This past year saw money fund assets jump by 20%, money fund yields fall back by one-third and the launch of a number of special-interest funds, like ESG, veteran-affiliated and social MMFs. Money fund managers benefited from higher assets, and flows remained strong even though rates fell and bond and equity markets had banner years. Rates fell from 2.25% to 1.5% in 2019, following four straight years of increases, and money funds continued to hold substantial yield advantages over bank deposits and brokerage sweep accounts. We've selected some of the most important news stories of the year 2019 below, and some that represent some of the major trends over the past year.
Crane Data's Top 10 Stories of 2019 include (in chronological order): "European Money Market Funds Granted Extension for Reforms, March 21" (1/14/19); "Edward Jones Latest to Shift to FDIC Sweeps; ICI: MMFs Break $3T in '18" (1/31/19); "More on Green, ESG Money Funds: What's Not There, Barron's; N-MFP" (2/11/19); "China's Yu'e Bao No Longer World's Largest MMF; Repo Cap? Fed Minutes" (4/11/19); "Academy Securities, JPMAM Launch First Veteran-Affiliated Money Fund" (5/16/19); "Oppenheimer Funds Now Invesco Oppenheimer; Dreyfus Keeping Name" (6/3/19); "Cash Next Big Thing for Robos Says Barron's; Betterment Hikes Rates" (7/30/19); "Cash of the Titans: Schwab vs. Fidelity; MF Yields Dip Below 2.0 Percent" (8/31/19); "Dreyfus Launches 'Impact' or Diversity Government Money Market Fund" (11/21/19); and, finally, "SEC Stats: MMF Assets Close in on $4.0 Trillion, Up 16th Month in a Row" (12/9/19).
Early in 2019, we reported on new money market fund regulations in Europe. Our Jan. 14 story, "European Money Market Funds Granted Extension," explained, "Money market funds in Europe, which had been scheduled to submit to new regulations starting January 21, have been given a 2-month extension by Irish and Luxembourg fund regulators. A press release entitled, 'Statement on the treatment of share cancellation under EU Regulation' explains, 'The Central Bank of Ireland ('Central Bank') and the Commission de Surveillance du Secteur Financier ('CSSF') are issuing this joint statement in the interests of supporting the orderly implementation of the Money Market Funds Regulation (MMF Regulation) by converging their respective supervisory approaches to share cancellation and advising the market accordingly.' (See also, the Financial Times article, 'Fund groups gain reprieve from EU money market rules.')"
Another hot topic in 2019 was brokerages shifting sweeps away from money funds and into bank deposits. Our Jan. 31 piece, "Edward Jones Latest to Shift to FDIC Sweeps," comments, "Brokerage Edward Jones announced plans to alter its sweep program, and money market funds will no longer be made available to new investors on or after Feb. 9. In a letter entitled, 'Required Notice to All Clients: Cash Management Option Changes,' they explain that the restriction also applies to current investors who 'have not selected the fund as your sweep option for your brokerage [or retirement] account as of that date.' They 'will no longer be able to do so.' There will be no immediate change for customers who have previously selected the money fund as their sweep option. They will 'continue to have uninvested cash automatically transferred to the fund.' The advisory also stipulated that 'if you make a change to your brokerage account's sweep option on or after Feb. 9, 2019, you will not be able to select the fund as your brokerage sweep option again.'"
A February story, "More on Green, ESG Money Funds," hit on another major theme of 2019 -- growth in the new ESG MMF sector. We wrote, "Last week, our February Money Fund Intelligence newsletter featured the article, 'Green Money Funds Become a Thing, But Big Issues Remain,' which discussed the nascent segment of ESG money funds. (See our Feb. 7 News, "Feb. MFI: Green Money Funds a Thing; Schwab's Chandoha; MFU Recap.") However, DWS took issue with our statement that 'To date, Crane Data sees almost no difference between the portfolio holdings of the DWS fund and normal Prime MMFs,' so we wanted to get their response on the record and to take another look at the actual portfolio holdings and guidelines. (On second glance, there are clear differences.) Barron's also comments on the trend (both in money funds and in ultra-short bonds) in this weekend's article, 'Earning Income With Socially Responsible ETFs and Mutual Funds.'"
Our piece on "China's Yu'e Bao" explains, "The Wall Street Journal again covers money market funds in China in the piece, 'China's Giant Money-Market Fund Scraps Investment Caps.' They tell us, 'China's biggest money-market mutual fund is lifting restrictions on how much individuals can invest in it, after suffering through months of outflows to rivals. Tianhong Asset Management Co., a unit of Jack Ma's Ant Financial Services Group, said individuals in its flagship Tianhong Yu'e Bao money-market fund would no longer be subject to an investment cap of 100,000 yuan ($14,900). It first imposed a ceiling on account sizes in May 2017, following a surge in the funds' assets.'"
In addition to ESG, other special purpose money funds came into being in 2019. We wrote in May on "Academy Securities." It explains, "We've recently seen a handful of 'green' or 'ESG' money market funds enter the market. But we're now seeing another kind of 'green' fund, Army green, in the form of the first veteran-affiliated money market fund. A press release entitled, 'Academy Securities and JP Morgan Announce New Money Market Funds,' tells us that, 'Academy Securities, a registered broker-dealer, certified Disabled Veteran Business Enterprise (DVBE), and Minority Business Enterprise (MBE), today announced the launch of the Academy Share Class of the JP Morgan Prime Money Market Fund (JPAXX) and JP Morgan U.S. Government Money Market Fund (JGAXX).'"
