The February 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: "MMFs Adapting to New Regs: Move to Govt & Private Funds," about how Fidelity, Federated, and others are preparing for MMF reforms; "Basics & Regulations Focus of 5th Money Fund University," a recap of Crane's Money Fund University, with a focus on MMF reforms; and, "Fidelity Cash Reserves Going Govt; Shocking MMF World," a story about how Fidelity plans to convert its Cash Reserves prime fund to a government fund. We also updated our Money Fund Wisdom database query system with Jan. 31, 2015, performance statistics, and sent out our MFI XLS spreadsheet this morning. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our February Money Fund Portfolio Holdings are scheduled to go out on Tuesday, Feb. 10.
The latest MFI lead article, "MMFs Prepare for New Regs: Move to Govt & Private Funds," says, "When the largest manager of money fund assets, Fidelity, announced plans to convert its flagship Fidelity Cash Reserves, from a "prime" fund to a government fund, it sent shockwaves through the industry. (See our story at the bottom of page 1.) It is the first clear indication that the SEC 2014 reforms, particularly the rule that will require Prime funds to adopt emergency gates and fees, will indeed lead to significant outflows (as many strategists predicted) from the prime sector."
It continues, "Other fund companies are watching carefully and considering alternatives. Until now, money market watchers had assumed that institutional investors would be the most averse to a floating NAV, but clearly retail sweep money concerned about gates and fees is also now an issue. Going government is clearly the first way to opt out of prime funds, but other alternatives are also being discussed."
In our middle column, we look at the highlights from our Money Fund University conference. It reads, "Crane's 5th Annual Money Fund University is in the books, attracting nearly 100 attendees to Stamford, Conn., 2 weeks ago, for a two-day crash course in money market funds. Day 1 touched on the History of Money Funds, the Federal Reserve, ratings, interest rates, and the various securities that make up the money markets. Day 2 focused entirely on regulations as the industry's leading attorneys dove into the 2014 MMF reforms, highlighting major changes." (Note: MFI Subscribers may access the conference materials at the bottom of our "Content" page, or here.)
The article on Fidelity's Cash Reserves Going Govt says, "Fidelity announced a series of changes to its money market fund lineup last week, representing the first major strategic reorganization following the SEC's July 2014 market fund reforms. The most noteworthy feature of the partial reorganization is a move to convert several prime funds into government funds, including Fidelity's largest fund (and the largest fund in the world), the $112 billion Fidelity Cash Reserves." (See Fidelity's announcement here.)
It continues, "In a statement, Fidelity said, "Many investors have told us that they want access to money market mutual funds with a stable NAV that will not be subject to liquidity fees or redemption gates, which would restrict their use of these funds. In response to those preferences, we are announcing the first set of proposed changes to certain of our money market mutual funds, which are designed to align our product offerings to best meet investors' future needs."
Crane Data's February MFI XLS with Jan. 31, 2015, data shows total assets decreasing in January, the first drop in 6 months, down $46.6 billion to $2.603 trillion, after rising $86.2 billion in December, $21.0 billion in November, $10.2 billion in October, $27.5 billion in September, and $34 billion in August. Our broad Crane Money Fund Average 7-Day Yield and 30-Day Yield remained at 0.02%, while our Crane 100 Money Fund Index (the 100 largest taxable funds) stayed at 0.03% (7-day and 30-day). On a Gross Yield Basis (before expenses were taken out), funds averaged 0.14% (Crane MFA, up from 0.13%) and 0.17% (Crane 100, unchanged) 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 same level as last month. The average WAMs for the Crane MFA and the Crane 100 were 41 and 45 days, respectively. The Crane MFA WAM is up 1 day 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.)
In other news, the New York Fed released a "Statement Regarding Term Reverse Repurchase Agreements." It says, "As noted in the January 28, 2015, Statement Regarding Term Reverse Repurchase Agreements, the Federal Open Market Committee instructed the Open Market Trading Desk at the Federal Reserve Bank of New York to conduct a series of term RRP operations from mid-February through early March. These tests are intended to help the Desk examine how term RRP operations might work as an additional supplementary tool to help control the federal funds rate. The tests will consist of four one-week term RRP operations to take place on successive Thursdays, beginning with a $10 billion operation on February 12. The amount offered and maximum offering rate associated with each subsequent operation will be announced on or around the Monday prior to the operation. Each of these operations will be conducted from 9:30 a.m. to 10:00 a.m. (ET), and each bidder will be limited to two bids per operation. Each bid will be subject to a maximum size equal to the total amount offered in a given operation."
