USAA is the latest in a long line of money fund managers to liquidate state-specific municipal, or tax-exempt money market funds. Tax-exempt MMFs have seen assets decline precipitously over the past decade, and in particular over the past year, falling from $385.6 billion in mid-2007 to $251.7 billion at the start of 2016, to $133.1 billion currently. The number of Tax Exempt funds has also shrunk dramatically, declining from 390 in 2007 to 353 in 2015 to 245 on 6/30/17. State Tax Exempt MMFs have dropped from 187 to 116 over the past 2 years. USAA has terminated its CA, NY and VA MMFs, but continues to offer USAA Tax-Exempt MMF, USAA MMF, and USAA Treasury MM. (See our August 1 Link of the Day, "Dreyfus Liquidating AMT-Free MMF," and our June 13 News, "Schwab Liquidating MA, NJ, PA MFs.") We also review a new SEC update on Private Liquidity funds below.
The USAA filing says, "The Board of Trustees (Board) of USAA Mutual Funds Trust (the Trust) has approved a Plan of Liquidation and Dissolution (the Plan) for USAA California Money Market Fund, USAA New York Money Market Fund, and USAA Virginia Money Market Fund (the Funds) pursuant to which the Funds will be liquidated on or about July 26, 2017 (the Liquidation Date). In approving the liquidations, the Board determined that the liquidation of each Fund is in the best interest of that Fund and its shareholders."
It adds, "The Funds may begin positioning their respective portfolios for liquidation, which may cause a Fund to deviate from its stated investment objective and strategies. It is anticipated that each Fund's portfolio will be positioned into cash on or some time prior to the Liquidation Date. Effective as of the close of business on June 14, 2017, each Fund will be closed to new investors. Shareholders of a Fund may redeem their shares prior to the Liquidation Date in accordance with the procedures described in the Fund's prospectus. If you choose not to do so prior to the Liquidation Date, we will redeem your Fund shares in accordance with the Plan and send you a check equal to the net asset value of your shares as of the Liquidation Date."
Another filing tells us that Dreyfus is liquidating the Participant shares of its AMT-Free NY MMF. It says, "Effective on or about July 31, 2017, Participant shares of Dreyfus AMT-Free New York Municipal Cash Management and Dreyfus Institutional Preferred Money Market Fund will no longer be offered by either fund and will be terminated as a separately designated class of the fund." (See the filing for more details on pending moves too.)
In other news, the SEC released it latest quarterly "Private Funds Statistics" report, which summarizes Form PF statistics and includes some data on "Liquidity Funds." The publication shows a modest increase in overall Liquidity fund assets in the latest quarter to $565 billion. Their previous press release, entitled, "SEC Staff Supplements Quarterly Private Funds Statistics" tells us, "The U.S. Securities and Exchange Commission staff ... published a suite of new data and analyses of private fund statistics and trends. The Private Funds Statistics ... offers investors and other market participants valuable insights by aggregating data reported by private fund advisers on Form ADV and Form PF. New analyses include ... characteristics of private liquidity funds." We review the latest SEC report below.
The document's "Introduction" explains, "This report provides a summary of recent private fund industry statistics and trends, reflecting data collected through Form PF and Form ADV filings. Form PF information provided in this report is aggregated, rounded, and/or masked to avoid potential disclosure of proprietary information of individual Form PF filers. This report reflects data from First Calendar Quarter 2015 through Fourth Calendar Quarter 2016 as reported by Form PF filers.... Form PF is still a relatively new reporting requirement for advisers to private funds. The Staff continues to work with the data and filers to identify and correct filing errors."
The tables in the SEC's "Private Funds Statistics: Fourth Calendar Quarter 2016," the most recent data available, now show 113 Liquidity Funds (including "Section 3 Liquidity Funds," which are Liquidity Funds from advisors with over $1 billion total in cash), up 10 funds from the prior quarter and up seven from a year ago. (There are 69 Liquidity Funds and 44 Section 3 Liquidity Funds.) The SEC receives Form PF reports from 39 Liquidity Fund advisers and 24 Section 3 Liquidity Fund advisers, or 63 advisers in total, seven more than last quarter (and five more than a year ago).
The SEC's table on "Aggregate Private Fund Net Asset Value" shows total Liquidity Fund assets at $565 billion, up $28 billion from Q3'16 and down $2 billion from a year ago (Q4'15). Of this total, $292 billion is normal Liquidity Funds while $273 billion is in Section 3 (large manager) Liquidity Funds.
A table on "Beneficial Ownership for Section 3 Liquidity Funds" shows $81 billion is held by Private Funds, $65 billion is held by Unknown Non-U.S. Investors, $52 billion is held by Other, $16 billion is held by SEC-Registered Investment Companies, $10 billion is held by Banking/Thrift Inst., $9 billion is held by Insurance Companies, $5 billion is held by Pension Plans, and $4 billion is held by Non-U.S. Individuals. Non-Profits and State/Muni Govt Pension Plans also held $1 billion each.
The tables also show that 80.9% of Section 3 Liquidity Funds have a liquidation period of one day, $253 billion of these funds may suspend redemptions, and $220 billion of these funds may have gates (out of a total of $270 billion). The Portfolio Characteristics show that these funds are very close to money market funds. WAMs average a short 29 days (40 days when weighted by assets), WALs are a very short 60 days (71 days when asset-weighted), and 7-Day Gross Yields average about 0.64% (0.62% asset-weighted). Daily Liquid Assets average about 45% while Weekly Liquid Assets average about 60%. Overall, these portfolios appear shorter with a much heavier Treasury exposure than money market funds in general; half of them (50.0%) are fully compliant with Rule 2a-7.
