The February issue of our flagship Money Fund Intelligence newsletter, which was sent to subscribers Friday morning, features the articles: "After the Buzzer: State Street Converting Prime ILR to Govt," which discusses State Street's recent fund filing; "Highlights of Q4 Earnings: Federated, Schwab, Northern," which looks at the latest conference calls from asset managers; and, "Boston Fed Paper Examines Prime Retail MMF Investors" which reviews a study on flows during recent turmoil. We also sent out our MFI XLS spreadsheet Friday a.m., and we've updated our Money Fund Wisdom database with 1/31/24 data. Our February Money Fund Portfolio Holdings are scheduled to ship on Tuesday, February 11, and our Feb. Bond Fund Intelligence is scheduled to go out on Friday, February 14.
MFI's "After the Buzzer" article says, "One year ago, American Funds filed to convert its Central Cash Fund from Prime Institutional to Government, starting a slow parade of moves away from Prime Institutional funds ahead of the SEC's latest Money Fund Reforms. (See 'American Funds Central Cash to Convert to Govt to Avoid Liquidity Fees' (2/6/24).) Prime Inst funds decreased from $614.9 billion to $317.5 billion in 2024, while Prime Retail MMFs increased from $691.9 billion to $866.0 billion. Though the October deadline for the new reforms has passed, it appears the conversions aren't quite over yet. SSGA just filed to convert its Prime Inst funds into Govt MMFs."
It continues, "A Prospectus Supplement filing for the $9.7 billion State Street Institutional Liquid Reserves Fund, which includes Bancroft Capital (VTDXX), Administration (SSYXX), Institutional (SSHXX), Investment (SSVXX), Investor (SSZXX), Opportunity (OPIXX) and Premier (SSIXX) share classes, tells us, 'The Board of Trustees has approved the conversion of the Fund to qualify as a 'government money market fund' as defined in Rule 2a-7 under the Investment Company Act of 1940, as amended. As a result, the Fund will be renamed the State Street Institutional Liquid Reserves Government Money Market Fund and will seek to achieve its investment objective by investing substantially all of its investable assets in the Street U.S. Government Money Market Portfolio.'"
We write in our Q4 Earnings article, "Federated Hermes reported Q4'24 earnings and hosted its Q4'24 earnings call late last week. On the call, President & CEO J. Christopher Donahue, comments, 'We ended 2024 with record assets under management of $830 billion, driven by record money market assets of $630 billion.... We reached another record high for money market fund assets at the end of '24, namely $462 billion, and total money market assets of the aforementioned $630 billion. Total money market assets increased by about $37 billion in Q4, as money market funds added $21 billion and money market separate accounts added $16 billion. Market sentiment around short-term interest rates indicates a higher for longer view, which is conducive for growth in money market strategies.'"
It continues, "He tells us, 'Higher rates support a positive view of cash as an asset class. Money market strategies in this environment have attractive yields compared to alternatives like bank deposits and direct investments in T-bills and commercial paper. Our estimate of money market mutual fund market share, which includes our sub-advised funds, was about 7.22% at the end of '24, down slightly from about 7.32% at the end of Q3. Now looking at recent asset totals as of a few days ago, managed assets were approximately $839 billion, including $634 billion in money markets, $83 billion in equities, $100 billion in fixed income, $19 billion in alternative private markets and $3 billion in multi-asset. Money market mutual fund assets were at $455 billion.'"
Our "Boston Fed Paper" piece says, "The Federal Reserve Bank of Boston asks, 'Are retail prime money market fund investors increasingly more sensitive to stress events?' The paper explains, 'U.S. prime money market mutual funds (MMFs) experienced large redemptions and bank-like runs in 2008 and 2020. During these episodes, institutional investors in prime MMFs tended to redeem quicker and at much larger magnitudes than retail investors. In this note, we examine how retail investors' redemption sensitivity has evolved between 2008 and 2020, to assess whether they have become relatively more attuned to stress in the MMF sector.'"
