The August issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Wednesday morning, features the articles: "Money Fund Assets Surging in '19; No Signs of Slowdown," which reviews the recent strength in money market fund asset flows; "Northern's Peter Yi: Money Market Business Asymmetric," which profiles Northern Trust Asset management's Director of Short Duration Portfolio Management and Head of Taxable Credit Research; and, "Confusion Grows as 'ESG' Gets Hotter in Money Funds," which discusses the latest developments in the "green" money fund space. We've also updated our Money Fund Wisdom database with July 31 statistics, and sent out our MFI XLS spreadsheet Wednesday a.m. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our August Money Fund Portfolio Holdings are scheduled to ship on Friday, August 9, and our August Bond Fund Intelligence is scheduled to go out Wednesday, August 14.
MFI's "Money Fund Assets," article says, "Money market fund assets have been unusually strong in 2019, and the surge shows no signs of slowing. Quite the contrary. Assets jumped by $78.1 billion in July to a $3.622 trillion, according to Crane Data's latest totals. This is the highest level since March 2009 (Jan. 2009 was the record high) and follows gains of $42.3 billion in June, $81.2B in May and $113.3B in April. (April's numbers were inflated by the addition of the $108B American Funds Central Cash Fund.) Year-to-date, money fund assets have increased by $408.6 billion, or 12.7%, and over 12 months assets have jumped by $579.8 billion, or 19.1%."
It continues, "Year-to-date and over the past year, Prime money funds have led the gains, but Government & Treasury MMFs have grown faster over the past 3 months. Prime MMFs increased by $282.6 billion, or 38.8%, YTD, and they've grown by $327.7 billion, or 48.0%, over 12 months. Govt (& Treasury) funds have grown by $136.3 billion, or 5.8%, YTD and $247.2 billion, or 11.1%, over 1-year. The past 3 months, Prime MMFs have grown by $42.8B, or 4.4%, vs. $157.2B, or 6.8%, for Govt MMFs."
Our Northern profile reads, "This month, MFI speaks with Peter Yi, Northern Trust Asset Management's Director of Short Duration Portfolio Management and Head of Taxable Credit Research. We discuss Northern's history and presence in the cash sector, the latest challenges and issues facing money market funds and a number of other issues below. Our Q&A follows."
MFI says, "Give us some history." Yi responds, "Northern Trust Asset Management has a very rich history managing cash and other liquidity products. We've been managing money markets since the 1970s, when our trust department created its first cash sweep vehicle. We view cash management to be a core capability and a product that caters incredibly well to our institutional asset servicing business, as well as to our wealth management franchise. We're managing about $238 billion in AUM across our money market funds and other liquidity products. History tells us that experience and leadership are critical for the money market business. It's served us well in successfully navigating different credit and interest rate cycles."
He adds, "Personally, I've been at Northern Trust since 2000, and we've seen significant growth in our liquidity business since then. I oversee the teams that manage our 2a-7 money market mutual funds, our common and collective STIFs, our offshore global cash funds and our separately managed accounts, as well as our security lending reinvestment. I also recently took over as head of our taxable credit research team that covers strategies ranging from money market all the way to high yield across the yield curve."
Our "ESG" update says, "Over the past month, we saw several developments in the 'ESG,' 'green' and 'social' money fund space, including a WSJ article on a converted Goldman 'social' fund and the launch of the first 'offshore' ESG money funds. While interest grows in the sector, so do questions about what exactly should be considered ESG and whether there is any hope of standardization."
It continues, "It appears you don't need to be 'environmental' to be an 'ESG' fund, at least according to The Wall Street Journal. They write in 'Apple, JetBlue Buy Goldman ESG Cash Fund,' that, 'Apple Inc., JetBlue Airways Corp. and other U.S. corporations are parking cash in a new socially conscious offering managed by Goldman Sachs Group Inc. The $1.5 billion money-market fund helps corporate treasurers steer money to bond brokerages operated by minorities, women and veterans, reflecting a growing shift toward investing with environmental, social and governance, or ESG, principles."
The latest MFI also includes the News Brief, "Fed Cuts, Yields Inch Lower." It says, "The Federal Reserve cut short-term interest rates for the first time since December 2008, lowering its Federal funds target range by 1/4 point to 2.00-2.25%. Money fund yields, which have been inching lower for 2 months in anticipation of the cut, have fallen by about 10 bps since."
Our July MFI XLS, with June 30, 2019, data, shows total assets rose by $78.1 billion in June to $3.622 trillion, after rising $40.0 billion in June, $91.1 billion in May and $105.7 billion in April (this included the addition of the $108 billion American Funds Central Cash Fund). Our broad Crane Money Fund Average 7-Day Yield fell to 1.98% during the month, while our Crane 100 Money Fund Index (the 100 largest taxable funds) was down 5 basis points to 2.13%.
On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA fell 3 basis points to 2.40% and the Crane 100 fell to 2.40%. Charged Expenses averaged 0.42% (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 31 days, respectively (up one day for both). (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