In June, we wrote an update on the Invesco Oppenheimer deal, one of the few instances of continued consolidation in the cash space. Our News piece, "Oppenheimer Funds Now Invesco Oppenheimer, says "Back in October 2018, we wrote about Invesco making a deal to take over Oppenheimer's money market funds. (See our Oct 22 News, 'Invesco Buying OppenheimerFunds.') ... The Oppenheimer funds have been renamed Invesco Oppenheimer. We review the merger and changes below, and we also discuss changes to the Dreyfus/BNY Mellon funds which take effect Monday, June 3. The original press release on the purchase, entitled, 'Invesco announces Combination with OppenheimerFunds,' told us, 'Invesco Ltd. (IVZ) ... announced a combination with OppenheimerFunds, a strategic partnership with Massachusetts Mutual Life Insurance Company (MassMutual) and a $1.2 billion common stock buyback program.'"
On July 30, we discuss the growing threat of "fin-tech" in our article "Cash Next Big Thing for Robos." The article says, "Barron's writes, 'Robos Look Beyond Investing,' which tells us, 'In Barron's annual ranking of robo-advisors, the evolution continues. The next big thing? Checking and savings accounts.' The piece explains, 'Barron's third-annual robo ranking -- in partnership with Backend Benchmarking -- shows that robo assets continue to rise, to at least $440 billion at last count.... The increase has been driven by new services, including access to live advisors, sustainable-investing products, and higher-yielding cash accounts.' We quote from the Barron's update below, and we also cover articles on fin-tech firm Betterment by the Financial Times and BankRate. (Although not part of our Top 10 in 2019, for more on the digital space, see our "Franklin Files for Blockchain Enabled U.S. Govt Money Market Fund (9/4/19).")
Our article, "Cash of the Titans: Schwab vs. Fidelity," highlighted the brokerage and cash battle which broke out in the fall of 2019, as well as Fed cuts and falling yields. We wrote, "Most money market fund and brokerage sweep yields moved lower in the latest week, driven by the Federal Reserve's July 31 rate cut. The notable exception was Fidelity's brokerage sweep rate, which jumped from 0.79% to 1.07% last week. (See our August 8, 9 and 12 Links of the Day, 'Fidelity Now Sweeps to Money Fund,' 'WSJ on Fidelity: Cash's Sweeping Giant' and 'Barron's Clarifies Fidelity Sweep Push.')
The piece explains, "Fidelity announced the sweep move, which took aim at Schwab, E*TRADE and TD Ameritrade, with a full page ad ('Your cash never had it so good') in the Wall Street Journal, but over the weekend Charles Schwab returned fire with a full page ad in the Sunday New York Times. So begins what we're calling the 'Cash of the Titans.' Schwab's advertisement, which is also featured on www.schwab.com, ignores the issue of default 'sweep' accounts and compares Schwab Value Advantage Money Fund's 2.04% yield (as of 8/8) to Fidelity Money Market Fund's 1.98%. (It also compares the yield to JPMorgan Liquid Assets MMF's 1.85%.) Under the headline, 'With Schwab, earning more on your cash is just the beginning,' it says, 'Get more when you invest your cash with Schwab,' and emphasizes a satisfaction guarantee."
In November, Crane Data's News announced the new genre of "impact" funds, with our article "Dreyfus Launches 'Impact' or Diversity Government Money Market Fund." We penned, "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. A Prospectus Supplement for the $4.6 billon Dreyfus Government Securities Cash Management Fund tells us, The following information supplements the information contained in the section of the fund's prospectus entitled 'Shareholder Guide – General Policies': `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.'"
Finally, we wrote about MMF assets and the race to hit $4.0 trillion before the end of the year. In our early December article, "MMF Assets Close in on $4.0 Trillion," we wrote, "After a lengthy delay, the Securities and Exchange Commission finally released its latest 'Money Market Fund Statistics' summary, which confirms that total money fund assets jumped in October, rising by $88.6 billion to a record $3.938 trillion. It was the 16th straight month of gains for money fund assets overall. Prime MMFs increased $38.4 billion in October to close at $1.102 trillion, their highest level since July 2016, while Govt & Treasury funds rose by $46.6 billion to a record $2.694 trillion. Tax Exempt funds rose by $3.6 billion to $142.6 billion. Yields fell across the board with Prime MMFs, Govt MMFs and Tax-Exempt MMFs all decreasing in October. The SEC's Division of Investment Management summarizes monthly Form N-MFP data and includes asset totals and averages for yields, liquidity levels, WAMs, WALs, holdings, and other money market fund trends. We review their latest numbers below."
For more 2019 (and soon 2020) News (and prior years going back to 2006), see Crane Data's News Archives. We'll continue to provide daily updates on the money fund marketplace in the coming year, so keep reading our News and Link of the Day commentaries in 2020. (We'll also be posting the "Top 10 Stories of the Decade in coming days.) Let us know if you need web access (unlimited access is for subscribers only), or if you'd like to see our latest Money Fund Intelligence or Bond Fund Intelligence newsletters, or our MFI Daily publication. Thanks to all of our readers and subscribers for your support in 2019, and we wish you all the best in the coming year. Merry Christmas and Happy New Year!
