This past year was a welcome calm respite following the dramatic regulatory and portfolio changes of 2016, as slowly rising rates made it money funds' best year in almost a decade. Money fund managers benefited from the end of fee waivers, the slow but steady gradual recovery of Prime funds and assets in general and the return of that endangered species -- yield. It was the third straight year that rates moved higher, and the first in over a decade that yields moved higher more than one-quarter percent. We've selected the most important news stories of the past year below, as well as those that represent some of the major trends. Crane Data's Top 10 Stories of 2017 include (in chronological order): "In Memoriam: Money Fund Guru Bill Donoghue; Popularized MMFs in '80s" (2/13/17); "Ultra-Short Hits Big-Time at Inaugural Crane's Bond Fund Symposium (3/30/17); "Money Funds Yielding Over 1.0 Percent Makes News; More Coming Soon" (4/6/17); "BlackRock to Acquire Money Fund Trading Portal Tech Firm Cachematrix" (6/28/17); "AFP Liquidity Survey Shows Money Funds Up, Bank Deposits Inch Down" (7/14/17); "Dillon Eustace Reviews European Money Market Reforms; Disclosures" (8/23/17); "Assets Surge in August, Prime Shows Biggest Gain of Year; More ESMA" (8/25/17); "WSJ Calls Chinese Money Fund Yu'e Bao World's Largest MMF; Still Going" (9/14/17); "Money Funds Back Says Barron's; SSGA Webcast on Fed, Govt vs. Prime" (10/17/17); and, "Fed Hikes Rates Again to 1.25-1.5 Percent; Wells Funds, BOJ Research" (12/14/17).

On February 13, we paid tribute to one of the most important figures in the history of money market funds with the story, "`In Memoriam: Money Fund Guru Bill Donoghue; Popularized MMFs in '80s (2/13/17)." This piece says, "Crane Data was saddened to learn recently that the original money fund "guru," Bill Donoghue, passed away last month. Donoghue's Obituary explains, "William E. Donoghue, 75, of Seattle, Washington, died January 16, 2017 in Healdsburg, California. Donoghue was a respected author and investment expert best known for the growth of money market mutual funds, of which he raised awareness through newsletters, investment conferences, books, and television appearances." We excerpt from the obituary and reflect on our Peter Crane's relationship and history with Donoghue below." (Note: We also wrote about another money fund industry giant, Federated's John McGonigle, passing in September.)

Another top story of the year, "Ultra-Short Hits Big-Time at Inaugural Crane's Bond Fund Symposium (3/30/17)," highlighted the growth of money fund alternatives following the flight from Prime MMFs in 2016. We wrote, "Crane Data hosted its first Bond Fund Symposium conference in Boston last week, and the turnout and enthusiasm of attendees confirmed what many had thought, that the ultra-, ultra short or "conservative" ultra-short bond fund sector is one of the hottest and fastest-growing in the mutual fund industry. Bond Fund Symposium brought together 150 bond fund managers, marketers, and professionals with fixed-income issuers, investors, regulators and service providers for a day and a half of intense discussion on all things bond fund-related. We briefly review the some of the sessions below.... Mark your calendars too for [our] next [BFS], which will be March 22-23, 2018, in Newport Beach, Calif."

On April 6, we wrote, "Money Funds Yielding Over 1.0 Percent Makes News; More Coming Soon (4/6/17)," which discussed rising rates and money funds' comeback. Crane Data's News said, "While most recent articles on money funds are still dwelling on the negatives and the past (see Bloomberg's 6-months late piece, "Almost a Decade Later, U.S. Money Markets Are Yet to Recover"), a couple of recent ones have finally discovered the good news -- rising yields and funds now returning over 1%. Over the weekend, both Investment News and Barron's wrote about the growing number of funds yielding 1.0% or higher. IN featured "As Fed raises interest rates, money funds increase yields, some to more than 1%," while Barron's wrote, "Where to Find Safe Yields Above 1%." We quote from these two articles, and review the latest top-yielding funds and averages, below."

Another important trend in 2017, investment in "FinTech," was represented by our June 28 article, "BlackRock to Acquire Money Fund Trading Portal Tech Firm Cachematrix (6/28/17)." We explained, "A press release entitled, "BlackRock to Acquire Cachematrix," and subtitled, "Innovative Financial Technology to Enhance BlackRock's Risk and Cash Management Capabilities to Address Clients' Evolving Needs," explains, "BlackRock, Inc. has entered into a definitive agreement to acquire Cachematrix, a leading provider of financial technology which simplifies the cash management process for banks and their corporate clients in a streamlined, open-architecture platform. Cachematrix supports approximately $200 billion in client assets through relationships with many of the world's largest banks and asset managers." Online money market trading portals using Cachematrix software include those from Bank of America Merrill Lynch, Comerica, Fifth Third, HSBC, Huntington, PNC, SVB, UBS and Union Bank."

Yet another theme during the year was that of bank deposits peaking and flows reversing into money funds. In our July 14 News, we posted the piece, "AFP Liquidity Survey Shows Money Funds Up, Bank Deposits Inch Down (7/14/17). It says, "We wrote earlier this week that the Association for Financial Professionals released its "2017 AFP Liquidity Survey and quoted from the AFP's press release. (See our July 12 Link of the Day.) Today, we quote from the "Report of Survey Highlights," which is available to the public. It says, "[T]reasury and finance professionals remain cautiously optimistic. Safety is still of the utmost importance to them. Despite encouraging signs from the Federal Reserve -- particularly the Federal Open Market Committee’s decisions to gradually raise short-term interest rates -- organizations' investment policies are still not focused on yield. Indeed, a general feeling of apprehension is reflected in companies' heavy reliance on bank deposits as their investment vehicles of choice: 53 percent of all corporate cash holdings are still maintained at banks. That is slightly lower than the 55 percent reported last year.""

