Money fund assets rebounded last week to end February roughly flat. This follows a sharp decline in January, which broke a 5-month winning streak for MMFs. Assets have declined in six out of 8 weeks YTD in 2015, and they should remain weak until we move past the April 15 tax filing date. Over the past 4 weeks, money fund assets have declined by $11 billion according to ICI's weekly, though Crane Data's MFI Daily shows MMF assets up $5 billion in February through 2/26. We review the Investment Company Institute's latest weekly money fund statistics, as well as their latest monthly "Trends" report and Portfolio Composition figures for January, below. We also report again on the news out of Europe (see Friday's "Link of the Day"), where controversy continues to rage over pending money fund reforms.
ICI's latest weekly "Money Market Mutual Fund Assets" report says, "Total money market fund assets increased by $10.28 billion to $2.69 trillion for the week ended Wednesday, February 25, the Investment Company Institute reported today. Among taxable money market funds, Treasury funds (including agency and repo) increased by $4.19 billion and prime funds increased by $7.74 billion. Tax-exempt money market funds decreased by $1.65 billion.... Assets of retail money market funds decreased by $4.05 billion to $896.09 billion.... Assets of institutional money market funds increased by $14.33 billion to $1.79 trillion."
ICI also released its latest monthly "Trends in Mutual Fund Investing, January 2015" late last week, which shows that total money fund assets decreased by $33.4 billion in January to $2.692 trillion. MMF assets had been on a hot streak, increasing by $81.4 billion in December, $21.1 billion in November, $19.2B in October, $22.7B in September, and $34.0 billion in August. Year-to-date through Jan 31, ICI's monthly series shows money fund assets were down by $33 billion, or 1.2%.
The Trends report says, "The combined assets of the nation's mutual funds decreased by $117.61 billion, or 0.7 percent, to $15.73 trillion in January, according to the Investment Company Institute's official survey of the mutual fund industry.... Bond funds had an inflow of $9.98 billion in January, compared with an outflow of $19.09 billion in December.... Money market funds had an outflow of $33.44 billion in January, compared with an inflow of $80.40 billion in December. In January, funds offered primarily to institutions had an outflow of $20.38 billion and funds offered primarily to individuals had an outflow of $13.07 billion." Money funds represent 17.1% of all mutual fund assets while bond funds represent 22.3%.
ICI also released its latest "Month-End Portfolio Holdings of Taxable Money Funds," which verified our previously reported sizable decrease in Repos and Treasurys, and increase in CP and CDs, in January. (See Crane Data's Feb. 12 News, "Feb. MF Portfolio Holdings Show Fed Repo Plunge, Jump in TDs, Europe.") ICI's latest Portfolio Holdings summary shows that Holdings of CDs (including Eurodollar) increased by $84.3B, or 15.5%, in January to $628.1B, after decreasing $79.6 billion in December. CDs represent 25.8% of assets and are the largest composition segment. Repo holdings, the second largest segment, decreased sharply, falling $132.5 billion, or 20.2%, in January (after increasing $124.6B in December) to $522.0 billion. Repos represent 21.5% of taxable MMF holdings.
U.S. Government Agency Securities moved up into third place despite decreasing $1.6B, or 0.4%, in January to $388.9 billion (16.0% of assets). Treasury Bills & Securities, which decreased by $31.1 billion, or 7.4%, fell to become the fourth largest segment. Treasury holdings totaled $388.9 billion (15.9% of assets). Commercial Paper remained the fifth largest segment, increasing $28.3B, or 6.4%, to $367.0 billion. They represent 15.1% of assets. Notes (including Corporate and Bank) dropped by $1.8 billion, or 2.3%, to $77.7 billion (3.2% of assets), and Other holdings (including Cash Reserves) increased by $22.4 billion to $61.3 billion.
The Number of Accounts Outstanding in ICI's series for taxable money funds decreased by 114.8 thousand to 23.359 million, while the Number of Funds decreased by 1 to 364. Over the past 12 months, the number of accounts fell by 615.0 thousand and the number of funds declined by 17. The Average Maturity of Portfolios remained the same 44 days in January. Over the past 12 months, WAMs of Taxable money funds have declined by 4 days.
Note: Crane Data has updated its February MFI XLS to reflect the 1/31/15 composition data and maturity breakouts for our entire fund universe. Note too that we are now producing a "Holdings Reports Issuer Module," which allows subscribers to choose a series of Portfolio Holdings and Issuers and to see a full listing of which money funds own what paper. (Visit our Content Center and the latest Money Fund Portfolio Holdings download page to access our February holdings and the latest version of this new file.)
Also, a new European money market fund reform proposal working its way through Parliament does not include the capital buffer, as we mentioned in yesterday's Link, "IMMFA Disappointed w/European Union ECON Committee Money Fund Regulations)." BlackRock explains in an update, "Today the European Parliament's (EP) Economic and Monetary Affairs Committee (ECON) voted on their initial position on European Money Market Fund (MMF) reform. This is very much the latest step in a broader regulatory process and does not represent the final rule of law. The regulatory process in the European Union is initiated with a proposal by the European Commission, which was released for MMF reform in September 2013. The subsequent process is for the European Parliament and European Council to separately review the text and suggest their amendments. Once the three institutions have finalized their review, they move to the trilogue process to agree a final text to be set as rule of law."
They continue, "The ECON vote today puts forth the following key suggestions: 1) Retail funds may retain a Constant Net Asset Value (CNAV); 2) Government funds that invest at least 99.5% of assets in government and government-guaranteed securities may retain a Constant Net Asset Value (CNAV), by 2020 to be EU government and government-guaranteed securities only; 3) Institutional style strategies will have the option to adopt either of the following structures: Low Volatility Net Asset Value funds that use amortised cost accounting (ACA) for securities maturing within 90 days and mark-to-market pricing for securities maturing after 90 days. The Low Volatility Net Asset Value structure is subject to a sunset clause, to expire within five years or at the Commission's review; or, Variable Net Asset Value (VNAV) funds that mark to market their full holdings."
On reform's next steps, BlackRock says, "The text approved today will be put to the European Parliament for a final vote in the April Plenary session. Secondly, the European Council is still to release its response and suggested amendments to the Commission's proposal. The Council Presidency currently lies with Latvia and there is a strong possibility that we will hear from the Council prior to the Presidency being handed over to Luxembourg at the end of June 2015. Thirdly, upon completion of the two steps outlined above the trilogue process can begin. In the trilogue process the three entities (Commission, Parliament & Council) will agree on a final text of regulation which will be passed as law." (For the Institutional Money Market Fund Association's reaction to the proposal, which we cited Friday, click here.)
