BNY Mellon's Dreyfus money fund complex announced a series of changes to its product lineup, but most notably indicated that it's sticking with Prime funds in its offerings. A press release entitled, "Dreyfus Cash Investment Strategies to Optimize Money Market Fund Range" tells us, "Dreyfus Cash Investment Strategies (Dreyfus CIS), a BNY Mellon Investment Management firm with $254bn in assets under management, ... announced that it will be optimizing its suite of money market funds to meet the evolving needs of cash investors. The enhancements to Dreyfus CIS' money market fund range over the next several months will result in: A streamlined product offering of 19 funds across three fund families to provide investment choice across all major money market asset classes; A uniform pricing structure within each fund family to improve client navigation, as well as reduced management fees in four retail funds and one institutional fund; and, Broader investor eligibility through lower investment minimums in many fund share classes." (On a separate note: Crane Data will also be hosting its European Money Fund Symposium Online on Thursday, Nov. 19 from 10am-12pm Eastern, or 3-5pmGMT. Please join us!)

Stephanie Pierce, CEO of ETF, Index, and Cash Investment Strategies at BNY Mellon Investment Management comments, "For nearly 50 years, as markets and client needs have changed, Dreyfus CIS has met the cash management needs and preferences of investors.... As part of BNY Mellon, Dreyfus CIS offers clients deep investment expertise, resilient infrastructure, and a record of strong financial stewardship across the entire cash spectrum. Streamlining our money market fund range is part of our ongoing commitment to providing clients with the professional money management and competitive market returns they expect from us."

The release adds, "These actions build upon Dreyfus CIS' other recent enhancements, which include trading platform technology upgrades that are currently being rolled out to institutional and intermediary clients, the launch of a money market IMPACT strategy (Diversity & Inclusion), and updates to the investment guidelines on one government money market fund to help meet the needs of Federal Credit Unions. All fund changes have been approved by the respective Fund Boards and certain actions will require shareholder approval over the coming months."

The "Dreyfus CIS Proposed Fund Range" will include among its "Cash Management Family: Dreyfus Cash Management (Institutional Prime); Dreyfus Government Cash Management (Government Repo); Dreyfus Government Securities Cash Management (Government Repo); Dreyfus Treasury Obligations Cash Management (Treasury Repo); Dreyfus Treasury Securities Cash Management (Institutional Municipal); Dreyfus AMT-Free Municipal Cash Management Plus (Retail Municipal); and, Dreyfus AMT-Free New York Municipal Cash Management (Retail Municipal).

Dreyfus's updated "Preferred Family" will include: "Dreyfus Institutional Preferred Government Money Market (Government Repo); Dreyfus Institutional Preferred Government Plus Money Market Fund (Government Repo); Dreyfus Institutional Preferred Treasury Securities Money Market Fund (Treasury); and, Dreyfus Institutional Preferred Treasury Obligations (formerly Dreyfus Institutional Treasury Obligations Cash Advantage) (Treasury Repo).

The "Dreyfus Family & Specialty Funds" group includes: Dreyfus Money Market Fund, Inc. (Retail Prime); Dreyfus National Municipal Money Market (Retail Municipal); Dreyfus New York Municipal Money Market (Retail Municipal); Dreyfus Treasury and Agency Liquidity Money Market (Treasury Repo); BNY Mellon Variable Investment Fund Government Money Market Portfolio (Government Repo); Dreyfus Basic Money Market Fund, Inc. (Retail Prime); and Dreyfus Prime Money Market Fund (Retail Prime)."

Under "Fund Liquidations & Mergers," the "Mergers include: General Government Securities to merge into Dreyfus Government Cash Management (Government Repo); Dreyfus Institutional Treasury Securities Cash Advantage to merge into Dreyfus Institutional Preferred Treasury Securities Money Market Fund (Treasury); General Treasury Securities Money Market Fund to merge into Dreyfus Treasury Securities Cash Management (Treasury); Dreyfus Institutional Preferred Money Market to merge into Dreyfus Cash Management (Institutional Prime); and Dreyfus Liquid Assets to merge into Dreyfus General Money Market Fund, Inc. (Retail Prime). Finally, "Liquidations include: General Treasury and Agency Money Market Fund (Treasury Repo) and General California Municipal Money Market Fund (Retail Municipal).