The passage of European Money Fund Reforms was another big theme of '17. Our piece, "Dillon Eustace Reviews European Money Market Reforms; Disclosures (8/23/17)," discussed the pending regulations, explaining, "As we mentioned in our August 9 Link of the Day, Irish law firm Dillon Eustace published a brief review of pending European Money Market Fund Reforms, entitled, "Ireland: A Guide To Money Market Funds Under The MMFR." The paper states, "After protracted negotiations, the Council and the European Parliament reached political agreement on the final text of the Regulation on MMFs (the "MMFR") in November 2016." We review the guide in more detail below, with a focus on pending disclosure requirements for European-domiciled money market funds." (See also our May 31 News, "ESMA Publishes Consultation on European MMF Regs; Fitch on European.")

On August 25, as we did many times in 2017, we wrote about the Prime comeback in "Assets Surge in August, Prime Shows Biggest Gain of Year; More ESMA (8/25/17)." Crane Data's News said, "Money fund assets jumped for the 5th week in a row and Prime MMFs rose for the 10th week straight, we learned from the Investment Company Institute's" latest report. Government money funds continued their rebound, also jumping for the fifth week in a row, after they showed outflows during most of the first half of the year. Prime MMFs rose for the 16th week in the past 18 (up $44.5, or 11.2%), and showed their biggest inflows of 2017 They've now increased by $63.4 billion, or 16.8%, year-to-date. We review the latest asset flows below."

We also wrote a number of times about the dramatic growth of Chinese money market funds in 2017. On Sept. 14, we featured, "WSJ Calls Chinese Money Fund Yu'e Bao World's Largest MMF; Still Going" (9/14/17). We wrote, "The Wall Street Journal featured an article entitled, "Meet Earth's Largest Money-Market Fund." Subtitled, "Alibaba Spinoff Yu'e Bao has accrued 370 million account holders and $211 billion in assets in just four years. As its model is replicated, the government is enforcing new regulations," It says, "In just four years, a money-market fund created by an affiliate of China's Alibaba Group Holding Ltd. has become the world's largest, providing millions of the country's savers a high-returning place to park their money. Now, it is facing pressure from regulators to slow down." We excerpt from the Journal's piece below. (See also our Sept. 6 News, "FT Says Chinese Issue New Rules on Money Funds.")"

On Oct. 17, we wrote, "Money Funds Back Says Barron's; SSGA Webcast on Fed, Govt vs. Prime (10/17/17)." It explains, "The latest Barron's magazine features the article, "Money-Market Funds Are Back," which discusses money fund yields moving over 1% and compares them with the dismal yields on brokerage sweep accounts. It says, "It's not much, but as the Federal Reserve edges short-term interest rates higher, money funds are finally starting to offer a yield -- sometimes even more than 1%. With a rate hike probable in December and three more expected in 2018, "money market funds will become more attractive than they've been in a decade," says Peter Crane, president of Crane Data. Consider the Vanguard Prime Money Market fund (ticker: VMMXX), yielding 1.13%, or the Fidelity Money Market fund (SPRXX), yielding 0.99%.""

Finally, we again wrote about rising rates in "Fed Hikes Rates Again to 1.25-1.5 Percent; Wells Funds, BOJ Research" (12/14/17). Crane Data explains, "The Federal Reserve raised interest rates yesterday for the third time in 2017 and the fifth time in 3 years. The Fed continues to expect 3 more hikes in 2018, and money market fund yields, which have been inching up in anticipation of the hike, should move higher in coming weeks. The Federal Reserve's FOMC statement says, "In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 1-1/4 to 1 1/2 percent. The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation." We review the Fed's latest move, as well as research pieces from Wells Fargo Funds and the Bank of Japan, below."

Another December article that sums up some of the year's trends is "U.S. SEC MMF Stats: Prime Rebound Streak 11 Mos; Assets, Yields Jump" (12/20/17). It explains, "The Securities and Exchange Commission released its latest "Money Market Fund Statistics" summary late Monday. It shows that total money fund assets were up sharply ($55.4 billion in November to $3.080 trillion, as Prime funds increased for the 11th month in a row. Prime MMF assets rose by $14.3 billion (after gaining $1.0 billion in October, $22.8 billion in September, and $16.8 billion in August) to $679.8 billion. Government money funds increased by $40.8 billion, while Tax Exempt MMFs rose by $0.2 billion. Gross yields moved higher for Prime, Government & Treasury, and Tax Exempt funds. The SEC's Division of Investment Management summarizes monthly Form N-MFP data and includes asset totals and averages for yields, liquidity levels, WAMs, WALs, holdings, and other money market fund trends. We review their latest numbers below."

For more 2017 News (and prior years going back to 2006), see Crane Data's News Archives. We'll continue to provide daily updates on the money fund marketplace in the coming year, so keep reading our News and Link of the Day commentaries in 2018. (Watch for our Bond Fund Intelligence News website to launch at some point in the coming months too.) Thanks to our readers, subscribers and supporters; we wish you all the best in the coming year. Happy New Year!

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