The piece continues, "They tell us, 'To do this, we estimate the response of prime funds' net flows to periods of stress in the MMF industry. We find that, on average, institutional prime MMFs experienced similar aggregate net outflows in both stress periods. In contrast, the average aggregate net outflows from retail prime MMFs increased from 2008 to 2020. Our findings suggest that redemption dynamics of investors in retail prime MMFs, which are often thought of as slower to react to stress events than institutional investors, may be evolving.'"
MFI also includes the News brief, "BlackRock Money Mkt ETFs Go Live. A press release says, 'BlackRock [launched the] iShares Money Market ETFs -- iShares Prime Money Market ETF (PMMF) and iShares Government Money Market ETF (GMMF) -- [which] combine the quality and liquidity of regulated money market funds with the transparency and efficiency of the ETF structure..'"
Another News brief, "WSJ: SEC, Brokerage Sweeps Settle," says, "The Wall Street Journal writes, 'Banks Scrimped on Customer Interest. Now They’re Paying for It.' The article explains, 'Wall Street is starting to pay the price for the stingy interest rates it gave some customers for their cash. Wells Fargo <b:>`_ and Bank of America's Merrill Lynch unit agreed to pay a combined $60 million to settle SEC probes into the [cash] accounts for some of their wealth-management clients.'"
A third News brief, "MarketWatch Quotes Crane on MMFs. MarketWatch's brief states, "Why Americans still can't get cheaper.' They tell us, 'Rates for money-market mutual funds are also moving lower, but they’re still giving many banks a run for their money.... The average seven-day yield on the biggest funds is now around 4.19%, down from 5.10% at the start of the Fed cuts, said Peter Crane, president of Crane Data. 'Rates really shouldn’t move much unless and until the Fed moves,' Crane said.' The piece quotes, 'Even if the rates are a full percentage point lower than they were a year ago, the current spot is still high for recent years, he noted. Money-market rates were last around the 4% range nearly two decades ago, Crane said.' It adds, 'It's still not in a bad spot.... I think savers are still happy in general.'"
A sidebar, "FT: Bond Wobble, Cash Allure," says, "The Financial Times wrote, 'Bond wobble underscores allure of cash.' The opinion piece says, 'In one corner of markets at least, it looks like the amateurs are out- smarting the professionals again. A good majority of the big asset managers and banks had a clear view for this year that bonds are back. If that rings a bell then yes, we have heard this before. No, it didn't really work out, due to the persistence of bonds' mortal enemy: inflation. But for 2025, the message was clear: central banks are cutting rates and you won't see yields like this again. Get out of cash, buy the bonds and lock those rates in.... [I]t was bad enough that the huge ascent in bond prices that many big asset managers and investment banks had predicted for 2024 failed to materialise, and so far, as one professional bond investor put it to me, 2025 has been 'annoying'.'"
Our February MFI XLS, with Jan. 31 data, shows total assets increased $47.9 billion to a record $7.231 trillion, after increasing $113.0 billion in December, $196.1 billion in November, $89.9 billion in October, $155.2 billion in September, $105.6 billion in August, $19.7 billion in July, $11.8 billion in June and $79.7 billion in May. They decreased $17.6 billion in April and $66.7 billion in March. But MMFs increased $50.0 billion last February.
Our broad Crane Money Fund Average 7-Day Yield was down 9 bps at 4.09%, and our Crane 100 Money Fund Index (the 100 largest taxable funds) was also down 9 bps at 4.19% in January. On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA and the Crane 100 averaged 4.47% and 4.46%. Charged Expenses averaged 0.38% and 0.27% for the Crane MFA and the Crane 100. (We'll revise expenses once we upload the SEC's Form N-MFP data for 1/31/25 on Monday, 2/10.) The average WAM (weighted average maturity) for the Crane MFA was 37 days (unchanged) and the Crane 100 WAM was up 1 day from the previous month at 38 days. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
