Morgan Stanley Liquid Assets Gone
We saw another liquidation in the money fund space this week, from Morgan Stanley Liquid Asset Fund. A Prospectus Supplement says, "On March 9, 2017, the Board of Directors of the Fund approved the redemption (the "Redemption") of all issued and outstanding shares of stock of the Fund. Prior to the Redemption, the Fund will suspend the offering of shares to all investors on or about March 31, 2017. The Redemption is expected to occur on or about May 31, 2017." See our Aug. 15, 2016 News, "Morgan Stanley Pulls Plug on Prime, Muni Sweeps; ignites on Strikes." The old article says, "Though at this point it appears everybody is selling or switching, brokerage sweep accounts continue to be the major contributor of the now over $500 billion shift from Prime and Muni into Government MMFs. As we hinted, shifts by Morgan Stanley money funds drove much of last week's flows. According to our Money Fund Intelligence Daily, which tracks daily asset flows, yields, MNAVs and WLA liquidity figures, Morgan Stanley Govt Sec Inst took in a massive $21.5 billion in the week through Thursday, while while MSIM's Prime and Municipal Active Assets, and Liquid Assets funds showed declines of $12.9 billion. While there is no official word that their retail Prime and Muni funds are liquidating, they did lose over half of their assets and are showing single-digit WAMs (often a sign of an imminent liquidation). We review a recent statement by Morgan Stanley brokerage on changes to their sweep program, and also quote from an ignites article on strike and cutoff times below. Though there is no mention of any liquidations in Active Assets' recent filings, a recent Morgan Stanley "Bank Deposit Program Disclosure Statement" says, "Under the Bank Deposit Program, free credit balances in your Active Assets Account ... will be automatically deposited into deposit accounts established for you by and in the name of Morgan Stanley Smith Barney LLC and Morgan Stanley Bank, NA, and Morgan Stanley Private Bank, NA ... and for free credit balances above $2 million, Morgan Stanley will sweep such balances into a Sweep Fund.")
