund Reforms: Swing Pricing Out, More Liquidity In" (7/14/23), "More from the SEC's Money Market Fund Reforms: Liquidity Fee Excerpts" (7/24/23), "Money Fund Managers Publishing, Educating on Latest SEC MMF Reforms" (7/26/23) and "Amendments to Reporting Requirements in SEC Reforms; Investor Type" (8/3/23).
Our July 13 piece says, "As we said in a bulletin to Money Fund Intelligence subscribers earlier, the U.S. Securities & Exchange Commission (SEC) passed new Money Market Fund Reforms Wednesday morning, which abandoned their swing pricing proposal for Prime and Tax Exempt Institutional money market funds and replaced it with a mandatory liquidity fee regime. They also increased liquidity and disclosure requirements. The "Fact Sheet" says, "The Commission is considering adopting amendments to certain rules that govern money market funds under the Investment Company Act of 1940. The amendments are designed to improve the resilience and transparency of money market funds by: Increasing minimum liquidity requirements to provide a more substantial buffer in the event of rapid redemptions; Removing provisions from the current rule that permit a money market fund to temporarily suspend redemptions and removing the regulatory tie between the imposition of liquidity fees and a fund's liquidity level; Requiring certain money market funds to implement a liquidity fee framework that will better allocate the costs of providing liquidity to redeeming investors; and Enhancing certain reporting requirements to improve the Commissions ability to monitor and assess money market fund data."'
The SEC's release of reforms was followed by a flurry of articles from fund companies. Our News coverage included: "SSGA Gives History, Update on MMF Reforms; Explains New Liquidity Fee" (9/21/23), "Dechert on SEC's Money Fund Reforms" (8/28/23), "Stradley Ronon, K&L Gates Post Papers on SEC Reforms, Liquidity Fees" (8/21/23), "Federated's Cunningham on Reforms" (8/18/23), "JPM Writes on Reforms, Liquidity Fees" (8/14/23) and "August MFI: Managers Comment; SEC Money Fund Reforms; EU MF Regs" (8/7/23).
Earlier this week, we quoted a recent piece from Federated Hermes' Deborah Cunningham, who wrote, "The remainder of the SEC's new money market fund rules kick in this year, and the industry has been hard at work creating solutions for clients. The requirement for money funds to hold 30% and 50% in daily and weekly liquidity, respectively, begins April 2; enhanced reporting and accounting start June 11; and the mandatory liquidity fee on institutional prime and institutional municipal funds if net redemptions exceed 5% of the fund's total net assets (unless the liquidity cost is <0.01% of the value of the shares redeemed) begins Oct. 2. Expect the main players to alter some products and create new ones to continue to provide the benefits liquidity vehicles offer."
Happy New Year from Crane Data and Money Fund Intelligence! We'll be sure to keep you posted on product developments and any news impacting money market funds in 2024. So best wishes and thanks for your continued support!
