Last week, the SEC posted its latest quarterly "Private Funds Statistics report, which summarizes Form PF reporting and includes some data on "Liquidity Funds." The publication shows that overall Liquidity fund assets were down in the latest reported quarter to $573 billion (from $584 billion in Q4). A previous press release, entitled, "SEC Staff Supplements Quarterly Private Funds Statistics" tells us, "The U.S. Securities and Exchange Commission staff ... published a suite of new data and analyses of private fund statistics and trends. The Private Funds Statistics ... offers investors and other market participants valuable insights by aggregating data reported by private fund advisers on Form ADV and Form PF. New analyses include ... characteristics of private liquidity funds."
The SEC's "Introduction" explains, "This report provides a summary of recent private fund industry statistics and trends, reflecting data collected through Form PF and Form ADV filings. Form PF information provided in this report is aggregated, rounded, and/or masked to avoid potential disclosure of proprietary information of individual Form PF filers. This report reflects data from Second Calendar Quarter 2017 through First Calendar Quarter 2019 as reported by Form PF filers." (Note: Crane Data believes many of the liquidity funds are securities lending reinvestment pools and other short-term investment funds; these are not the "3c-7" private liquidity funds being marketed by Federated, JPMorgan and some others.)
The tables in the SEC's "Private Funds Statistics: First Calendar Quarter 2019 the most recent data available, now show 117 Liquidity Funds (including "Section 3 Liquidity Funds," which are Liquidity Funds from advisers with over $1 billion total in cash), down 2 from the last quarter and up 2 from a year ago. (There are 72 Liquidity Funds and 45 Section 3 Liquidity Funds.) The SEC receives Form PF reports from 39 Liquidity Fund advisers and 22 Section 3 Liquidity Fund advisers, or 61 advisers in total, down 2 from last quarter (down 1 from a year ago).
The SEC's table on "Aggregate Private Fund Net Asset Value" shows total Liquidity Fund assets at $573 billion, down $11 billion from Q4'18 and down $3 billion from a year ago (Q1'18). Of this total, $288 billion is in normal Liquidity Funds while $285 billion is in Section 3 (large manager) Liquidity Funds. The SEC's table on "Aggregate Private Fund Gross Asset Value" shows total Liquidity Fund assets at $581 billion, down $8 billion from Q4'18 and up $1 billion from a year ago (Q1'18). Of this total, $292 billion is in normal Liquidity Funds while $289 billion is in Section 3 (large manager) Liquidity Funds.
A table on "Beneficial Ownership for Section 3 Liquidity Funds" shows $84 billion is held by Private Funds (29.6%), $60 billion is held by Unknown Non-U.S. Investors (20.9%), $57 billion is held by Other (20.0%), $19 billion is held by SEC-Registered Investment Companies (6.6%), $10 billion is held by Insurance Companies (3.5%), $4 billion is held by Non-U.S. Individuals (1.3%) and $1 billion is held by Nonprofits (0.5%).
The tables also show that 77.9% of Section 3 Liquidity Funds have a liquidation period of one day, $273 billion of these funds may suspend redemptions, and $237 billion of these funds may have gates (out of a total of $510 billion). The Portfolio Characteristics show that these funds are very close to money market funds. WAMs average a short 30.8 days (36.5 days when weighted by assets), WALs are a short 55.4 days (64.1 days when asset-weighted), and 7-Day Gross Yields average 2.3% (2.3% asset-weighted). Daily Liquid Assets average about 50.2% (45.7% asset-weighted) while Weekly Liquid Assets average about 63.9% (57.5% asset-weighted). Overall, these portfolios appear shorter with a much heavier Treasury exposure than money market funds in general; almost half of them (46.7%) are fully compliant with Rule 2a-7.
In other news, rates on brokerage sweep accounts, bank accounts and money market funds continue inching lower in the third week following the Federal Reserve's most recent rate cut. (See our Oct. 31 Link of the Day, "Fed Cuts Rates a Third Time.") Our latest Brokerage Sweep Intelligence publication, with data as of Friday, Nov. 15, shows Schwab, RW Baird and UBS cutting rates over the past week. Raymond James and Wells Fargo cut rates the prior week.
RW Baird dropped rates for its 100K balance tier by 12 basis points to 0.33%. Schwab cut rates on its lower tiers; the 100K balance now pays 0.06%, down two basis points from the previous week. TD Ameritrade cut rates only on its 100K tier; it dropped 1 bp to 0.01%. Finally, UBS cut rates on all tiers; its 100K balance dropped by 5 bps to 0.05%. Two weeks ago, Raymond James trimmed rates across the board with its 100K tier balance down to 0.08%. Wells Fargo cut its 100K balance to 0.07%.
Our Crane Brokerage Sweep Index inched down to 0.15% from 0.17% in the week ended November 15 (for balances of $100K). E*Trade and TD Ameritrade currently have the lowest rate for balances at this level (0.01%). Meanwhile, Fidelity continues to have the highest sweep rate (0.82%). (Fidelity also have a higher-yielding money fund option for new accounts.) UBS, Merrill and Morgan Stanley are all paying 0.05%. Schwab is paying 0.06%, Wells Fargo is paying 0.07% and Raymond James is paying 0.08%. Ameriprise is paying 0.10%, and RW Baird is paying 0.33% for balances of $100K.
Money market fund yields are also inched lower over the past week. Our Money Fund Intelligence Daily shows the Crane Money Fund Average 7-day yield falling by 0.02% to 1.40% in the week through 11/15. Our Crane 100 MF Index also dropped 0.02% to 1.52% over the past week. Treasury Inst, Government Inst and Prime Inst average yields were all down 2 bps too, to 1.43%, 1.47% and 1.61%, respectively. Treasury Retail MFs currently yield 1.15%, (down 0.01%), Government Retail MFs yield 1.18% (down 0.05%) and Prime Retail MFs yield 1.44% (down 0.03%). Tax-exempt MF 7-day yields fell to 0.73%, unchanged from the previous week.
In related sweep news, UBS will be removing two money market fund options from its sweep lineup. A Prospectus Supplement filing for UBS Select Government Capital Fund [and] UBS Select Treasury Capital Fund tells us, "The purpose of this supplement is to update certain information in the prior prospectus supplements dated September 10, 2019 and October 3, 2019, which related to the planned liquidation of UBS Select Government Capital Fund and UBS Select Treasury Capital Fund (the 'Liquidating Funds'). In particular, UBS Financial Services Inc. has determined that November 18, 2019, will be the effective date of changes to its sweep options and, accordingly, the liquidation date will be on or about the same date. Additional information regarding the liquidation of the Liquidating Funds is outlined in the prospectus supplement dated September 10, 2019."
A filing for UBS Liquid Assets Government Fund adds, "At a meeting held on September 9, 2019, the Board of Trustees of UBS Series Funds approved certain changes to the eligibility requirements of the UBS Liquid Assets Government Fund.... The fund offers its shares primarily to "eligible benefit plans," which include: qualified plans with a pooled structure and 403(b) plans, including, in the case of both such plans, accounts opened by participants therein. You must be a client of UBS Financial Services Inc. to purchase fund shares. The fund is offered as a sweep fund for the automatic investment of free credit balances in your securities account."
