The July issue of Crane Data's Money Fund Intelligence was sent out to subscribers Wednesday morning. The latest edition of our flagship monthly newsletter features the articles: "Vanguard Goes Pure Retail; UBS, SSgA, MS Reveal Plans," which explains what several of the largest managers have said recently on money fund reforms; "Anticipation, Change Focus of 7th Money Fund Symposium," which recaps the highlights of our record breaking conference last month in Minneapolis; and "Responding to MM Reform Questions at Crane MFS," which features commentary from the SEC's Sarah ten Siethoff and other attorneys on reform FAQs. It also discusses recent fund liquidations. We have also updated our Money Fund Wisdom database query system with June 30, 2015, performance statistics, and sent out our MFI XLS spreadsheet earlier this a.m. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our July Money Fund Portfolio Holdings are scheduled to ship Friday, July 10, and our July Bond Fund Intelligence is scheduled to go out on July 17.
The lead article in MFI says, "In June, a wave of fund companies announced how they plan to adapt to the new money fund rules, including one of the biggest, Vanguard. UBS, SSgA and Morgan Stanley also made MMF announcements. Of note, Vanguard became the first to decline to offer institutional floating rate Prime or municipal money funds, though every other large complex had pledged to offer these to date."
It continues, "A press release entitled, "Vanguard To Designate Prime And Tax-Exempt Money Market Funds For Individuals," explains, "Vanguard plans to designate its $133.4 billion Prime Money Market Fund and its six tax-exempt funds (one national and five state municipal money funds) as "retail funds," meaning that individual investors will continue to have access to these funds at a stable $1 NAV. In addition, Vanguard announced two name changes, effective December 2015: Institutional Shares of Vanguard Prime MMF will be renamed Admiral Shares. Vanguard Admiral Treasury MMF will be renamed Vanguard Treasury Money Market Fund."
In our "profile" this month, we review the highlights of our Money Fund Symposium. It reads, "Crane's 7th Annual Money Fund Symposium, which was held in Minneapolis in late June, is now in the books, and it goes down as our largest conference ever. We had a record number (501) of attendees, and we also had what many have called our best program ever. Thanks to those that participated! Below, we review some of the highlights."
MFI explains, "The conference kicked off with a welcome address and Q&A featuring Karla Rabusch, President of Wells Fargo Advantage Funds. Rabusch said, "We are focused on clients first, that's why we are all here. Sometimes it feels like we're focused on regulators first because we're responding so much to [them]. But we need to make sure that we're fitting our clients' needs into the regulatory framework. There is always going to be a place for money funds. We'll see how they transition -- how much [shifts] to government funds, how much stays in prime, how it all works. There are obviously going to be opportunities, and we're all going to find ways to meet the needs of our clients."
It adds, "Day 1 also featured a session on the "State of the Money Fund Industry" with Crane Data's Peter Crane, Federated Investors' Deborah Cunningham, and JP Morgan Securities' Alex Roever. Crane said, "Money funds still hold $2.6 trillion; it's amazing that the base is still there. So while people predict where the money might flow in 2016, I take the 'under' on this. I think assets will be pretty much where they are today, because they have been flat for the last 4 years. If the money hasn't gone elsewhere by now, what in God's name is it waiting for?" Roever added, "We've got fund sponsors like Federated, Fidelity, Blackrock, etc., who are who are making all sorts of plans about what to do as reform approaches.... The missing piece in all this is the shareholders, and actually that's the most important piece. Where do they move their money and are they going to have the ability to actually move?" Predicting fund flows out of prime or bank deposits and potentially into government funds is "the biggest parlor game.""
The third article says, "One of the featured speakers at Crane's Money Fund Symposium in Minneapolis, June 24-26, was Sarah ten Siethoff, Senior Special Counsel at the Securities & Exchange Commission, who elaborated on some Frequently Asked Questions on money fund reforms. She sat on a panel along with attorneys Stephen Keen of Perkins Coie; and Jack Murphy of Dechert, in a session called "Money Fund Rules: Questions on the Rule." Keen & Murphy provided an overview of reforms, then focused their attention on some of the FAQs that they felt required additional clarification."
The issue also has a brief entitled, "Fund Liquidations Jump in June. It says, "JP Morgan, Fidelity, Federated, Touchstone, and Reich & Tang all liquidated money funds in recent weeks as a result of lineup changes and mergers precipitated by reforms."
Crane Data's July MFI XLS, with June 30, 2015, data shows total assets rising by $15.5 billion in June, after rising $26.8 billion in May. (MMFs assets fell by $156.8 billion total in the first 4 months of 2015.) YTD, MMF assets are down by $114.8 billion, or 4.3% (through 6/30/14). 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 0.16% (Crane MFA, up 0.01% from last month) and 0.19% (Crane 100, same as last month) on an annualized basis for both the 7-day and 30-day yield averages. Charged Expenses averaged 0.14% and 0.15% (unchanged) for the two main taxable averages. The average WAMs for the Crane MFA and the Crane 100 were 36 and 39 days, respectively, down 2 days and 1 day, respectively, from last month. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
In other news, the International Monetary Fund released its annual assessment of the US economy, commenting on a number of areas, including money markets. On money market funds it says reforms have helped, but vulnerabilities remain. "Changes to the triparty repo infrastructure (including reengineering of the settlement cycle, improvements in the collateral allocation processes, and limits on intra-day credit) have reduced risks. Despite reforms, vulnerabilities in the triparty repo market remain large (including the reliance on two clearing banks). Potential next steps could include the use of central counterparty clearing houses for repo transactions. This, in turn, would require implementing adequate risk management requirements for central counterparty clearing houses including cyber resilience, standardized stress testing, and recovery and resolution regimes. The requirement that some money market funds move to a floating net asset value by 2016 is a positive step. `However, a significant share of funds will be able to maintain stable net asset values, allowing institutional and retail investors to treat their investment as deposit-like, despite their greater liquidity risks. Shifting all money market funds to floating net asset values should be reconsidered."
