The May issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers over the weekend, features the articles: "Money Fund Expenses Higher in ‘17; Crane Data Turns 12," which discusses the decline in fee waivers due to higher yields; "Investortools' James Morris on Money Fund Software," which interviews the VP of a money fund software tool provider; and, "FDIC Sweep Rates Rising, Feeling Pressure from MMFs," which highlights a recent increase in brokerage sweep yields. We've also updated our Money Fund Wisdom database with April 30, 2018, statistics, and sent out our MFI XLS spreadsheet Saturday. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our May Money Fund Portfolio Holdings are scheduled to ship on Wednesday, May 9, and our May Bond Fund Intelligence is scheduled to go out Monday, May 14.

MFI's "Expenses" article says, "ICI published “Trends in the Expenses and Fees of Funds, 2017” recently, which finds that while overall mutual fund expenses continue lower, money market fund expenses rose for the second year in a row on declining fee waivers. ICI writes, 'The average expense ratios for money market funds rose 5 basis points in 2017 to 0.25%. This increase was indirectly related to the Federal Reserve raising short-term interest rates three times in 2017. These actions prompted fund advisers to continue paring expense waivers.'"

Our lead piece continues, "They tell us, 'On an asset-weighted basis, average expense ratios incurred by mutual fund investors have fallen substantially over the past two decades…. The average expense ratio for money market funds dropped from 0.52% to 0.25% over this period.'"

MFI's latest Profile reads, "This month, Money Fund Intelligence interviews James Morris, a Vice President at Investortools, an Illinois-based company that produces portfolio management and compliance software. We talk about their history and software products, recent regulatory changes, and cash separate accounts. Our interview follows."

MFI says, "Tell us about your beginnings. Morris explains, "Investortools goes all the way back to 1983 … back to the early days. We started out focusing on tax exempt mutual funds, and have grown our product suite from our initial product, which is called ‘Perform.’ We now offer of a handful of products that all can be integrated into one common software suite, or used on a standalone basis. Our presence in the money fund space started around the middle 1990s."

Morris continues, "I have been with the company for over 17 years now, and our presence in the money fund space predates that. Our money fund product is called ‘Smart,’ which stands for Short Maturity Analytic Reporting Tool. We have seen some pretty substantive growth in this space, as the fixed income market has evolved over the past couple of decades. About half of our business relates to separate accounts or SMAs. I use the term broadly -- I'm talking about institutional SMAs, private clients, high net worth, family office, and retail separate accounts."

MFI also says, "Tell us more about the products." Morris responds, "If you are in the short maturity space, Smart is the focal point of our products. So that means it incorporates all of our 2a-7 compliance and stress testing with reports and graphs oriented to short maturity. It also is designed to integrate into that suite I mentioned, so you can have Perform for your long portfolios, and Smart for the short and ultrashort portfolios, all integrated with CreditScope, which provides the credit team instant answers to how much credit exposure they have."

Our "FDIC Sweep" article says, "Brokerage 'sweep' providers continue to feel the heat from higher rates, but they also continue to shift assets into bank deposits and away from money market funds. Our Brokerage Sweep Intelligence product shows the average yield for FDIC insured sweeps has risen to 0.18% (for accounts of $100K) from 0.02% a year ago. (See our table on p. 8 too.) Like we did 2 years ago in MFI, we briefly review some of the recent changes in this $1 trillion market below."

It continues, "FDIC-insured sweeps now make up the vast majority of brokerage sweep cash, but this could change as money fund yields continue to rise. The signals are mixed though. A handful of recent articles have discussed brokerage clients’ growing frustration with near-zero yields, but brokerages continue to lag in raising rates and continue to funnel cash into banks. (See our “WSJ Hits Brokerage Sweep Rates.”)

The piece adds, "Charles Schwab, the 8th largest manager of money market mutual funds with $138.8 billion in assets as of April 30, is the latest and one of the last brokerages to shift sweep assets from money funds to bank deposits. But their shift may prove to be a contrarian indicator. (They’ve also have been hedging by offering low expense and high-yielding “position” money funds.) In Q1, they shifted $25 billion from MMFs to deposits (and it looks like this continued in April)."

Our May MFI XLS, with April 30, 2018, data, shows total assets increased $203 million in April to $2.984 trillion, after decreasing $52.6 billion in March, increasing $37.2 billion in February, and decreasing $54.3 billion in January. Our broad Crane Money Fund Average 7-Day Yield was up 6 basis points to 1.35% during the month, while our Crane 100 Money Fund Index (the 100 largest taxable funds) was up 8 bps to 1.55%.

On a Gross Yield Basis (7-Day) (before expenses were taken out), the Crane MFA rose 6 bps to 1.80% and the Crane 100 rose 8 bps to 1.84%. Charged Expenses averaged 0.45% and 0.28% (unchanged), respectively for the Crane MFA and Crane 100. The average WAM (weighted average maturity) for the Crane MFA and Crane 100 were 30 and 29 days, respectively (down 2 days from last month). (See our Crane Index or craneindexes.xlsx history file for more on our averages.)

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