The April issue of our flagship Money Fund Intelligence newsletter was sent to subscribers Thursday morning. It features the articles: "Money Fund Reforms Phase II; Disclosures: MNAV, DLA, WLA," which reviews the regulatory changes that go into effect April 14; "ICD Portal's Tory Hazard on Prime MMFs, Alternatives," which profiles Tory Hazard from Institutional Cash Distributors; and "Brokerage Sweeps Go Govt, FDIC; $1 Trillion Still at 0%," which briefly examines trends in the brokerage sweep market. We have also updated our Money Fund Wisdom database query system with March 31, 2016, performance statistics, and sent out our MFI XLS spreadsheet Thursday morning. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our April Money Fund Portfolio Holdings are scheduled to ship Monday, April 11, and our April Bond Fund Intelligence is scheduled to go out Thursday, April 14.
MFI's lead article on "Money Fund Reforms Phase II," says, "On April 14, "Phase Two" of the SEC's Money Market Fund Reforms take effect, requiring firms to make several important changes to the way they report information on, and run, their money market funds. The major new requirements deal with portfolio diversification, website disclosure, reporting, and stress testing. We believe the website disclosures generate the most interest, but a host of other changes will soon go live too. Law firms Dechert and Perkins Coie issued summaries of the upcoming April 14 changes in recent legal updates. We review the imminent changes and excerpt from Dechert and Perkins' briefs below."
It continues, "Among the pending website disclosures are: percentages of daily and weekly liquid assets (DLA and WLA); daily net inflows and outflows; and, the current market NAV (or MNAV) rounded to four decimal places. Funds must also include 6-months worth of data in a chart or graph. The changes will also remove the 2-month lag on the SEC's Form N-MFP; this form will undergo minor changes. (See our Aug. 6, 2014 News, "SEC Money Fund Reform Disclosure Requirements Not Quite Kitchen Sink," and see the SEC's full "MMF Reform Final Rules.") Note that our Money Fund Intelligence Daily has been tracking MNAVs, DLAs and WLAs for over a year now, but that only some of the large Institutional MMFs have been reporting until now."
Our ICD Portal Profile reads, "This month, Money Fund Intelligence profiles Tory Hazard, President and COO at Institutional Cash Distributors, or ICD. Hazard talks about the growing ICD Portal, which has expanded beyond money funds to include Short-Term Bond Funds, SMAs, Private Funds, and some bank deposit products. He tells us, "Institutional Prime money market funds are still going to be a very important part of the portfolios." Hazard also discusses new enhancements to the ICD Portal that are slated to debut later this month that will help investors deal with upcoming money market reforms. He says, "We're extremely excited about 2016 and beyond. We have been working to prepare for this time."
Responding to the question How much do you distribute? Hazard says, "We have over $70 billion in assets in the U.S., and about $8 billion offshore. We have approximately 35 fund families on the portal and about 300 funds. That includes money funds, as well as other types of portfolios. When we saw that changes were happening with money fund reform, we were very active in fighting against onerous over-regulation. We were happy when the rules finally came out [that] they included the simplified tax accounting method. That was, as we saw it, the biggest challenge that was going to face prime money market funds. With that in play, Institutional Prime money market funds are still going to be a very important part of the portfolios."
The "Brokerage Sweeps" article explains, "With the major elements of money fund reform approaching, brokerage "sweep" providers are tweaking their offerings, moving away from Prime funds and into Govt MMFs or FDIC insured bank deposit programs. They also continue to add features for brokerage customers, but yields remain pinned to zero. We review some of the recent changes in this market below, which we estimate is around $1 trillion in size (bank deposits & MFs combined)."
It adds, "Schwab, UBS, Morgan Stanley, Merrill and others have all made changes to sweep funds or options. UBS filed with the SEC to state that it would no longer be offering several funds on sweep platforms. The filing says, "Later this year, but before the October 2016 compliance deadline, [funds] may no longer be offered as a sweep fund as part of certain distributor platforms. As a result, the Fund's shareholders would be transitioned to an alternative money market sweep fund." UBS also converted its Liquid Assets sweep option from Prime to Govt."
In a sidebar, we also discuss, "Yet More Prime to Govie." This brief says, "SEI Investments and Wilmington Trust are the latest firms to make a major retreat from the money fund space and "go government." Also, we do a sidebar on "Federated, Edward Jones Restructure Deal," which says, "One of the largest "private label" relationships in the money fund business is changing after over 3 1/2 decades. Federated Investors and brokerage firm Edward Jones will alter the terms of their money fund management agreement later this year." Finally, as we do every month, we review all the important "Money fund News."
Our April MFI XLS, with March 31, 2016, data, shows total assets decreasing $22.2 billion in March to $2.676 trillion, after increasing $37.4 billion in February decreasing $22.4 billion in January, and increasing $44.2 billion in December. Our broad Crane Money Fund Average 7-Day Yield climbed by 1 bps to 0.12% for the month, while our Crane 100 Money Fund Index (the 100 largest taxable funds) increased 1 basis point to 0.22% (7-day).
On a Gross Yield Basis (before expenses were taken out), funds averaged 0.40% (Crane MFA, up 2 basis points) and 0.47% (Crane 100, up 3 bps). Charged Expenses averaged 0.29% (up 2 bps) and 0.25% (up 1 bp) for the Crane MFA and Crane 100, respectively. The average WAM (weighted average maturity) for the Crane MFA was 36 days (down 1 day from last month) and for the Crane 100 was 37 days (unchanged). (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
