An announcement posted on Morgan Stanley Investment Management's Liquidity Funds Investment website tells us that the 10th largest manager of money market funds (ranked by our MFI XLS) will begin providing daily 1-day and 7-day "liquidity" numbers, making them the second company to begin providing this information volunatarily. (Money fund portfolios are required to hold 10% daily and 30% weekly "liquidity" but the SEC doesn't require companies to provide this info publicly, and few do.) JPMorgan Asset Managemant announced that they would be begin offering these liquidity measures volunatarily last month (see Crane Data's June 18 News "JPMorgan Gets Jump on SEC Proposal by Posting Liquid Asset Levels"). The SEC proposed a number of additional disclosure measures for money funds in its June Money Market Fund Reform proposals. But we haven't seen any other funds follow suite to-date. (Note: If the SEC mandates this disclosure, it won't be required until sometome late in 2014. Crane Data does not track these yet, but we will add them to our MFI Daily product if and when they gain critical mass like the disclosure of daily MNAVs, or Market NAVs did earlier this year.)
Morgan Stanley's CIO and Head of Global Liquidity, Kevin Klingert, writes in a letter to clients, "In our continuing effort to provide transparency into our money market fund portfolios, we are now disclosing the levels of Daily and Weekly Liquid Assets in the Morgan Stanley Institutional Liquidity Funds." The data will be as of the prior business day's close and will be posted on our website (www.morganstanley.com/liquidity)." (See their most recent posting here.)
They manager defines these as, "Daily liquid assets" ... "include (i) cash; (ii) direct obligations of the U.S. Government; and (iii) securities that will mature or are subject to a demand feature that is exercisable and payable within one business day." "Weekly liquid assets" ... "include (i) cash; (ii) direct obligations of the U.S. Government; (iii) Government securities issued by a person controlled or supervised by and acting as an instrumentality of the Government of the United States pursuant to authority granted by the Congress of the United States, that are issued at a discount to the principal amount to be repaid at maturity and have a remaining maturity of 60 days or less; and (iv) securities that will mature or are subject to a demand feature that is exercisable and payable within five business days." They also note: "Tax-Exempt money market funds are not required to maintain 10% of their total assets in daily liquid assets. They are required to maintain 30% of their total assets in daily weekly liquid assets."
Klingert's letter explains, "Amendments to Rule 2a-7 adopted by the Securities and Exchange Commission (SEC) in 2010 established new requirements for minimum levels of Portfolio Liquidity. Taxable money market funds must maintain at least 10 percent of their total assets in daily liquid assets and all money market funds must maintain at least 30 percent of their total assets in weekly liquid assets. Daily liquidity is the percentage of assets that can be converted into cash by the next business day; weekly liquidity is the percentage that can be converted into cash in the next five business days."
He adds, "Higher levels of liquidity provide flexibility to manage flows and meet client redemption needs. In recent periods, our Funds have maintained daily and weekly liquidity positions substantially above the regulatory minimums. In this time of challenging markets, we hope that our steps to enhance disclosure along with our endeavors to maintain heightened levels of liquidity will assist our clients as they strive to make informed investment decisions. Our disclosure is also in keeping with the SEC's recent proposal for additional money market fund reform, which is now open for public comment. Among the proposed changes is a requirement that money market funds prominently disclose on their websites percentages invested in daily and weekly liquid assets as of the previous business day."
Finally, Klingert tells shareholders, "As we begin the second half of 2013, historically low interest rates and expectations of further money market fund reform overhang the industry. Nevertheless, we remain confident in the industry's resiliency and we are optimistic about our long-range prospects for growth. For the first half of the year, industry flows reflected the challenges of the current environment as institutional money market fund assets continued on a downward trend. Over the same period, the Morgan Stanley Institutional Liquidity Funds experienced industry-leading growth. We want to thank our shareholders for their continued use and support of our funds. Many factors have contributed to our recent growth. Most importantly, shareholders have come to recognize our commitment to the protection of the safety and liquidity of their assets."
