The November issue of Crane Data's Money Fund Intelligence was sent out to subscribers Friday morning. The latest edition of our flagship monthly newsletter features the articles: "Assets Up 3rd Straight Month; New Products for New Rules?," a look at recent MMF fund flows and the post-reform product landscape; "Invesco's Katz on Adapting to a Changing Liquidity Market," an interview with Invesco's Head of Global Liquidity, Lu Ann Katz; and, "Ultra-Short Bond Funds Attracting Interest, Not Assets," which explores trends and looks at the largest funds in the ultra-short bond fund universe. We also updated our Money Fund Wisdom database query system with October 31, 2014, performance statistics, and sent out our MFI XLS spreadsheet early this morning. (MFI, MFI XLS and our Crane Index products are available to subscribers via our Content center.) Our October Money Fund Portfolio Holdings are scheduled to go out on Tuesday, Nov. 11.
The latest MFI newsletter's "Assets Up 3rd Straight Month; New Products for New Rules?" article comments, "Money market fund reform became "effective" on October 14, which means that funds may now begin to start complying with the new rules before the major stipulations take effect on Oct. 14, 2016. It's the beginning of what will be a period of change in the industry as money fund companies begin exploring, and introducing, new products that will not only comply with the new rules, but thrive in the new environment."
It continues, "Surprisingly, interest in money market funds has not waned since the SEC approved the new rules on July 23. In fact, MMF assets have steadily increased over the last few months. In October, assets increased for the third straight month, rising by $10.2 billion to $2.539 trillion. In September, assets climbed $29.0 billion, after jumping $40.9 billion in August. In the 3 months since the SEC approved its Money Fund Reforms on July 23, assets have increased by $80.0 billion, 3.3%."
In our monthly MFI profile, we discussed a range of topics with Invesco's Lu Ann Katz. She spoke about money fund reforms, the company's veteran 60-day maturity money fund, new fund launches, global and European issues, and the space beyond money market funds. On Invesco's experience managing money funds, she said, "We have deep roots in this industry and launched our first money market fund in 1980. That portfolio is called the Invesco STIC Prime Portfolio [previously AIM STIC Prime] and was launched as an institutionally priced product with a 60-day maximum maturity. Invesco STIC Prime is still in existence today [and maintains its 60-day maturity limit]. We have nearly 35 years managing prime, U.S. Treasury, government, and municipal funds, as well as separately managed accounts. We also manage offshore assets in multiple currencies."
On her background, Katz said, "I came to Invesco in 1992 as a senior analyst after having worked in research and commercial banking. I've been in portfolio management and research for 35 years. I have primarily worked in the U.S., but did spend four years in London overseeing our global investment grade research efforts as well as our offshore fixed income products. In late 2012, I began overseeing what was then our Cash Management business. We have since changed our name to Invesco Global Liquidity as we saw the changing environment and our investor's desire for more comprehensive liquidity management solutions. Additionally, we experienced demand for longer maturity portfolios in Europe as well as in the U.S., so we really felt the market was beginning to move in that direction. We also saw liquidity management going more global -- the disintermediation of money across boundaries. Invesco currently manages fund in nine currencies including three renminbi money funds in China and rupee money funds in India through our joint ventures."
The November MFI article on ultra-short bond funds says, "Ultra-short bond funds have gotten a lot of press over the last few years as investors search for any yield in the near zero interest rate environment, but the buzz continues to outstrip actual asset growth. In the first half of 2014, ultra short bond funds saw net inflows of a mere $2.5 billion, according to a recent article in The Wall Street Journal. That's after inflows of just $10.7 billion in 2013 and $9.5 billion in 2012 (according to Morningstar data)."
It explains, "Given the lack of standardization in the space beyond money funds' strict Rule 2a-7 definitions, the differences among various ultra-short bond funds, and even among "enhanced cash" vehicles, are immense. Though the changing landscape created by money fund reform may lead to faster growth in this space, the threat of rising rates later in 2015 could also cause an untimely end to the ultra-short sector.... While it remains to be seen whether there will be substantial demand for ultra-short products, we've nonetheless decided to expand our coverage beyond MMFs. We plan to track ultra-short bond funds and ETFs first, but hope to add separate account information in coming months. We currently estimate the ultra-short bond fund market to be around $100 billion (when you include ultra-short ETFs) and the separately managed account market to be over $300 billion."
Crane Data's November MFI with October 31, 2014, data shows total assets increasing for the third straight month in October, rising $10.2 billion after jumping $27.5 billion in September and climbing $34 billion in August. As of October 31, total money market fund assets stood at $2.538 trillion with 1,235 funds, 12 less 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 44 and 47 days, respectively. The Crane MFA WAM is up 3 days from last month while the Crane 100 WAM is up 2 days from the prior month. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
