The October issue of Crane Data's Money Fund Intelligence was sent out to subscribers Tuesday morning. The latest edition of our flagship monthly newsletter features the articles: "Rates, Reforms Driving Money Fund Consolidation, Changes," an update of fund liquidations and consolidation; "Euro Symposium Recap: Turn Challenges into Opportunities," a look at the highlights from Crane's European Money Fund Symposium; and, "Record Low Expenses, High Waivers, Fee Recapture," which explores fee waivers, low expenses and the possibility of "recapture" as interest rates rise. We also updated our Money Fund Wisdom database query system with September 30, 2014, performance statistics, and sent out our MFI XLS spreadsheet earlier this morning. (MFI, MFI XLS and our Crane Index products are available to subscribers via our Content center.) Our September 30 Money Fund Portfolio Holdings are scheduled to go out on Thursday, Oct. 9.

The latest MFI newsletter's "Consolidation" article comments, "More fund liquidations and consolidation is expected as a result of pending money fund reforms in the U.S. and Europe, andwe are already beginning to see an uptick in activity. Zero yields and fee waivers are driving these trends too, as costs for running money funds continue to move higher. But even though we've seen a slight resurgence in liquidations and we expect to see more consolidation, the majority of fund families continue to soldier on. Below, we discuss consolidation and review recent exits and actions. Just this past month, we've seen two small fund families -- Virtus and Williams Capital -- give up the ghost and withdraw from money fund management. But this follows a relatively long period of inactivity. We saw some exits last year, including GE and Highmark, but 2014 has been relatively uneventful until now."

We also recap our recent London conference. The second annual European Money Fund Symposium had record attendance and featured expert commentary on the European money funds industry. The event -- Sept. 22-23 at the Hilton London Tower Bridge -- attracted some 120 attendees, up from about 100 last year. Despite the challenging environment, there was much optimism. It kicked off with an address by Jonathan Curry, Global CIO for Liquidity at HSBC Global Asset Management, and chairman of IMMFA, on the "State of Money Market Funds in Europe," who told the audience to turn challenges into opportunities. It could lead to new products, consolidation, and outsourcing. "At times I think we all feel a little bit gloomy, a little bit down, but I really believe that we have a real opportunity here."

Curry said, "Change creates opportunity and we're in a period of change in the industry. I think we have to embrace it and move forward and take advantage of the opportunities that are out there today." Curry opened by saying that money market funds have actually been a positive story the past 6 months with assets increasing over that time period. Crane Data's Money Fund Intelligence International shows total European money fund assets currently at $750.6 billion at quarter-end, up from $702.2 billion on March 1, 2014. Also, the CNAV industry is expected to have a larger market share than the VNAV for the first time this year. "That's a testament to the CNAV product to all the providers who offer these products to the investors in Europe and elsewhere in the world," he said.

The October MFI article on fees and waivers says, "The Independent Adviser, a newsletter covering Vanguard funds, recently discussed money fund fee waivers and the possibility of fee "recapture," so we decided to review the article and issues involving expenses below. Adviser Editor Daniel Wiener writes, "Over the most recently-reported six months Vanguard waived a bit less than $9.2 million on Prime Money Market, a fund with approximately $131 billion in assets.... Now, take a look at Charles Schwab's Cash Reserves money fund, with a bit less than $40 billion in assets. Schwab waived $87.7 million to "maintain a positive net yield" as they write in the fine print of their semi-annual report. This makes Vanguard's waiver look like chicken scratch. One thing you won't see in Vanguard's filings, but you do at Schwab (and they aren't alone) is language giving the company the ability to claw back waived fees. To give you a sense of the magnitude of this potential windfall, Schwab says that between 2014 and 2017 it has the right to recoup as much as $522.2 million in fees."

Crane Data's October MFI with September 30, 2014, data shows total assets increasing for the second straight month in September, rising $27.5 billion after jumping $34 billion in August. As of Sept. 30, total money market fund assets stood at $2.508 trillion with 1,246 funds, 1 more than last month. Our broad Crane Money Fund Average 7-Day Yield and 30-Day Yield remained at a record low 0.01% while our Crane 100 Money Fund Index (the 100 largest taxable funds) yielded 0.02% (7-day and 30-day). On a Gross Yield Basis (before expenses were taken out), funds averaged 0.13% (Crane MFA, unchanged) and 0.16% (Crane 100) on an annualized basis for both the 7-day and 30-day yield averages. (Charged Expenses averaged 0.12% and 0.14% for the two main taxable averages.) The average WAM for the Crane MFA and the Crane 100 were 41 and 45 days, respectively. The Crane MFA is down 1 day from last month while the Crane 100 is unchanged from the prior month. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)

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