As we wrote in our latest Money Fund Intelligence, money market mutual funds have begun disclosing their portfolio holdings in a standardized format as of October 7. While money funds have always posted some form of portfolio holdings, many of these were not timely and the information and formats provided varied widely. The SEC's new "Disclosure of Portfolio Information" rule that went live last week mandates that funds post monthly holdings with CUSIPs, principal values, amortized cost values, maturities, and new SEC investment categories. Below, we discuss these new holdings disclosures, the SEC Reform rules, and Crane Data's efforts to track this new info and to construct a database of money fund holdings.
Federated Investors has released a "Guide to New Portfolio Holdings Format" on the company's "Money Market Matters" page. The "Federated Money Market Fund Portfolio Holdings" guide, subtitled, "New Format. Same Commitment to Our Investors," says, "This month you will notice a new format for Federated's money market portfolio holding reports. The recently amended Rule 2a-7, which governs money market funds, requires all money market funds to provide their holdings on a monthly basis. Additionally, the requirements dictate that the holdings report includes specific information about the fund. The example below highlights newly required information, plus some new information that has been added by Federated. We believe our new format will provide additional clarity so that you can more effectively monitor your fund."
Federated's example lists the fund (Prime Obligations Fund), current assets, weighted average maturity (must now be 60 days or fewer), weighted average life (must be 120 days or fewer), principal amount, security description, CUSIP, amortized cost value, effective maturity ("the maturity date as determined under Rule 2a-7 for purposes of calculating WAM, taking into account maturity shortening provisions, such as interest rate resets), final maturity, and Rule 2a-7 category of investment (security categorization as defined by the SEC). The guide adds, "Although not required, Federated will continue to provide additional security categorization information to the holdings."
Note that the SEC's Category of Investment (see p.21) includes: "Treasury Debt; Government Agency Debt; Variable Rate Demand Note; Other Municipal Debt; Financial Company Commercial Paper; Asset Backed Commercial Paper; Other Commercial Paper; Certificate of Deposit; Structured Investment Vehicle Note; Other Note; Treasury Repurchase Agreement; Government Agency Repurchase Agreement; Other Repurchase Agreement; Insurance Company Funding Agreement; Investment Company; [and] Other Instrument."
On page 72 of its February 23 "Money Market Fund Reform rule, the SEC says under, "Disclosure of Portfolio Information. Public Website Posting," "We are amending rule 2a-7 to require money market funds to disclose information about their portfolio holdings each month on their websites. The disclosure will provide greater transparency of portfolio information in a manner convenient for most investors. The amendment is designed to give investors a better understanding of the current risks to which the fund is exposed, strengthening their ability to exert influence on risk-taking by fund advisers."
It continues, "As amended, rule 2a-7(c)(12) will require funds to disclose monthly with respect to each security held: (i) the name of the issuer; (ii) the category of investment (e.g., Treasury debt, government agency debt, asset backed commercial paper, structured investment vehicle note); (iii) the CUSIP number (if any); (iv) the principal amount; (v) the maturity date as determined under rule 2a-7 for purposes of calculating weighted average maturity; (vi) the final maturity date, if different from the maturity date previously described; (vii) coupon or yield; and (viii) the amortized cost value. In addition, the amendments require funds to disclose their overall weighted average maturity and weighted average life maturity of their portfolios.... The amended rule requires funds to post the portfolio information, current as of the last business day of the previous month, no later than the fifth business day of the month.... Portfolio information must be maintained on the fund's website for no less than six months after posting."
On the pending Form N-MFP, a second holdings mandate which will require more detailed disclosures starting with month-end November data but with a 60-day lag (it will be first released in early February), the SEC writes, "Money market funds must report on Form N-MFP, with respect to each portfolio security held on the last business day of the prior month, the following items: (i) the name of the issuer; (ii) the title of the issue, including the coupon or yield; (iii) the CUSIP number; (iv) the category of investment...; (v) the NRSROs designated by the fund [this provision has been put on hold], the credit ratings given by each NRSRO, and whether each security is first tier, second tier, unrated, or no longer eligible; (vi) the maturity date as determined under rule 2a-7, taking into account the maturity shortening provisions of rule 2a-7(d); (vii) the final legal maturity date, taking into account any maturity date extensions that may be effected at the option of the issuer; (viii) whether the instrument has certain enhancement features; (ix) the principal amount; (x) the current amortized cost value; (xi) the percentage of the money market fund's assets invested in the security; (xii) whether the security is an illiquid security (as defined in amended rule 2a-7(a)(19)); and (xiii) 'Explanatory notes.' Form N-MFP also requires funds to report to us information about the fund, including information about the fund's risk characteristics such as the dollar weighted average maturity of the fund's portfolio and its seven-day gross yield."
These new data points and the new holdings format standardization should allow companies to begin building a true database of money fund holdings, which doesn't exist currently. (We currently offer Portfolio Composition and 'Hotlinks' to Portfolio Holdings in our monthly Money Fund Intelligence XLS. The links have been updated to reflect the new holdings format in most cases.) Crane Data has been storing the largest fund's holdings in a spreadsheet format for several months now, but we've recently begun work on a full portfolio holdings dataset. We intend to add this to our Money Fund Wisdom software early in 2011, and we plan on adding WAL, or weighted average life, to our MFI XLS beginning next month. Contact us if you'd like more details.