Dreyfus is the 9th largest manager of money market funds with $194.7 billion, according to our latest Money Fund Intelligence XLS. For more Dreyfus news, see our article from one year ago, "Dreyfus Launches 'Impact' or Diversity Government Money Market Fund."

In other news, the U.S. Treasury's Office of Financial Research published its "2020 Annual Report yesterday, which "found that unexpected turbulence from the COVID-19 pandemic elevated risks across financial markets and revealed limitations in conventional market monitoring." They write, "To stabilize short-term funding markets, the Federal Reserve reestablished several credit facilities that were first used in the 2007-09 financial crisis. Some were set up under the Federal Reserve's emergency section 13(3) authority with the funding approval of the Treasury Secretary. Others were established by Title IV of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), with the funding approval of the Treasury Secretary. Although the facilities did not go into effect for days or weeks, market conditions began to improve with the initial announcements in mid-March that they would be available."

The report explains, "Under the Primary Dealer Credit Facility (PDCF), the Federal Reserve Bank of New York made collateralized loans to primary dealers, which are the banks and securities broker-dealers designated to serve as trading counterparties in carrying out U.S. monetary policy. The Money Market Mutual Fund Liquidity Facility (MMLF) allowed the Federal Reserve Bank of Boston to provide loans to eligible financial institutions to purchase assets from certain types of money market funds. The Commercial Paper Funding Facility (CPFF) financed commercial paper issuance. Primary dealers serve as intermediaries for issuance requests."

The OFR tells us, "Banks mostly avoided funding and liquidity problems this year. One reason is that large banks maintain liquidity buffers that generally exceed regulatory requirements calibrated to withstand up to 30 days of financial stress. Deposits, which are relatively more stable than wholesale funding, also flowed into banks. In contrast, some nonbank financial entities experienced temporary challenges managing liquidity. For example, some prime money market funds experienced unusually high customer redemptions. Under ordinary circumstances, money market funds experiencing significant liquidity demands would have met those demands by drawing on cash and cash equivalents, income earned on investments, and temporary lines of credit, or by selling securities with embedded gains or that are trading close to their par value. However, before the Federal Reserve's Money Market Mutual Fund Liquidity Facility (MMLF) was initiated, some prime institutional money market funds turned to their sponsors for liquidity support. The MMLF provided loans to banks to finance purchases of eligible assets from prime and municipal funds. Once the MMLF was established, several money market funds sold securities to affiliated and unaffiliated financial institutions via the facility to raise liquidity to meet redemptions while also maintaining weekly liquidity ratios above the regulatory minimum of 30 percent."

They also say, "Liquidity crises tend to get worse when investors anticipate potential net asset value declines or redemption gates, and increase their redemptions accordingly. As a result, the MMLF played an important role in helping money market funds maintain high asset liquidity essential for meeting redemption demands. But, as discussed later in this section, the liquidity problem for money market funds spilled over into funding problems for commercial paper issuers because money market funds are one of the largest classes of investors in these assets."

Finally, OFR's report comments, "Liquidity fell and rates spiked in other short-term funding markets, too. Prime money market funds sought to reduce their commercial paper holdings and raise cash to meet investor redemptions. Also, securities lending cash collateral reinvestment accounts reduced commercial paper holdings by nearly 30 percent in first quarter 2020. At the same time, commercial paper issuers, particularly nonfinancial companies with few alternative sources of short-term funding, experienced greater short-term funding needs under the stress of the pandemic. The Federal Reserve's Commercial Paper Funding Facility allowed issuers to buy back their outstanding commercial paper and reissue it. This facility reduced funding stress for most issuers. However, the facility does not address funding pressures of lower-credit-quality commercial paper issuers or support secondary market liquidity. Conditions in short-term funding markets gradually improved."

It adds, "The market's problems in March were very different from those experienced during the 2007-09 crisis, when asset-backed commercial paper was issued to fund risky residential mortgage-backed securities. Disruptions experienced in 2020 affect all types of investment-grade firms dependent on commercial paper for their short-term funding needs, both financial and nonfinancial."

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