The Investment Company Institute released its latest "Money Market Fund Holdings" summary (with data as of Sept. 30, 2015) earlier this week, which tracks the aggregate daily and weekly liquid assets, regional exposure, and maturities (WAM and WAL) for Prime and Government money market funds. We also review JP Morgan Securities' "Prime Money Market Fund Holdings Update" for September. In other news, The Independent Adviser for Vanguard Investors published a statement that says Vanguard won't seek to recapture any money fund fees it has waived over the past several years. While we haven't heard of any firms announcing that they will recapture waived fees, some do include language in their prospectuses that give them the option to do so, as we wrote about in our Sept. 17, 2014, News, "Wiener on Vanguard Fee Waivers, Recapture."

ICI's "Prime and Government Money Market Funds' Daily and Weekly Liquid Assets" table shows Prime Money Market Funds' Daily liquid assets at 24.2% as of September 30, down from 26.8% on August 31. Daily liquid assets were made up of: "All securities maturing within 1 day," which totaled 20.9% (vs. 23.2% last month) and "Other treasury securities," which added 3.3% (down from 3.6% last month). Prime funds' Weekly liquid assets totaled 40.8% (vs. 39.4% last month), which was made up of "All securities maturing within 5 days" (34.7% vs. 33.8% in August), Other treasury securities (3.3% vs. 3.6% in August), and Other agency securities (2.9% vs. 2.0% a month ago). (See also Crane Data's Oct. 14 News, "Holdings Show Huge Jump in Fed Repo; Agencies Surge on Cash Res Shift.")

The ICI holdings report says Government Money Market Funds' Daily liquid assets totaled 59.1% as of September 30 vs. 61.7% in August. All securities maturing within 1 day totaled 26.5% vs. 25.5% last month. Other treasury securities added 32.7% (vs. 36.2% in August). Weekly liquid assets totaled 82.1% (vs. 82.7%), which was comprised of All securities maturing within 5 days (40.7% vs. 38.6%), Other treasury securities (32.6% vs. 34.1%), and Other agency securities (8.7% vs. 10.0%).

ICI's "Prime and Government Money Market Funds' Holdings, by Region of Issuer" table shows Prime Money Market Funds with 54.4% in the Americas (vs. 42.5% last month), 18.1% in Asia Pacific (vs. 18.6%), 27.1% in Europe (vs. 38.6%), and 0.4% in Other and Supranational (vs. 0.5% last month). Government Money Market Funds held 93.0% in the Americas (vs. 85.4% last month), 0.6% in Asia Pacific (vs. 0.7%), 6.4% in Europe (vs. 13.9%), and 0.1% in Supranational (vs. 0.1%).

The table, "Prime and Government Money Market Funds' WAMs and WALs" shows Prime MMFs WAMs at a low of 32 days as of September 30, down from 33 days last month. WALs were at 67 days, down from 68 days last month. Government MMFs' WAMs was at 38 days, same as last month, while WALs was at 83 days, down from 78 days. ICI's release explains, "Each month, ICI reports numbers based on the Securities and Exchange Commission's Form N-MFP data, which many fund sponsors provide directly to the Institute. ICI's data report for June covers funds holding 94 percent of taxable money market fund assets." Note: ICI publishes aggregates but doesn't publish individual fund holdings.

Also, JP Morgan Securities' Short Duration Strategy team released its "Prime MMF Holdings Update for September" last week. JPM strategists Alex Roever, Teresa Ho, and John Iborg write, "Prime and government fund assets finished September mostly flat. During September, prime MMF assets fell by -0.42% or $6bn while government fund assets rose by +0.13% or $1bn. Prime fund AuMs currently stand at $1,435bn while government balances register $971bn. YTD, flows have exhibited seasonality in line with recent history, and we have yet to see any significant reform-related investor outflows. Funds began to extend maturities after the Fed's inaction during September's FOMC meeting. Prime funds collectively increased their WAMs by 3 days from all-time lows in the weeks following the FOMC meeting."

JPM's update continues, "The final G-SIB reporting date on 9/30 appeared to have exacerbated typical large dealer pullbacks within the short-term wholesale funding markets at quarter-end. With the 8 G-SIBs further incentivized to temporarily reduce their footprints in the money markets, prime MMF holdings of bank debt contracted to the lowest levels that we have on record. As usual, time deposits drove the reductions, falling by $111bn.... As dealers pulled back on their outstanding short-term wholesale funding, usage of the Fed RRP surged. The overnight RRP drew $200bn in demand on 9/30, while both term RRP operations were oversubscribed and totaled $250bn in usage. The combination of the overnight and term facilities put total usage at $450bn on 9/30, an all-time high in demand for the RRP. In total, MMFs accounted for $399bn or 89% of RRP usage at quarter-end. Prime MMFs took down $100bn in term RRP and $113bn in overnight RRP. Government funds used $128bn in term RRP and $58bn in overnight RRP."

It continues, "Away from the swings in bank and RRP exposures, most other sector allocations went relatively unchanged. Holdings of UST securities decreased by $15bn, with massive cuts to bill supply over the course of the month. Indeed, bill supply has fallen by close to $200bn over the past two months amidst seasonal tax receipt-related reductions by Treasury. Conversely, holdings of agencies increased by $64bn, likely serving as a substitute to short-term Treasuries for their high credit quality and liquidity."

In other news, The Independent Adviser for Vanguard Investors piece, "Vanguard Gift to Money Fund Shareholders: $112 million and Counting," says, "Big news for Vanguard money market fund shareholders: Vanguard has now explicitly said that its money market funds (meaning shareholders) will not have to pay back the more than $112 million in fees that it has waived over the past five-plus years." Editor Daniel Wiener writes, "In the just-released annual report for its three taxable money funds, Vanguard has added language that says, "... the fund is not obligated to repay this [fee waiver] back to Vanguard."

He explains, "The language clarifies that Vanguard won't try to claw back millions in fees, something that other mutual fund complexes may be forced to emulate. Vanguard is also rapidly taking off the temporary fee reductions that have been in place on Prime Money Market and Federal Money Market, though they're still waiving more than $1 million at Treasury Money Market."

The article continues, "The waived fees on Federal Money Market dropped from $298,000 in the first half of its fiscal year, from September 2014 through February of this year, to just $75,000 in the second half, which ended in August. For Prime Money Market the fee reduction went from $8.1 million in the first six months of the fiscal year to just $589,000. At the same time, the funds' yields have been rising (from 0.01% in June to a current 0.08% SEC yield for Prime Money Market and to 0.06% from 0.01% in August for Federal Money Market) as manager David Glocke has been buying higher-yielding paper in Australia and Canada. Treasury Money Market still needs those waived fees to keep its yield at 0.01% though even its waivers are slimming down. In the first six months of the current fiscal year the fund waived $2.9 million in fees. Over the second six months that was reduced to $1.6 million."

It concludes, "The big question now is how fund complexes like Charles Schwab & Co. will respond given their much larger fee waivers. Will Schwab money fund investors be forced to pay back waived fees? Vanguard has now shot a big one across the bow of its competitors."

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