State Street Global Advisors is the latest to update clients on plans to adjust their fund lineup to approaching Money Fund Reforms. Barry Smith, Global Head of Cash, writes in a letter, "Across global markets, changes to the regulatory environment are forcing both investors and managers to take a fresh look at their cash holdings and businesses. It's a new world -- and cash management is changing. With over $400 billion of cash assets globally, cash management is core to State Street Global Advisors' investment franchise and we are focused on helping our clients make the best decisions for their cash portfolios. A significant part of that effort involves helping interpret the operational complexities and investing challenges resulting from these changes, while providing solutions that can help continue to meet your operating, core and strategic cash needs. We believe that a full understanding of the impact of evolving regulations on our clients' portfolios and the resulting operational environment is critical to offering a comprehensive cash management solution for 2016 and beyond."

The letter explains, "As we continue to assess the impact of the regulations, we would like to share with you some of our preliminary plans for our money market mutual funds. Government Money Market Funds: The new regulations require that a government money market fund invests at least 99.5% of its total assets in cash, government securities, and/or repurchase agreements that are "collateralized fully" (i.e., collateralized by cash or government securities). Our government money market funds meet these requirements today; A government money market fund is not required to implement a floating net asset value; State Street Global Advisors has no plans to implement liquidity fees or redemption gates in our government money market funds and has reviewed this intention with the funds' Board of Trustees."

Finally, Smith says about "Prime Funds:," "State Street Global Advisors will continue to offer prime institutional funds; Consistent with the revised regulations, our flagship prime fund, the State Street Institutional Liquid Reserves Fund, will operate with a floating NAV when required in October of 2016; As we look forward, we expect prime funds to offer an attractive yield advantage over government funds and will continue to play an important part in clients' cash management portfolios. We recognize our clients' needs to retain intraday liquidity and are working on operational solutions; and, Liquidity fees and redemption gates were designed by regulators to safeguard clients' assets in extraordinary conditions; however you and your peers have shared concerns about the operational challenges the implementation of these measures could cause. We understand the significance of these issues, and will work to help our clients better understand how these mechanisms might affect them. We will continue to communicate with you as our plans solidify and we collectively approach the implementation deadline. If you have questions or would like additional information, please do not hesitate to contact your SSGA relationship manager."

In other news, the Federal Reserve released its latest Z.1 "Financial Accounts of the United States" statistical survey (formerly the "Flow of Funds"). The four tables it includes on money market mutual funds show that the Household sector remains the largest investor segment, though it declined in the First Quarter of 2015. State and Local Governments, Nonfinancial Noncorporate Businesses, and Funding Corporations each gained slightly. Table L.206 shows the Household sector with $1.031 trillion -- or 39.5% of the $2.610 trillion held in Money Market Mutual Fund Shares as of Q1 2015. Household shares decreased by $71.2 billion in the 1st quarter (after dropping $10 billion in 2014), and these assets remain well below their record level of $1.581 trillion at year-end 2008.

Nonfinancial corporate businesses were the second largest investor segment, according to the Fed's data series, with $548.5 billion, or 21.0% of the total. Nonfinancial corporate business assets in money funds decreased $13.7 billion in the quarter after rising $35 billion in 2014. Funding corporations, which includes securities lending cash, remained the third largest investor segment with $423.5 billion, or 16.2% of money fund shares. They increased by $2.7 billion in the latest quarter and jumped $44 billion in 2014. Funding corporations held over $906 billion in money funds at the end of 2008.

State and local governments held 6.9% of money fund assets ($181.5 billion) -- up $8.3 billion for the quarter. Private pension funds, which held $135.5 billion (5.2%), remained in 5th place. The Rest of the world category was the sixth largest segment in market share among investor segments with 4.2%, or $110.3 billion, while Nonfinancial noncorporate businesses held $88.7 billion (3.4%), State and local government retirement held $46.3 billion (1.8%), Life insurance companies held $26.6 billion (1.0%), and Property-casualty insurance held $18.2 billion (0.7%), according to the Fed's Z.1 breakout.

The Fed's "Flow of Funds" Table L.121 shows "Money Market Mutual Fund Assets" largely invested in Credit market instruments ($1.441 trillion, or 55.2%), which includes: Open market paper ($341.8 billion, or 13.1%; we assume this is CP), Treasury securities ($434.5 billion, or 16.7%), Agency and GSE backed securities ($323.4 billion, or 12.4%), Municipal securities ($273.5 billion, or 10.5%), and Corporate and foreign bonds ($67.5 billion, or 2.6%).

Other large holdings positions in the Fed's series include Security repurchase agreements ($625.9 billion, or 24.0%) and Time and savings deposits ($512.1 billion, or 19.6%). Money funds also hold minor positions in Foreign deposits ($24.4 billion, or 0.9%) and Miscellaneous assets ($16.7 billion, or 0.7%). Checkable deposits and currency went into negative territory with -$9.8 billion.

During Q1, only Open Market Paper (up $8.3 billion), Treasury securities (up $21.8 billion), and Foreign Deposits (up $300 million) showed increases. Security Repos (down $18.7 billion), Time and Savings Deposits (down $3.4 billion), Agency and GSE Backed Securities (down $61.2 billion), Municipal Securities (up $8.2 billion), Corporate and foreign bonds (up $10.8 billion), Misc. Assets (down $600 million), and Checkable Deposits and Currency (down $5.5 billion) all showed declines.

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