The March issue of our flagship Money Fund Intelligence newsletter, which was sent to subscribers Thursday morning, features the articles: "Bank Deposit Growth Slowest Since '95; MF Assets Stronger," which shows money funds growing faster than bank MMDAs; "PFM's Margolis & Rowe Discuss Cash Market, LGIPs," our profile of PFM Asset Management; and, "Last European Money Fund Conversions Imminent; Euro," which talks about the about the pending EU Reforms March 21 compliance deadline. We've also updated our Money Fund Wisdom database with Feb. 28 statistics, and sent out our MFI XLS spreadsheet Thursday a.m. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our March Money Fund Portfolio Holdings are scheduled to ship on Monday, March 11, and our March Bond Fund Intelligence is scheduled to go out Thursday, March 14.
MFI's "Bank Deposit Growth," article says, "U.S. money fund assets grew by 5.7% in 2018, their biggest increase since 2008, while bank money market deposit accounts grew a mere 1.7%, their slowest rate since 1995. Money funds added $145.9 billion and MMDAs gained $153.6 billion during 2018, while Small Time Deposits, consisting mainly of bank certificates of deposit, showed annual growth of 34.3% or $138.3 billion last year, according to the Federal Reserve's H.6 data."
It continues, "Assets of MMDAs turned negative in January 2019, down $41.6 billion (-0.4%) to $9.276 trillion, while money funds grew $64.1 billion (2.4%) in January (the latest data available) to $2.785 trillion."
Our PFM "Profile", reads, "This month, MFI interviews Marty Margolis, CIO of PFM Asset Management, and Jeffrey Rowe, Co-Head of PFM Asset Management's money market portfolio management team. We ask them about their firm, which is based in Harrisburg, Pa., and about recent developments in the money markets and the LGIP, local government investment pool, marketplace. Our Q&A follows."
MFI says, "Give us a little history." Margolis responds, "We began managing LGIPs in Pennsylvania in 1981, and we now manage 17 state-specific pools with total assets approaching $35 billion, as of 12/31/2018. They range in size and are across the country, and they're part of our fixed-income strategies, which total about $85 billion. Our strength over this long period has been in the short-intermediate, fixed-income market. We've always been focused on bringing value to the public sector, and more recently as we've grown, we found relevance and interest in the broader institutional marketplace. We are an institutional-only manager, and cash, enhanced cash, and short-intermediate duration remains the area that we have the most resources devoted to."
He adds, "I started the business that eventually became PFM Asset Management in 1978. I'd been on the staff of the Governor of Pennsylvania at that point for about five or six years. His second term was running out and I needed a job.... So, I went off with a colleague and we started a public sector financial advisory business in the attic of his house in Harrisburg. When we opened the first LGIP in Pennsylvania in 1981, the first trade was a repo done at a level of 18% and change."
Our "European Reforms" update says, "Just a handful of funds have yet to convert to LVNAV or VNAV ahead of the extended March 21 deadline for European Money Fund Reforms, but the stragglers should change Monday (Invesco) and on 3/21 (HSBC). In February, Aberdeen, Deutsche, Fidelity and UBS converted funds and tweaked lineups, and most others converted in November or January ahead of the original Jan. 21 deadline. (See our latest MFI International publication for the new classifications. Short-Term money funds will all be CNAV, LVNAV or VNAV, and Standard MMFs will be tracked.)
MFI includes a sidebar, "Federated 10-K on Risks," which reviews Federated Investors' latest Annual Report. It tells us, "Deregulation also is a focus of certain legislative efforts. The House Financial Services Committee advanced a bill seeking to reverse certain aspects of money market fund reform and a hearing on that bill was held in the Senate in June 2018, and efforts continue in Congress to get this legislation passed and signed into law. The proposed law would permit the use of amortized cost valuation by, and override the floating NAV and certain other requirements."
A news brief, entitled, "Money Fund Assets Keep Rising," says, "ICI's Latest 'Money Market Fund Assets' report shows money fund assets rising for 15 out of past 17 weeks (to $3.079 trillion), while Crane Data's MFI totals show assets increasing by $51.3 billion in February to $3.298 trillion, their 8th monthly increase in a row."
Our March MFI XLS, with Feb. 28, 2019, data, shows total assets rose by $56.4 billion in February to $3.303 trillion, after gaining $14.4 billion in January, $41.9 billion in December and $64.3 billion in November. Our broad Crane Money Fund Average 7-Day Yield rose 2 bps to 2.08% during the month, while our Crane 100 Money Fund Index (the 100 largest taxable funds) was up 1 basis point to 2.25% (its highest level since Oct. 2008).
On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA rose 1 basis point to 2.51% and the Crane 100 rose to 2.52%. Charged Expenses averaged 0.44% (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 29 and 29 days, respectively (unchanged). (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
