The February issue of Crane Data's Money Fund Intelligence newsletter, which was e-mailed to subscribers this morning, features the articles: "Year-End Asset Surge Stalls in January; Jury Out on TAG," which talks about recent asset flows; "Breaking Bad: Comments Opposed to FSOC, But Rift," which reviews the comment letters posted to date; and, "Introducing MNAV; Daily "Market" Pricing Spreads," which discusses the recent postings of daily "shadow" NAVs by some funds. We've also updated our Money Fund Wisdom database query system with Jan. 31, 2013, performance statistics and rankings, and our MFI XLS will be sent out shortly. Our Jan. 31 Money Fund Portfolio Holdings are scheduled to go out on Tuesday, Feb. 12. Note that we'll also be releasing the agenda for Crane's Money Fund Symposium, which will be held June 19-21, 2013, in Baltimore, Md., early next week. Registrations ($750) and hotel reservations are now being accepted via the website at www.moneyfundsymposium.com.
Our piece on TAG-related asset inflows says, "For those expecting a surge of new money fund assets in January due to the expiration of unlimited FDIC insurance in the form of the TAG (transaction account guarantee) program, January was very disappointing. Though money funds did see big asset increases in November (up $74.6 billion) and December (up $74.4 billion), January proved to be a bust (down $6.3 billion). However, Institutional (taxable) assets did continue their increase in January (up $22.8 billion), and they've increased by $100.9 billion over the past 3 months."
MFI also writes on FSOC comments, "While the now-extended deadline isn't until February 15, it appears that the majority of substantial comment letters on the Financial Stability Oversight Council's "Proposed Recommendations Regarding Money Market Mutual Fund Reform" have already been posted. (See the 86 letters at: www.regulations.gov; search for "FSOC-2012-0003".) Two things are clear. First, funds and the few investors that bothered to weigh in hate all the options, particularly the floating NAV. And, second, funds, particularly retail ones, are making contingency plans, arguing that if FSOC goes with any of their drastic measures, they should exclude Treasury, Government, Municipal, and/or Retail funds from the proposals."
Our article on MNAVs (market NAVs) explains, "Since Goldman Sachs and J.P. Morgan announced that they would publish daily "market" or "shadow" NAVs on some of its money funds almost a month ago, a majority of large institutional money fund managers have followed suit. Those now posting daily NAVs include: BlackRock (most funds), BofA (some funds), Federated (some funds), Fidelity (all funds), Goldman Sachs (all funds), Invesco (most funds), and JPMorgan (all funds). Schwab and Reich & Tang have announced that they will post, but their data has yet to appear. More fund complexes are expected to join the trend in coming weeks, though announcements have slowed to a trickle after the initial burst of activity."
MFI adds, "Crane Data's Money Fund Intelligence Daily, which tracks daily yields, assets and news, shows that all but 3 of the now 345 funds (out of 1,057 tracked by MFID) disclosing these Market NAVs (or "MNAVs") shows a value of 1.0000 or higher. On average, taxable money funds are publishing MNAVs of 1.0001 (as of Feb. 5)."
In other news, the Federal Reserve Bank of New York published a Staff Report entitled, "Money Market Funds Intermediation, Bank Instability, and Contagion" which was written by Marco Cipriani, Antoine Martin, and Bruno Parigi. The Abstract says, "In recent years, U.S. banks have increasingly relied on deposits from financial intermediaries, especially money market funds (MMFs), which collect funds from large institutional investors and lend them to banks. In this paper, we show that intermediation through MMFs allows investors to limit their exposure to a given bank (i.e., reap gains from diversification). However, since MMFs are themselves subject to runs from their own investors, a banking system intermediated through MMFs is more unstable than one in which investors interact directly with banks. A mechanism through which instability can arise in an MMF-intermediated financial system is the release of private information on bank assets, which is aggregated by MMFs and could lead them to withdraw en masse from a bank. In addition, we show that MMF intermediation can also be a channel of contagion among banking institutions."
