Waltham Partners' David Castle writes, "Treasury Notes No. 7 - Money Market Funds, Shifting Sands." It explains, "The shifting sands of the money market industry as a source of liquidity for bank and financial issuers over recent years has been driven by regulation that impacts both issuer and investors. Most recently the U.​S. Money Fund rules prompted a dramatic shift from Prime to Government assets as the reform agenda influenced risk and liquidity profiles. Coupled with this issuers have taken a more conservative stance in accessing this source of funding as Basel III liquidity rules prompt an ever more granular and diverse approach to funding plans. In this edition of Treasury Notes we explore the changing Money Fund landscape, looking at fund types, asset mix, geographic changes and issuer activity to see if we can identify trends that may provide risk or opportunity for Treasury." The piece continues, "U.​S. Prime and Liquidity funds have historically been a ready source of wholesale liquidity for Bank Issuers of Commercial Paper, Certificates of Deposit or Short Bonds. The financial crisis of 2008-​2009 brought into stark focus the potential pit falls of over reliance on this source of funding, saw some issuers retrench and an increased move by investors toward high quality issuer names. Pete Crane, President of Crane Data LLC, summarises the changing shape of the U.​S. MMF industry, 'While U.​S. money fund balances had been surprisingly stable for a number years following the financial crisis, we saw an unprecedented $​US1.​1 trillion shift from Prime funds into Government money funds in 2016 due to money fund reforms.' In a remarkable throwback to the early 1990s the bank issuer market to MMFs is now dominated by Japanese, Scandinavian, Aussie, Canadian and a select few European names. While there have been cyclical changes to this mix, and some have always been there, the concept of 20 or so '​on the run' issuers who both support money managers and are in turn supported by them seems to have taken hold again. The changing shape of the Money Fund complex where assets have shifted towards government products in the U.​S. has re-​focused managers on relationships with issuers who can provide consistent service and will be liquid in times of need."

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