The January issue of our flagship Money Fund Intelligence newsletter, which was sent to subscribers Friday morning, features the articles: "Money Fund Highlights of '15; More Changes Ahead in '16," which looks at the major trends and stories from 2015; "RBC Global on Going Govt; Rethinking Liquidity," where we talk to RBC's money market fund management team on their view of the markets; and "Top Money Funds of 2015; 7th Annual MFI Awards," which honors the best performing MMFs in a variety of categories. We have also updated our Money Fund Wisdom database query system with Dec. 31, 2015, performance statistics, and sent out our MFI XLS spreadsheet this morning. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our December Money Fund Portfolio Holdings are scheduled to ship Tuesday, January 12, and our January Bond Fund Intelligence is scheduled to go out Friday, January 15.
MFI's lead article, "Money Fund Highlights of '15,” says, "Between 2014, when Money Market Fund Reforms were passed, and 2016, when those reforms go into effect, 2015 was a year of transition. Ahead of the Oct. 14, 2016 implementation date, money fund managers tweaked, revamped, and even scrapped their money fund lineups. The most notable trend we saw was managers converting Prime funds to Government funds to maintain the stable NAV."
The piece adds, "It was also the year that the Federal Reserve finally raised interest rates; its first hike in almost 10 years. The long-awaited Fed move was a welcome relief for money fund managers, and investors, as we head into 2016. In just the few weeks since the Dec. 16 rate hike, yields have already increased, though by far less than 25 bps. (Part of the move was no doubt absorbed by fund managers unwinding fee waivers.)"
Our latest MFI "profile" reads, "This month, Money Fund Intelligence profiles the liquidity management team at RBC Global Asset Management in the U.S., including Brandon Swensen, Senior Portfolio Manager and Co-Head of U.S. Fixed Income; John Donohue, Head of Liquidity Management; and, Matthew Appelstein, Head of U.S. Sales and Distribution. They discuss RBC's decision to no longer offer the RBC Prime Money Market Fund, the firm’s growth in the U.S., and the opportunities that exist in the new liquidity management landscape."
We ask, "Tell us about your recent changes. Why are you getting out of prime?" Donohue answers, "The decision was driven by conversations with our clients -- they just don't feel the need to be involved in a variable rate NAV product. What we've seen is that the majority of our clients are considering a move to our government money market fund, while also evaluating our ultra-short products. In addition, clients continue to explore customized separate account strategies for their core cash positions. We have approximately $30 billion of short duration assets, which enables us to be large enough in the market, but remain flexible. We believe clients will scrutinize their cash investing practices more than ever before."
Swensen continues, "While we're not predicting the demise of prime funds, we are in the camp that believes they have been fundamentally changed and are less desirable in terms of delivering the liquidity solution our clients are looking for. Prime funds now exhibit liquidity characteristics that aren't quite the same as what a liquidity investment should look like. We think government funds are still a pure play liquidity product, but prime funds have this baggage associated with it. Fundamentally, we feel that clients that are looking for yield should be in something other than a prime fund, and that's where our separately managed accounts will come in to fill that void. The government funds are there to provide that pure play liquidity with no strings attached."
The "7th Annual MFI Awards" article says, "In this issue, we once again recognize some of the top‐performing money funds, ranked by total returns, for calendar year 2015, as well as the top-ranked funds for the past 5‐year and past 10-year periods. We present the following funds with our annual Money Fund Intelligence Awards. These include the No. 1‐ranked funds based on 1‐year, 5‐year and 10‐year returns, through Dec. 31, 2015, in each of our major fund categories -- Prime Institutional, Government Institutional, Treasury Institutional, Prime Retail, Government Retail, Treasury Retail, and Tax‐Exempt. (Watch for the full Awards story in coming days.)
We also review the latest Prime to Govie moves in a sidebar entitled, "More Funds Go Govie." It says, "Money market fund conversion announcements have accelerated in the final weeks of the year -- 7 additional fund managers have filed recently to change their Prime MMFs into Government funds since our last update. The recent batch of Prime to Govie conversions include: Cavanal Hill, John Hancock, Prudential, SunAmerica, Thrivent, TIAA-CREF, and Voya." We also have a sidebar called, "Goldman Sachs AM Details More MMF Changes."
Our January MFI XLS, with Dec. 31, 2015, data, shows total assets increasing $44.2 billion in December after increasing $3.5 billion in November, jumping $56.5 billion in October, declining by $9.4 billion in September, and rising $7.2 billion in August. In 2015, MMF assets rose by $39.4 billion, or 1.5%. Our broad Crane Money Fund Average 7-Day Yield doubled, rising by 3 bps to 0.06% for the month, while our Crane 100 Money Fund Index (the 100 largest taxable funds) jumped 8 basis points to 0.13% (7-day).
On a Gross Yield Basis (before expenses were taken out), funds averaged 0.26% (Crane MFA, up 6 basis points) and 0.32% (Crane 100, up 10 bps). Charged Expenses averaged 0.20% (up 4 bps) and 0.19% (up 2 bps) for the two main taxable averages. The average WAM (weighted average maturity) for the Crane MFA was 34 days (up 1 day from last month) and for the Crane 100 was 34 days (down 1 days). (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
