The October issue of our flagship Money Fund Intelligence newsletter was sent out to subscribers Friday morning. It features the articles: "Money Fund Reform One Year Later; Slow Recovery, Changes," which reviews the past year since radical reforms were implemented, "IMMFA's Lowe on European Money Fund Reforms, LVNAV," which excerpts from the IMMFA Secretary General's recent keynote speech, and, "Worldwide MMF Assets: China Surges, Ireland Up," which reviews MMF assets in different countries. We also updated our Money Fund Wisdom database with Sept. 30, 2017, statistics, and sent out our MFI XLS spreadsheet Friday a.m. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our October Money Fund Portfolio Holdings are scheduled to ship Tuesday, October 10, and our October Bond Fund Intelligence is scheduled to go out Friday, October 13.
MFI's "Money Fund Reforms" article says, "One year ago, regulatory changes dramatically transformed the money fund landscape. (See our Oct. 14, 2016, News, "SEC's Money Fund Reforms Go Live; NAVs Float, Emergency Gates, Fees.") In addition to triggering a massive $1.2 trillion shift from Prime and Tax Exempt money funds into Government funds, a host of other changes were implemented. Given the major stresses, money funds have had a surprisingly good first year under the new regime, with a steady but gradual recovery of Prime funds. Below, we celebrate the first birthday of MMF Reforms, look back at flows over the past year, and examine the continued changes in the money fund arena."
The piece continues, "Though the months leading up to October 2016 saw dramatic asset shifts, the year since then has been remarkably calm. Very gradually rising rates, a slow, steady return of Prime assets, and the lack of any credit events to test the new 30% weekly liquidity thresholds and emergency gates and fees have allowed money fund managers much needed rest and revenue recuperation."
Our IMMFA Keynote piece reads, "This month, Money Fund Intelligence recaps the keynote session from our 5th Annual European Money Fund Symposium, which took place early last week on Paris, France. The segment, "IMMFA Update: The State of European CNAV MMFs," featured IMMFA Secretary General Jane Lowe. She told the record EMFS audience, "I'm going to say a little but about the scope of regulatory reform, and then move on to ... some of the cultural differences that I think trick people up if they come from one side of the pond or the other."
Lowe explains, "Rather than having what you've got at the moment, which is a regulated product where all the investments controls are kind of backed up by what the rating agencies do, the IMMFA Code, etc., [the new regulations] will be imbedded in law, common across Europe. [This] is game changing in ways that you probably won't notice at first but will [grow] over time. In a way that the people in the U.S. totally understand the SEC's [Rule] 2a-7, for example, they know what it is.... Even though the regulation has many bits in it that are difficult, not well done, etc., overall it will probably be pretty positive for the industry. That's my prediction. Also, I should mention that we have a Code that will not be needed once this reform comes into place, [though a] reduced form may very well be needed."
She continues, "Looking at the CNAV [industry], it has been pretty steady, even across the crisis. When you reach the period of negative yield, it is a little bit choppier on the Euro. The VNAV has had a much more dramatic set of changes, but also showing quite a steady picture. I think the drop off after the crisis, which you can see pretty clearly there, had to do with money funds that left the market. In Germany, there are relatively few money funds relative to pre-crisis. [On the other hand], the French money fund industry is a very big one and has shown very obvious growth.... Obviously with the Euro going into negative yield that sort of really dampened down activity. But it hasn't disappeared; it is in a modest upswing."
Our "Worldwide" update says, "The Investment Company Institute released its "Worldwide Regulated Open-End Fund Assets and Flows Second Quarter 2017" Wednesday. The latest data collection on mutual funds in other countries (as well as the U.S.) shows that money fund assets globally rose by $172.2 billion, or 3.3%, in Q2'17, led by a huge jump in Chinese money funds. U.S. money funds fell while Irish MMFs rose. MMF assets worldwide have increased by $333.7 billion, or 6.7%, the past 12 months."
The article continues, "China, Ireland and Luxembourg showed the biggest asset increases in Q2'17, while China, Japan, Luxembourg, France and Ireland showed the largest increases over 12 months. The U.S. and Belgium posted the largest declines over the past year. We review the latest Worldwide MMF totals below."
A sidebar, "Fed Z.1: Securities Lending Bigger Than Corps in MMFs," explains, "The Federal Reserve's latest quarterly "Z.1 Financial Accounts of the United States" statistical survey (formerly the "Flow of Funds"), Second Quarter, 2017, shows that the Household Sector remains the largest investor segment in money market funds; assets here fell in Q2 after rising in Q1. The next largest segments, Funding Corporations (primarily Securities Lending reinvestment money) and Nonfinancial Corporate Businesses, also saw assets decline in the second quarter."
Our October MFI XLS, with Sept. 30, 2017, data, shows total assets increased $32.0 billion in September to $2.929 trillion after increasing $68 billion in August and $32.6 billion in July, but decreasing $20.2 billion in June. (Note that we added $67.3 billion in new funds in April.) Our broad Crane Money Fund Average 7-Day Yield was up 1 basis point to 0.70% during the month, while our Crane 100 Money Fund Index (the 100 largest taxable funds) was also up 1 bp to 0.87%.
On a Gross Yield Basis (7-Day) (before expenses were taken out), the Crane MFA fell 1 bp to 1.14% and the Crane 100 fell 2 bps to 1.15%. Charged Expenses averaged 0.44% and 0.29% for the Crane MFA and Crane 100, respectively. The average WAM (weighted average maturity) for the Crane MFA was 32 days (down one day from last month) and for the Crane 100 was 31 days (unchanged from last month). (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
