The June issue of Crane Data's Money Fund Intelligence was sent out to subscribers Friday. The latest edition of our flagship monthly newsletter features the articles: "More Change: Federated, FAF, Wells; Private Fund Options," which looks at recent MMF lineup changes from 3 major fund managers and examines "Private" funds; "Northern Trust's Peter Yi on Reforms; More Than MMFs," a profile of Northern's Peter Yi, who talks about responding to reforms and other topics; and "JPM Cuts Back on Triple, 'AAA' Ratings; Rated Funds," which reports on JP Morgan's decision to streamline its AAA rated money market funds. We also updated our Money Fund Wisdom database query system with May 31, 2015, performance statistics, and sent out our MFI XLS spreadsheet late last week. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our May Money Fund Portfolio Holdings are scheduled to go out tomorrow afternoon, June 9, and our May Bond Fund Intelligence is scheduled to ship Friday, June 12.
The lead article on "More Change" says, "Since our last edition of MFI, we've had several more money fund managers announce changes to their lineups, including Federated, Wells Fargo, and U.S. Bank's First American Funds. Fund companies continue to keep their options open by offering all types of funds, they continue to slowly declare funds as retail or institutional, and they also continue to explore alternatives like short maturity funds, private funds, and separate accounts. We briefly review the latest strategies below. Federated's most recent set of fund changes, announced yesterday, categorize a number of funds as "retail" funds and streamline its product line by merging 7 funds. Once these mergers are completed, Federated will offer 6 Prime Retail and National Municipal funds." (See Friday's News, "Federated Announces Retail Money Fund Plan, Streamlines MF Lineup".")
MFI continues, "The 10th largest MMF manager, Wells Fargo, also outlined which funds will be classified as Retail recently. Wells Fargo Advantage MMF ($2.7 billion) will be Prime Retail, and Wells Fargo Advantage California Municipal ($1.0B), Advantage Muni ($1.5 billion), and Advantage National Tax-Free ($2.6 billion) will be classified as Muni Retail funds. It also will designate Wells Fargo Advantage Cash Investment ($11.1B) and Heritage ($41.0B) as Prime Institutional, while Municipal Cash Management ($1.2 billion) will float as a Municipal Institutional fund.... First American Funds also said last month that it won't impose gates or fees on its Government MMFs once SEC reforms go into effect. In an update, Lou Martine, Senior Managing Director, Head of Distribution at US Bancorp Asset Management, (which manages the First American Funds) elaborated further on the firm's post-reform plans, including the possibility of Private and 60-day max maturity funds."
In our middle column, we profile Peter Yi, Head of Short Duration Fixed Income at Northern Trust <b:>`_ who discussed how his firm is responding to money market reforms and the growing interest in ultrashort bond funds. It reads, "MFI: How long have you managed cash? Yi: We've been managing money market funds since the 1970s, when we created our first cash sweep vehicle in our trust department. We've been doing this for a long time and have demonstrated a commitment to the money market business. We view cash management to be a flagship capability and a product that caters incredibly well to our institutional asset servicing business and our wealth management franchise. Right now we're managing about $235 billion in assets across various money market funds and short duration products and strategies. Of that $235 billion, about $85 billion is in money market funds. The remainder is in STIFs, "sec lending" reinvestment vehicles, ultra short fixed income strategies and separately managed accounts. What resonates most with investors across all these strategies is our conservative investment philosophy that emphasizes credit research and risk management."
It continues, "MFI: What is your top priority right now? Yi: Both internally and externally, I'm spending an enormous amount of time focusing on money market reform. Without a doubt, our number one priority is to focus on our investors and find the right solutions for them as the reforms take effect. We have the benefit of a reasonably long compliance period for the new structural changes for certain types of money market funds. Our message to investors is that we believe that this is enough time for everyone to thoughtfully assess their options and not react in a disruptive, knee-jerk manner. It's very valuable to engage with our money market investors, observe reactions to these changes, and think about what we can do to address their liquidity needs in this changing industry. It's also especially important to ensure that our investors have a voice in our product evolution. Aside from the regulatory debates, I'm spending a lot of strategic focus on our ultrashort fixed income product offerings."
The third MFI article says, "JP Morgan Asset Management is streamlining the number of 'AAA' ratings on its money market mutual funds, removing ratings on a number of funds that previously had multiple triple-A's. The ratings removals include funds rated 'AAAm' by S&P and 'Aaamf' by Moody's and involve U.S. money funds, as well as "offshore" Luxembourg-domiciled money funds. (It also recently added a new ultra-short "offshore" money fund and got this triple-A rated.) On the changes, JP Morgan Asset Management's John Donohue, CEO of Investment Management Americas says, "The three major NRSRO's views of credit and risk management have diverged significantly over the past few years and have imposed differing investment requirements on rated money market funds. Our request to remove these ratings follows an ongoing global strategic review of all of our ratings across the J.P. Morgan range of money market funds." (See our May 20 News, "JP Morgan Streamlines AAA Ratings on Money Funds; Lux Current Yield" for more.)
Crane Data's June MFI XLS, with May 31, 2015, data, shows total assets gaining in May by $26.8 billion to $2.514 trillion, the first positive month of 2015. The first four months of the year, assets were down -- by $89.3 billion in April, $20.9 billion in March, $1.6 billion in February, and $44.6 billion in January. Our broad Crane Money Fund Average 7-Day Yield and 30-Day Yield both 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 0.15% (Crane MFA, unchanged) and 0.19% (Crane 100, unchanged) on an annualized basis for both the 7-day and 30-day yield averages. (This is up 2 bps from gross yields of 0.13% and 0.17%, respectively, at the start of the year.) Charged Expenses averaged 0.14% (up from 0.13%) and 0.15% (unchanged) for the two main taxable averages. The average WAMs for the Crane MFA and the Crane 100 were 38 and 40 days, respectively, both down 1 day from last month (and down from 40 and 43 days, respectively, at the start of 2015). (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
