The June issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Friday morning, features the articles: "MFs Begin Waiving Expenses to Avoid Negative Yields," which focuses on fee waivers as money fund yields approach zero; "Invesco's Brignac on Time-Tested Process, Client Care," which profiles the CIO for Invesco Global Liquidity; and, "NY Fed Blog Reviews MMLF, CPFF, PDCF Fed Support Plans," which looks at the Fed's lending facilities. We've also updated our Money Fund Wisdom database with May 31 statistics, and was 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 June Money Fund Portfolio Holdings are scheduled to ship on Tuesday, June 9, and our June Bond Fund Intelligence is scheduled to go out Friday, June 12.
MFI's "Waiving Expenses" article says, "Money funds have stabilized at a record $5.2 trillion following a harrowing March and a surprisingly robust recovery in April and May. While CP market turmoil, the Prime asset drop and recovery and the Government MMF asset bonanza are still stories, the big issue facing funds is now zero and perhaps negative yields, along with fee waivers and reduced expenses. Yields have fallen to 0.15% on average and over 25% of assets (and 50% of funds) are now on the 0.00%-0.01% floor."
It continues, "During the last zero yield era (2009-2015), funds basically waived half of their fees, cutting expenses from roughly 0.35% to 0.17%. While it's difficult to get timely and accurate expense and waiver data, it's clear that waivers are starting to bite and expenses are moving downwards. (We update ours using the SEC's Form N-MFP info, but we don't update until the 6th business day -- so see our June MFI XLS and craneindexes.xlsx file on the website on Monday for the latest.)"
Our "Profile" reads, "This month, Money Fund Intelligence interviews Laurie Brignac, Chief Investment Officer for Invesco Global Liquidity, which will celebrate its 40th birthday this year. (Money funds will celebrate their 50th this October.) Brignac tells us about Invesco's history, about the events of the last several months and the issues facing money fund managers for the remainder of 2020. Our Q&A follows."
MFI says, "Give us a little history. Brignac tells us, "We launched our first money market fund back in 1980 and at that time we were known as AIM Investments. AIM merged with Invesco in the late '90s, but we're proud of the fact that we have the same investment process that we used on that first day in 1980. I don't know if many people can say that. The process has stood the test of time and worked very well for our clients over multiple interest rate and credit cycles. We're very proud of the fact that we have never had to buy securities or support any of our money market funds, even through the financial crisis. We've been able to honor all purchases and redemptions on T-0 basis."
The "NY Fed Blog" article tells readers, "The Federal Reserve Bank of New York posted a series of 'Liberty Street Economics' blogs reviewing the Fed's recent support facilities, including 'The Money Market Mutual Fund Liquidity Facility,' 'The Primary Dealer Credit Facility' and 'The Commercial Paper Funding Facility.' The MMLF piece tells us, 'Over the first three weeks of March, as uncertainty surrounding the COVID19 pandemic increased, prime and municipal (muni) money market funds (MMFs) faced large redemption pressures. Similarly to past episodes of industry dislocation, such as the 2008 financial crisis and the 2011 European bank crisis, outflows from prime and muni MMFs were mirrored by large inflows into govt MMFs.'"
The post explains, "To prevent outflows from prime and muni MMFs from turning into an industry-wide run, as happened in September 2008 when one prime MMF 'broke the buck,' the Federal Reserve announced the establishment of the Money Market Mutual Fund Liquidity Facility, or MMLF, on March 18. Under this facility, the Federal Reserve Bank of Boston provides loans to eligible borrowers ... taking as collateral eligible securities purchased from prime and muni MMFs. The U.S. Treasury provides $10 billion of credit protection to the Federal Reserve from the Treasury's Exchange Stabilization Fund."
The latest MFI also includes the News brief, "Money Fund Assets Up in May But Down in June," which writes, "MMF assets increased by $31.6 billion in May to a record $5.163 trillion according to Crane's MFI XLS. ICI's latest weekly shows assets falling by $36.3 billion in the latest week to $4.752 trillion."
A second News piece titled, "Northern Liquidating Prime Obligs," says, "Northern Institutional Funds filed to liquidate its $1.7 billion Northern Prime Obligations Portfolio. The filing says, 'The Board ... has determined ... that the Portfolio be liquidated and terminated on or about July 10, 2020.' See Bloomberg's 'Northern Trust to Shutter Money-Market Fund After Redemptions.'"
Our June MFI XLS, with May 31 data, shows total assets increased by $31.6 billion in May to $5.163 trillion, after jumping $417.9 billion in April, $688.1 billion in March and $23.4 billion in February. Our broad Crane Money Fund Average 7-Day Yield fell 8 bps to 0.11% during the month, while our Crane 100 Money Fund Index (the 100 largest taxable funds) was down 11 bps to 0.15%.
On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA was down 8 bps at 0.41% and the Crane 100 fell to 0.38%. Charged Expenses averaged 0.30% (down 4 bps from last month) and 0.23% (down two from the previous month), respectively for the Crane MFA and Crane 100. The average WAM (weighted average maturity) for the Crane MFA and Crane 100 was 41 (up 2 days) and 44 days (up 3 days) respectively. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
