The Financial Times writes, "Ant Financial's money market fund shrinks to 2-year low," which discusses the latest news on "The world's largest money-market mutual fund, Ant Financial's Tianhong Yu'E Bao." The FT explains that the fund "was at its smallest [in] two years by the end of last year as Chinese regulators pressured it to downsize over concerns about systemic risk." We review the latest news on Chinese money funds, we revisit the pending launch of BlackRock LEAF, an environmental money fund, and we summarize our latest Weekly Money Fund Portfolio Holdings below.
The FT piece tells us, "The shrinkage is a sign that Ant, the financial services business of Alibaba Group, is shifting away from marketing its own financial products to serving as a platform for other groups to access its huge customer base. It also reflects the impact of recent monetary easing by the People's Bank of China, which has pushed down money market interest rates, reducing the attractiveness of money market funds compared with other investments."
It adds, "Ant Financial owns a 51 per cent stake in Tianhong Asset Management, which manages the flagship fund. But the Yu'E Bao platform now offers 13 other money market funds from outside fund managers, which offer the same seamless integration with Ant's online payments service, Alipay."
Finally, the article says, "In 2017, China's securities regulator published new rules that imposed reserve requirements on money market funds and restricted their freedom to invest in higher-yielding but less liquid assets. In June, the agency limited instant redemptions to Rmb10,000 ($1,480) per day in an effort to control liquidity risk. In February last year, Tianhong Yu'E Bao voluntarily imposed restrictions on the total amount that a single user could invest in the fund. In May, it started introducing new money funds on to the platform. Non-Tianhong funds managed $190bn in assets by the end of last year."
In U.S. money fund news, website SustainableInvest.com, run by Moody's money fund rating veteran Henry Shilling and Steve Schoepke, review a recent SEC filing and press release announcing the launch the BlackRock Liquid Environmentally Aware Fund (LEAF), a Prime Institutional money fund which will become the second "ESG" money market fund. (See our Jan. 23 News, "BlackRock to Launch Environmental MF.")
The article notes that the LEAF fund "will invest in companies and counterparties with a better than average performance in environmental practices and, at the same time, avoid certain companies and counterparties." It says, "BlackRock is making a commitment to purchase or retire carbon offset credits with a portion of its revenues from the fund and make an annual payment to the World Wildlife Fund (WWF) to help further global conservation efforts."
Adds SustainableInvest.com, "The announcement follows the rebranding in November 2018 of the $329.3 million (as of Dec. 31, 2018) DWS ESG Liquidity Fund, a variable net asset value money market fund consisting of three share classes. While both are variable net asset value funds, the sustainable approaches and methodologies vary."
Shilling and Shoepke write, "[T]he DWS ESG Liquidity Fund integrates ESG considerations in making investment decisions. That is to say, the fund's investment selections also account for social and governance considerations rather than being limited to environmental practices. That said, the fund also employs negative screening. Formerly called the DWS Variable NAV Money Market Fund, the DWS fund, with its high minimum investments, is managed by DWS (formerly Deutsche Asset Management)."
They also write, "It is also noteworthy to mention that a number of short as well as ultra-short duration sustainable mutual funds and ETFs were also launched in the last year. These include the Hartford Short Duration ETF, the Calvert Ultra-Short Duration Income NextShares ETF and the TIAA-CREF Short Duration Impact Bond Fund."
Sustainableinvest.com adds, "The initial and by far the largest audience for LEAF as well its competitor money funds is likely to consist of the various institutional investor segments that have embodied sustainable investing strategies.... This is a growing segment that, in particular, includes foundations, university endowments, family owned offices/wealth management platforms, public defined benefit plans as well as defined contribution 403(b) plans." For more about ESG Money Market Funds, see also our Sept. 7, 2018 News, "DWS ESG Liquidity Goes Live, and our Aug. 13 News, "DWS Converts Variable NAV to DWS ESG Money Fund, First ESG Offering."
In other news, Crane Data published its latest Weekly Money Fund Portfolio Holdings statistics and summary Tuesday, which tracks a shifting subset of our monthly Portfolio Holdings collection. The latest cut, with data as of Friday, Jan. 25, includes Holdings information from 81 money funds (up from 46 on Jan. 18), representing $1.411 trillion, compared to $850.0 billion in the prior week. That represents 45.2% of the $3.124 trillion in total money fund assets tracked by Crane Data. (For our latest monthly Money Fund Portfolio Holdings numbers, see our Jan. 11 News, "Jan. MF Portfolio Holdings: Treasuries, Repo Jump; FICC Biggest Repo.")
Our latest Weekly MFPH Composition summary shows Government assets again dominated the holdings list with Repurchase Agreements (Repo) totaling $515.5 billion (a rise from $314.8 billion on Jan. 18), or 36.5% of holdings, Treasury debt totaling $452.1 billion (up from $273.1 billion), or 32.1%, and Government Agency securities totaling $262.9 billion (up from $160.1 billion), or 18.6%. Commercial Paper (CP) totaled $69.0 billion (down from $40.4 billion), or 4.9%, and Certificates of Deposit (CDs) totaled $50.2 billion (up from $34.2 billion), or 3.6%. A total of $34.3 billion or 2.4% was listed in the Other category (primarily Time Deposits), and VRDNs accounted for $26.4 billion, or 1.9%.
The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $452.1 billion (32.1% of total holdings), Federal Home Loan Bank with $194.5B (13.8%), BNP Paribas with $59.4B (4.2%), RBC with $57.2B (4.1%), Federal Farm Credit Bank with $50.7B (3.6%), Fixed Income Clearing Co with $32.5B (2.3%), Credit Agricole with $30.5B (2.2%), Barclays PLC with $27.6B (2.0%), HSBC with $25.6B (1.8%), and J.P. Morgan with $24.5B (1.7%).
The Ten Largest Funds tracked in our latest Weekly Holdings update include: Fidelity Inv MM: Govt Port ($113.6B), Goldman Sachs FS Govt ($99.9B), BlackRock Lq FedFund ($83.2B), Wells Fargo Govt MMkt ($73.9B), Federated Govt Oblig ($71.7B), BlackRock Lq T-Fund ($65.3B), Goldman Sachs FS Trs Instruments ($59.5B), Dreyfus Govt Cash Mgmt ($56.6B), Morgan Stanley Inst Liq Govt ($55.0B), and Fidelity Inv MM: MMkt Port ($48.6B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary.)
