The December issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Friday morning, features the articles: "MMF Assets Kill It in 2019; Signs of Slowdown in '20?," which discusses torrid but slowing money fund asset growth; "Cavanal Hill's Kitchen: There Will Be Yield," which profiles VP & Senior Money Market Portfolio Manager Mike Kitchen; and, "Dreyfus 'Impact' Govt MMF Opens Social Front vs. ESG," which discusses the newest breed of social money funds. We've also updated our Money Fund Wisdom database with Nov. 30 statistics, and sent out our MFI XLS spreadsheet Friday a.m. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our December Money Fund Portfolio Holdings are scheduled to ship on Tuesday, Dec. 10, and our Dec. Bond Fund Intelligence is scheduled to go out Friday, Dec. 13.
MFI's "MMF Assets Kill It" article says, "Money fund assets moved higher again in November, and they're on pace to have their best year in a decade. But there are signs of a slowdown, and flat to lower rates in 2020 should begin tempering 2019's smoking inflow pace. Instead of 20% returns like we've seen this year, we should be lucky to get 10% in '20."
It continues, "Crane Data shows money fund assets increasing by $40.9 billion in November to $3.918 trillion, following gains of about $80 billion the previous 4 months in a row. While we've still got a shot at breaking $4.0 trillion by year end, it'll take a big December to do it."
Our "Cavanal Hill" piece reads, "This month, MFI interviews Cavanal Hill Investment Management VP & Senior Money Market Portfolio Manager Mike Kitchen, who runs Cavanal Hill's Government Securities Money Market Fund and U.S. Treasury Fund, Senior Tax Free Fixed Income Manager Rich Williams, and Repo Trader Ryan Friedl. They tell us about the history and latest priorities at Cavanal Hill, whose new tagline is 'Long live your money.' We also discuss the outlook and challenges facing money market funds in general. Our Q&A follows."
MFI says, "Give us some history. Kitchen responds, "Cavanal Hill began managing its first money market fund in the '90s. Our wealth management group itself traces its roots back to 1910, when Harry Sinclair, of Sinclair Oil, and some other oil men, founded what's now called Bank of Oklahoma. What we at BOK's Wealth Management Division, which Cavanal Hill is part of, traditionally do is, we manage money for ultra-wealthy clients and institutions, including one of the nation's oldest charitable trusts. We've got over 35 investment strategies, taxable fixed income, tax free, fundamental and quantitative equity and, of course, cash management."
He continues, "Cavanal Hill itself has about $8.0 billion under management and roughly $3.0 billion of that is in money market funds. According to MFI, we're the 36th largest out of 67 money fund families. So we're bigger than one might think.... There's a presence not just in Oklahoma, but places like Arkansas, Arizona, Texas and Colorado. We've got a big footprint in the heartland.... I've been here 20 years and this is all I've done here, manage the money market funds."
When asked, "What's your major priority?" Kitchen tells us, "It's always the same. It's the classic money fund value proposition -- balancing safety, liquidity and yield. We're always responsive to the competitive environment. As you know, right now we have a Government fund and a Treasury fund. Before 2016, we had a Prime fund and a Treasury fund. But like so many others, we transitioned the Prime to a government security or 'govie,' due to the 2016 Money Fund reforms."
Our "Impact" update says, "Dreyfus recently filed to change one of its Government money market mutual funds into a new breed of 'impact' or socially responsible funds, making it the second fund to date to funnel business through minority and other 'diversity' dealers. In related news, one of these diversity dealers, Mischler Financial, is ramping up its presence in 'cash'. (See yesterday's News, 'Mischler Financial Joins 'Impact' or Social Money Market Investing Wave.')"
The Prospectus Supplement for the $4.6 billon Dreyfus Government Securities Cash Management Fund tells us, "BNY Mellon Investment Adviser, Inc. generally will seek to place, over time, a majority of the aggregate dollar value of purchases and sales orders for Dreyfus Government Securities Cash Management's portfolio securities with dealers that are owned by minorities, women, disabled persons, veterans and members of other qualified and recognized diversity and inclusion groups, subject to the Adviser's duty to seek the best execution for the fund's orders."
The latest MFI also includes the News brief, "MMF Yields Flatten at 1.5%." It tells us, "Rates on money funds and brokerage sweep accounts are flattening out after declining in the weeks after the Fed's third, and possibly final, rate cut on Oct. 30. Our flagship Crane 100 MF Index inched down 0.01% to 1.50% over the past month. The Crane 100 is down from 1.81% on Sept. 30 and down from 2.18% June 30 and 2.23% at the start of 2019."
A second News piece, "SEC Warns on Brokerage Sweeps," reads, "Stephanie Avakian, the SEC's Co-Director, Division of Enforcement, commented in a recent speech, "We are also looking at cash sweep arrangements. Cash in advisory accounts is often automatically swept into a money market mutual fund or a bank deposit sweep program. A dually-registered adviser or an adviser with an affiliated broker-dealer may have a financial interest, a conflict, in recommending one cash investment over another."
Our December MFI XLS, with Nov. 30 data, shows total assets rose by $40.9 billion in November to $3.917 trillion, after rising $85.2 billion in October, $80.2 billion in September and $86.9 billion in August. Our broad Crane Money Fund Average 7-Day Yield fell to 1.36% during the month, while our Crane 100 Money Fund Index (the 100 largest taxable funds) was down 17 basis points to 1.50%.
On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA fell 16 basis points to 1.76% and the Crane 100 fell to 1.76%. Charged Expenses averaged 0.40% (down one basis point from last month) and 0.26% (unchanged), respectively for the Crane MFA and Crane 100. The average WAM (weighted average maturity) for the Crane MFA and Crane 100 was 34 and 37 days, respectively (up one day for both the Crane MFA and Crane 100). (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
