The January issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Tuesday morning, features the articles: "Highlights of '18; Rising Yields, Retail Drive Assets Higher," which looks at rising money fund yields and asset growth in 2018; "U.S. Bancorp's Jim Palmer: Staying Focused on Cash," a Q&A featuring Jim Palmer, CIO of U.S. Bancorp Asset Management; and, "Top Money Funds of 2018; 10th Annual MFI Awards," which salutes the top-performing money funds for 2018, ranked by total returns. We've also updated our Money Fund Wisdom database with Dec. 31 statistics, and sent out our MFI XLS spreadsheet Tuesday a.m. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our January Money Fund Portfolio Holdings are scheduled to ship on Thursday, January 10, and our January Bond Fund Intelligence is scheduled to go out Tuesday, January 15.
MFI's "Highlights of '18," article says, "Rising yields pushed money fund assets over $3 trillion to their highest level in nearly a decade in 2018. Prime funds continued their gradual recovery, and returns more than doubled for the third straight year. Below, we take a backwards look at 2018 highlights and also provide a brief outlook for what may happen in 2019."
It continues, "Crane Data's numbers showed assets rose by $203.2 billion, or 6.7%, to $3.244 trillion in 2018. The Investment Company Institute's narrower asset collection settled at $3.047 trillion, up by $209.0 billion, or 7.4%. In 2017, assets rose slightly following five years of flat assets."
Our U.S. Bancorp "Profile", reads, "MFI interviews Jim Palmer, CIO of Minneapolis-based U.S. Bancorp Asset Management (USBAM), which manages the First American Funds, Inc. First American, the 14th largest money fund manager, is one of the few investment advisers focusing solely on cash and investment-grade fixed income. USBAM manages 34 funds with $58.3 billion (as of 11/30/18), according to Crane Data. We discuss the fund manager's outlook for 2019, the Fed, SMAs and a number of other topics below."
MFI says, "Tell us about your team." Palmer tells us, "I am the Chief Investment Officer of U.S. Bancorp Asset Management, which is a dedicated investment-grade, fixed-income manager. We have over $83 billion in assets under management as of the end of November 2018. We focus on three primary business lines. We are the investment adviser to the First American family of money market funds. We have a book of investment-grade, fixed-income SMA portfolios. Typically, these portfolios have maturity limits of five years and under, but we do have strategies going out to 15 years. We also manage the collateral reinvestment for the securities lending program. We run both taxable and tax efficient strategies."
We also ask, "What are your big issues for 2019? Palmer comments, "From an investment standpoint, I think [the biggest is] accurately predicting Fed rate changes for 2019, which we believe will be far less telegraphed than in the recent past. Obviously, making accurate predictions around what the Fed will do is crucial for money market fund and SMA absolute performance as well as for relative performance versus peers. We believe predicting the Fed will be more challenging this year for a couple of reasons. One, the Fed will be holding live press conferences at each meeting going forward, implying each meeting is live for a policy rate adjustment. Whereas [in] 2018, it was well signaled and accepted that at every other meeting we would be getting a rate hike."
MFI includes a sidebar, "Robinhood & Fintech." It notes that "Last week, Barron's took another shot at Robinhood and financial technology startups that have drawn the ire of regulators and consumers in their entry in to the savings and money market space. Their article, 'Fintech Takes the High Road, Only to Trip Up,' tells us, 'Robinhood, a start-up that offers no-fee stock and options trading, came out with a product on Dec. 13 that took direct aim at penny-pinching banks -- 'checking and savings' accounts that yield 3%.... But these were not checking and savings accounts."
Another sidebar, "European Reforms Go Live," explains, "BNY Mellon's Liquidity Funds are the latest to formalize plans to operate under the EU Money Fund Reforms that take effect Jan. 21. The fund group revealed changes to its BNY Mellon U.S. Dollar Liquidity Fund and BNY Mellon U.S. Treasury Fund, which will take place Jan. 14. A number of firms have already converted their money funds to be compliant with the pending reforms, including Aviva (9/1/18), BNP Paribas (11/11/18), and JP Morgan (11/30/18). Several firms -- BlackRock, Federated, and SSGA -- will convert late this week, on Jan. 11, and Morgan Stanley and UBS will also convert on Jan. 14."
Our January MFI XLS, with Dec. 31, 2018, data, shows total assets rising $72.6 billion in December to $3.244 trillion, after increasing $64.3 billion in November, $34.5 billion in October, $1.6 billion in Sept., and $29.2 billion in August. Our broad Crane Money Fund Average 7-Day Yield rose 15 bps to 2.04% during the month, while our Crane 100 Money Fund Index (the 100 largest taxable funds) was up 17 bps to 2.23% (its highest level since Oct. 2008).
On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA rose 15 bps to 2.47% and the Crane 100 rose to 2.50%. Charged Expenses averaged 0.43% (unchanged) and 0.27% (unchanged), respectively for the Crane MFA and Crane 100. The average WAM (weighted average maturity) for the Crane MFA and Crane 100 was 28 and 29 days, respectively (up 1 day). (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
