Earlier this month, the Investment Company Institute released its latest data on "Worldwide Mutual Fund Assets and Flows (Second Quarter 2013," which shows that money market mutual funds have shrunk to their lowest percentage of worldwide mutual fund assets (16.1%) on record. (ICI began publishing their Worldwide statistics in 2004.) The latest data show worldwide money market mutual fund assets falling by $164.9 billion, led by large declines in Australian, French and Chinese MMFs, in Q2'13 and by $89.3 billion over the past year (through 6/30/13) to $4.494 trillion. Crane Data excerpts from ICI's release and analyzes the money fund portion of the ICI's latest global statistics, and we also quote from BlackRock's latest earnings call, below.

ICI's latest Worldwide release says, "Mutual fund assets worldwide decreased 1.5 percent to $27.44 trillion at the end of the second quarter of 2013. Worldwide net cash flow to all funds was $83 billion in the second quarter, compared to $331 billion of net inflows in the first quarter of 2013. Flows into long-term funds decreased to $193 billion in the second quarter, from an inflow of $450 billion in the previous quarter. Equity funds worldwide had net inflows of $37 billion in the second quarter, down from $143 billion of net inflows in the first quarter. Flows into bond funds totaled $41 billion in the second quarter, down from net inflows of $190 billion in the previous quarter. Outflows from money market funds were $110 billion in the second quarter of 2013, similar to the $119 billion outflow recorded in the first quarter of 2013."

The release explains, "The Investment Company Institute compiles worldwide statistics on behalf of the International Investment Funds Association, an organization of national mutual fund associations. The collection for the second quarter of 2013 contains statistics from 45 countries."

ICI continues, "Money market funds worldwide experienced a net outflow of $110 billion in the second quarter of 2013 after recording a net outflow of $119 billion in the first quarter of 2013. The global outflow from money market funds in the second quarter was driven predominately by outflows of $69 billion in Europe and $33 billion in the Asia and Pacific region. Money market funds in the Americas registered outflows of $9 billion in the second quarter."

According to Crane Data's analysis of ICI's data, the U.S. maintained its position as the largest money fund market in Q2'13 with $2.585 trillion (57.5% of all worldwide MMF assets), though assets declined by $10.4 billion in Q2'13 (they were up by $72B in the past year). France remained a distant No. 2 (and continues to shrink dramatically) to the U.S. with $432 billion (9.6%, down $43 billion in Q2, down $51B over 1 year and down a shocking $261 billion since the end of 2009). This was followed by Ireland ($348 billion, or 7.7% of total assets, down $15B in Q2 and down $25B over 12 months). Luxembourg returned to 4th place in the latest quarter with a drop of just $2 billion in the quarter and $36B in the past year to $324B (7.2%), surpassing new No. 5 Australia, ($296B, 6.6% of the total, down $58B in Q2 and down $29B for 1 year).

Korea ($61B, down $7B and up $3B on the quarter and year, respectively), Mexico ($57B, down $1B and up $1B), and Brazil ($51B, down $5B and up $7B), all moved up ahead of China, which saw assets plummet($50B, down $34B in Q2 and down $7 billion in 12 months). Taiwan rounded out the 10 largest countries with money funds (moving ahead of India and Canada). Ireland and Luxembourg's totals are primarily "offshore" money funds marketed to global multinationals, while most of the other countries in the survey have primarily domestic money fund offerings. (Crane Data believes that some of these countries, like France and Italy, do not have true "money market funds" due to their lack of strict guidelines and "accumulating" NAVs instead of stable NAVs. Contact us if you'd like a copy of our "Largest Money Market Funds Markets Worldwide" spreadsheet based on ICI's data.)

In other news, BlackRock hosted its latest quarterly earnings call yesterday, though there were very few mentions of money market funds. (See Seeking Alpha's transcript here.) When Chairman & CEO Larry Fink was asked about the debt ceiling, he said, "Well, let me just state overall [that] we have dozens of teams working on contingent plans throughout the organization. Our job is to be a fiduciary and our job is to focus on even the unanticipated risk associated with any default. So beyond our money market funds, I think it would be incorrect to think that that's all we're focusing on related to default, there are many municipal bond market to collateral management of swaps to working with the custodians. You'll have to understand, the rating agencies, even if only one treasury bond, this is a coupon payment, definitionally, the entire sector then is considered a defaulted security. And so we have to be prepared for all the contingencies, whether they're T-bills or any other bond, U.S. bond, instrument. And so, I think, we're doing a very good job without getting in, in any of the details to making sure that we're anticipating those unanticipated problems associated with this type of event."

He added, "As we all know, when you think back about the Lehman Brothers result, everybody thought that Lehman Brothers was it. But then when the Reserve Fund had that Lehman Brothers exposure; that's when I believe that we really fell off a cliff 5 years ago. And so our job is having these task teams working towards all the unanticipated possibilities that would occur in terms of collateral management, in terms of clearing, in terms of what is considered good collateral and bad collateral. So in addition to our money market funds, where we're obviously very focused on, we're focused at across all different of our platforms."

Fink was then asked about being designated a SIFI and the recent OFR report. (See our Oct. 1 "News," "Moody's on Fed's Reverse Repo Facility; OFR on Asset Management.") He replied, "I think you're aware we have capital set aside for operational risk, that was a condition we had with our U.K. and U.S. regulators. So unlike many other asset managers, we are already in that position. We are already regulated because of PNC's 20% ownership with us by the Federal Reserve. We are regulated by the Comptroller of the Currency because of our bank trust division that we bought when we acquired -- when we bought BGI. So we have -- we're a firm that is very heavily regulated across region and across all the different regulators. So your question is a good question, but I can't answer it. But I can say we have -- we are -- we have regulatory oversight by many of those regulators that other firms, if they were a SIFI, do not at this present time."

Fink added, "And it's a good question, what does that mean? Because the OFR did state, we are not a bank, we're a fiduciary, we're an agent. And OFR stated that these are not our assets, we're not levered, so I honestly don't know what it would mean if they designated a bunch of firms as SIFIs. And that's why my comment was very specific related to one of the ways that we've read into the OFR is that maybe they are going to regulate specific products like money market funds. But they may begin some type of supervision over, let's say, all types of products that have some 'x' amount of leverage. So that would incorporate leverage type of hedge funds and other types of products like that. So we're not -- this is too early in the dialogue, too early, I believe, in the regulatory reviews of what they're going to do. But I think the OFR report was a very fair, in my mind, a very just report about what asset managers are and unjustly cited some risks associated with some of the types of businesses that asset managers are in. And so we are working alongside with regulators in responding to their questions as best we can."

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