The October issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Wednesday morning, features the articles: "Year to Go for Fund Changes; A Look at Floating NAV MMFs," which summarizes which large funds will have floating NAVs in October 2016; "Morgan Stanley Talks Growth, New Products," where we profile the money fund team at MS Investment Management; and "SEC Finalizes Ratings Removal from Rules," which recaps the recent SEC ruling on the removal of credit ratings from money funds. We have also updated our Money Fund Wisdom database query system with Sept. 30, 2015, performance statistics, and sent out our MFI XLS spreadsheet earlier. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our October Money Fund Portfolio Holdings are scheduled to ship Friday, October 9, and our October Bond Fund Intelligence is scheduled to go out Thursday, Oct. 15.
MFI's lead "Year to Go for Changes" article says, "With now just a year to go until the main piece of the SEC's 2014 Money Fund Reforms -- the floating NAV and emergency gates & fees for Prime and Municipal money funds -- goes into effect (Oct. 14, 2016), we wanted to again summarize some of the work done by fund companies to date. We also wanted to focus on the pending class of floating NAV money funds, Prime Inst in particular."
The piece continues, "First, while it's been a month since we've seen any major announcements from money market fund managers on reform-related changes, there have been a `flurry of smaller moves, including liquidations, name changes, share class launches, and changes in investment guidelines. PNC just merged its PNC Advantage Inst Govt MMF into PNC Govt MMF. Also, Dreyfus changed the names of several funds. (See the "`Changes" tab in our MFI XLS, and see our Oct. 5 News, "Lull in Major Announcements, But Minor Moves Continue: American, PNC") In addition, Goldman Sachs FS Federal Fund changed its name to Goldman Sachs FS Treasury Solutions on Oct. 1, 2015, and Fidelity recently provided another update to advisors on some previously announced fund mergers."
Our latest MFI "profile," "Morgan Stanley Talks Growth, New Products," reads, "The October issue of our flagship Money Fund Intelligence newsletter features an interview with the cash management team at Morgan Stanley Investment Management -- Managing Director Fred McMullen, Managing Director, Sr. Portfolio Manager Jonas Kolk, and Executive Director, Product Management Scott Wachs. Morgan Stanley, which has been managing money funds since 1975, is the 7th largest global institutional MMF manager with over $120 billion in MMF assets. McMullen, Kolk, and Wachs talk about Morgan Stanley's industry leading growth over the past 5 years and new product development."
MFI asks, "What is your biggest priority right now? McMullen: There are several priorities -- one is working with our clients to help them strategize around the impending rate and regulatory changes. Two is our focus on new product development. We're fortunate that we have a large retail fund money fund lineup as well as a large institutional fund lineup. Some in the marketplace have to create new retail funds to deal with the bifurcation the SEC created between institutional and retail investors. We don't have to worry about that so we're more freed up to focus on new product development. We've already announced some changes that we've made to our product lineup in response to the regulations and we've shared our views on several aspects of the regulations and the competitive landscape. A few months ago, we provided clients our perspectives on the announcements that several of our competitors had made to date. We'll soon post a more comprehensive update on our progress to date and on some of our key product development issues. Three, we are very focused on growing our European liquidity business."
The third article, "SEC Finalizes Ratings Removal from Rules," says, "The U.S. S.E.C. finalized one of two remaining supporting rules for its July 2014 Money Fund Reforms, the "`Removal of Certain References to Credit Ratings and Amendment to the Issuer Diversification Requirement in the Money Market Fund Rule." A press release says, "The Securities and Exchange Commission adopted amendments to remove credit rating references in the principal rule that governs money market funds and the form that money market funds use to report information to the Commission each month about their portfolio holdings. The Commission also adopted amendments that would subject additional securities to issuer diversification provisions in the money market fund rule." Thus, as expected, money funds' "First Tier" and "Second Tier" credit regime, which required (roughly) A-1, P-1, F-1 ratings (or A-2, P-2, F-2), will be replaced by a new "minimal credit risk" test that doesn't reference ratings."
We also briefly recap two sessions from our recent, European Money Fund Symposium, which was held September 17-18 in Dublin. One story, "Irish Funds' CEO on CNAV: Legitimate Reason to Exist," features commentary from Irish Funds' CEO Pat Lardner and Regulatory Affairs Head Patrick Rooney. The other, "French MMFs Have 'Continuum of Strategies'," says, "As the US money market fund industry braces for Floating or Variable NAV funds, it can look to France, for some insights into VNAV funds. France, with $329 billion in MMF assets, is almost entirely made up of VNAV funds."
Our October MFI XLS, with Sept. 30, 2015, data, shows total assets declining by $9.4 billion in September, after rising $7.2 billion in August, $52.4 billion in July, and $15.2 billion in June. YTD, MMF assets are down by $64.7 billion, or 2.5% (through 9/30/15). 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) remained at 0.04% (7-day).
On a Gross Yield Basis (before expenses were taken out), funds averaged 0.17% (Crane MFA, up from 0.16% last month) and 0.21% (Crane 100, up from 0.20% from last month). Charged Expenses averaged 0.15% (up from 0.14% last month) and 0.16% (unchanged) for the two main taxable averages. The average WAMs (weighted average maturities) for the Crane MFA was 34 days (up one day from last month) and for the Crane 100 was 35 days (down one day). (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
