The May issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Tuesday morning, features the articles: "Goldman Latest Prime Inst Exit; CP/CDs Should Be Okay," which covers the continued exodus from Prime Institutional MMFs; "Corporate Treasurers Leaning Away from Prime, to SMAs," which quotes from recent TEXPO 2024 & NEAFP conferences; and, "NY Fed Says Money Funds in Europe Reflect Rates Fast Too," which reviews an article from The Federal Reserve Bank of NY. We also sent out our MFI XLS spreadsheet Tuesday a.m., and we've updated our Money Fund Wisdom database with 4/30/24 data. Our May Money Fund Portfolio Holdings are scheduled to ship on Thursday, May 9, and our May Bond Fund Intelligence is scheduled to go out on Tuesday, May 14. (Note: Register soon for our Money Fund Symposium next month in Pittsburgh, June 12-14. We hope you'll join us!)
MFI's "Prime Exit" article says, "The hits keep coming to the Prime Institutional MMF sector, as Goldman Sachs becomes the latest fund firm to announce an exit. A filing for the $1.6 billion Goldman Sachs Financial Square Money Market Fund and the $2.9 billion Goldman Sachs Financial Square Prime Obligations Fund, including its Administration, Capital, Institutional, Preferred, Select, Service, and Drexel Hamilton Class shares, explains, 'At a meeting held on April 16-17, 2024, upon the recommendation of Goldman Sachs Asset Management, the Board ... approved a proposal to liquidate the Goldman Sachs Financial Square Money Market Fund and Goldman Sachs Financial Square Prime Obligations Fund.'"
It continues, "This brings the total of Prime Institutional money funds declaring either pending conversions to Government or pending liquidations to 5 funds to date, representing $229.3 billion in assets, or 34.9% of the $657.0 billion total in Prime Inst MMFs (assets as of 3/31/24)."
We write in our Treasurers Leaning Away article, "Over the past month, a number of money fund providers (as well as Crane Data) attended and spoke at a series of regional corporate treasury events, shedding light on the recent dramatic growth of money funds and the current shifts and changes in money fund lineups. We attended TEXPO 2024, the Texas treasury event in Houston (4/14-16) and New England AFP in Boston (4/25-26), and sat through almost a dozen sessions involving money funds, liquidity and short-term investing. We quote from some of the sessions and highlights below."
It tells us, "TEXPO includes a presentation titled, 'Regulatory, Rate and Regime Changes: A Perfect Storm for Liquidity Investors?' with Jeff Jones of Twisted X, Wes Rager of Invesco, and Brittany O'Shea of Texas Capital. Rager explains, 'So, for us we’re just very defensive. We're trying to stay nimble. Typically in the rate environment that we're in, where we've seen what we think is the last rate hike, you want to start extending your portfolio. But if you extend to soon, you're locking in lower rates for a longer period of time."
Our "NY Fed" piece says, "The Federal Reserve Bank of New York's Liberty Street Economics featured the article, 'Monetary Policy and Money Market Funds in Europe.' It states, 'As shown in a past [post], the yields of money market fund (MMF) shares respond to changes in monetary policy rates much more than the rates of bank deposits; in other words, the MMF beta is much higher than the deposit beta. Consistent with this, the size of the U.S. MMF industry fluctuates over the interest rate cycle, expanding during times of monetary policy tightening. In this post, we show that the relationship between the policy rates of the European Central Bank (ECB) and the size of European MMFs investing in euro-denominated securities is also positive -- as long as policy rates are positive; after the ECB introduced negative policy rates in 2015, that relationship broke down, as MMFs received large inflows during this period.'"
It continues, "The piece explains, 'Similar to their U.S. counterparts, European MMFs can be divided into government funds ... and prime funds based on their portfolio holdings <b:>`_.... European MMFs are regulated under Regulation (EU) 2017/1131 of the European Parliament and of the Council of the European Union (EU), which was adopted in 2017 in response to the 2008 run experienced by MMFs.'"
MFI also includes the News brief, "MMF Assets Fall on Tax Payments." It states, "Money fund assets fell by $17.6 billion to $6.387 trillion in April (after falling $68.5B in March). Outflows from the long Good Friday weekend last month-end and April 15 tax payments have temporarily paused MMFs record run. Over 12 months, money funds have risen by $694.5 billion, or 12.2%, with Taxable Retail MMFs jumping $490.2 billion (26.4%) and Taxable Inst MMFs rising by $186.1 billion (5.0%)."
Another News brief, "The Wall Street Journal's CFO Journal Writes, 'Companies Belly Up to Cash Buffet, in Five Charts.' The article tells us, 'Companies are socking away cash at the fastest rate since the onset of the pandemic. Four years ago, companies boosted their cash holdings to weather economic uncertainty stemming from virus-related lockdowns. Now, with interest rates hovering at two-decade highs, they are allocating more of their portfolios to high-yielding cash ... investments, getting a welcome boost from yields that top 5% on money-market funds.'"
A third News brief, "Barron's Says, 'Money-Market Funds Look Like a Tempting Place for Your Cash.' They write, 'Most of the time, money-market mutual funds are about as exciting as watching paint dry. That's what they're designed to be: boring and reliable. But these days, money funds have gotten interesting. And tempting. Maybe overly tempting.'"
A sidebar, "Payden Limited Maturity 30," says, "A release, 'Payden & Rygel Celebrates 30 Years of the Limited Maturity Fund (PYLMX) Amidst Four Decades of Investment Excellence' states, 'Payden & Rygel is proud to announce the 30-year anniversary of its Limited Maturity Fund (PYLMX).... Payden & Rygel has cemented its reputation as a leader in short-duration strategies.... The short duration strategy team has worked together for 15 years and currently oversees $70 billion in assets.'"
Our May MFI XLS, with April 30 data, shows total assets decreased $17.6 billion to $6.387 trillion, after decreasing $66.7 billion in March, increasing $50.0 billion in February, $87.0 billion in January, $24.5 billion in December and $219.8 billion in November. Assets decreased $39.3 billion in October, but increased $77.8 billion in September, $104.2 billion in August, $21.0 billion in July, $20.3 billion in June and $152.7 billion in May."
Our broad Crane Money Fund Average 7-Day Yield was unchanged at 5.03%, and our Crane 100 Money Fund Index (the 100 largest taxable funds) was down 1 bp to 5.13% in April. On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA and the Crane 100 averaged 5.40% and 5.40%, respectively. Charged Expenses averaged 0.37% and 0.26% for the Crane MFA and the Crane 100. (We'll revise expenses on Wednesday once we upload the SEC's Form N-MFP data for 4/30/24.) The average WAM (weighted average maturity) for the Crane MFA was 35 days (down 2 bps from previous month) and the Crane 100 WAM was down 3 bps at 35 days. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
