The December issue of Crane Data's Money Fund Intelligence was sent out to subscribers Tuesday morning, along with our November 30 performance statistics. The latest edition will contain articles entitled, "Record Low Yields and 2nd Worst Outflows in '10," which discusses the year in review; "Davis Advisors' Creston King Talks Government Money Market Funds," which interviews a Government portfolio manager; and, "Sauter on Confusing Liquidity With Credit," which contains comments on Federal Reserve support programs and the Liquidity Exchange Bank.
MFI's lead story says, "Though the year is not yet finished, 2010 will no doubt set the record for the lowest yields in money funds' 40-year history. It also saw the second largest annual asset outflow in both percentage and dollar terms. Finally, the past year will be remembered for major regulatory changes and for its shifting competitive landscape."
Our "Fund Profile" this month interviews Creston King, portfolio manager at Davis Selected Advisers, which manages the Davis Government Money Market Fund, which is offered to buyers of the Davis series of equity funds, and the Selected Daily Government Fund, which used for the company's no-load fund series. Both money funds are 100% exclusively "government."
We asked King, "Did Davis choose to have just Government funds because of safety concerns? Or were you just lucky?" He answers, "Yes, they choose to have them because of safety. Founder Shelby Davis used to call bonds 'certificates of confiscation.' We don't want to have anything risky.... The reason behind it is that we want our customers to take risk in the equity funds. We don't want them to take risk in the bond fund or money fund."
Finally, we also spoke this month with Vanguard Managing Director & Chief Investment Officer Gus Sauter, who discusses the recent release of information from the Federal Reserve on support programs for the money market. He also comments on the Liquidity Exchange Bank and on the future of money funds in general.
Sauter tells MFI, "With the release of [info on] the Fed Liquidity Programs, a lot of commentary is confusing a liquidity issue with a credit issue. A report might start describing that these liquidity facilities were put in place to alleviate some of the problems with liquidity in the marketplace, and then switch to a reference about credit issues. In reality, the liquidity facilities did nothing to address credit issues. They were not designed to enhance credit. They were only intended to break up the logjam in the marketplace.... So, since it was a liquidity problem, I believe that the changes made to rule 2a-7 have already largely addressed those concerns -- the liquidity requirements of 10% in one day and 30% in a week. I think those are positive changes and really address the issues that confronted money funds two years ago."
Note that subscribers should see the latest issue arrive around 11am this morning.
