Northern Funds exited the Prime Institutional money fund space earlier this year, and it has now filed to exit the Prime Retail and Municipal segments as well. A press release from the 11th largest money fund manager with $168.3 billion (99.7% of which is Government), entitled, "Northern Trust Asset Management Announces Changes to Money Market Mutual Fund Suite," tells us, "Northern Trust Asset Management, which oversees $339 billion in liquidity and short-duration strategies globally as of Sept. 30, 2020, announced the following changes to its suite of money market mutual funds: The Northern Funds - Municipal Money Market Fund (NOMXX) and the Northern Institutional Funds - Municipal Portfolio (NMUXX) will both close to new investors on or about Jan. 11, 2021 [and liquidate] on or about Feb. 12, 2021; and, A proposed merger of the Northern Funds Money Market Fund (NORXX) into the Northern Funds - U.S. Government Money Market Fund (NOGXX), subject to shareholder approval. These fund lineup changes highlight a thoughtful progression by Northern Trust Asset Management to exit the prime and municipal money market mutual fund space, a process that began back in May 2020 with the closure of the institutional prime money market mutual fund, the Northern Institutional Funds - Prime Obligations Portfolio."
Northern's Jen Hoffenkamp comments, "Given our strongly held, long-term views on interest rates, coupled with shifting investor preferences and the potential for continued regulatory changes, appropriate action was needed with our money market mutual fund offering.... Our investment strategies are rooted in the foundational belief that investors should be compensated for the risks they take, and we are committed to delivering investment products and solutions that fit our investor-centric approach."
The release explains, "Northern Trust Asset Management anticipates that U.S. interest rates will remain anchored near zero for the foreseeable future. In a continued low interest rate environment, investors in municipal and prime money market mutual funds earn yields comparable to government money market funds."
Peter Yi adds, "In our opinion, the risk/reward profile for these investors has become misaligned.... Our view is that the constraints limiting municipal and prime money market mutual funds today will not improve significantly over time. The money market mutual fund landscape has fundamentally changed." The release states, "Generally, prime and municipal money market mutual funds have declined in assets, while government money market mutual funds have grown as they seek to preserve the principal stability and liquidity that investors value. 'Investor preferences have changed, but their liquidity needs remain the same,' Hoffenkamp said."
Northern adds, "For the foreseeable future, Northern Trust Asset Management views government money market mutual funds as the optimal solution for investors' operational cash needs. For intermediate (six-to-12-month) liquidity needs, the firm encourages clients to consider a cash segmentation strategy to take advantage of the value ultra-short fixed income products can provide."
Finally, they write, "While these changes affect prime and municipal money market mutual funds, Northern Trust Asset Management will continue to deliver these cash strategies to clients through customized solutions and other fund product types. Northern Trust Asset Management has helped liquidity investors navigate the ever-evolving liquidity landscape for more than 40 years. As one of the largest global cash managers, with a full liquidity suite serving individual and institutional investors, the firm offers a range of strategies, from municipal, prime and government cash management to ultra-short fixed income strategies."
For more on this latest news, see the Prospectus Supplement filing for the $232 million Northern Money Market Fund (NORXX), the filing for the $113 million Northern Municipal Money Market Fund (NOMXX) and the filing for the $184 million Northern Institutional Muni Money Market (NMUXX). For more on Prime and Municipal money fund exits this year, see these Crane Data News stories: Dreyfus Consolidates Money Funds, Sticks w/Prime; OFR Annual Report (11/19/20), BMO Liquidating Inst Prime MMF (11/17/20), SEC's Blass on Push for More MMF Reforms; Vanguard Liquidating PA, NJ (9/28/20), Fidelity to Liquidate Prime Instit Money Funds; Cites Investor Behavior (6/22/20) and Northern Liquidating Prime Obligs; NY Fed on PDCF; Weekly Port Holds (5/20/20).
In other news, Crane Data's latest MFI International shows that assets in European or "offshore" money market mutual funds moved higher over the past month. They broke above the $1.0 trillion for the first time ever three months ago, hitting a record $1.056 trillion in August. These U.S.-style funds, domiciled in Ireland or Luxembourg and denominated in US Dollars, Pound Sterling and Euros, have increased by $28.1 billion over the last 30 days (when translated into dollars) and they're up by $158.8 billion (18.1%) year-to-date. Offshore US Dollar money funds, which broke over $500 billion in January, are down $481 million over the last 30 days but are up $24.5 billion YTD to $519.0 billion. Euro funds are up E15.0 billion over the past month, and YTD they're up E51.6 billion to E150.3 billion. GBP money funds have risen by L8.3 billion over 30 days, and are up by L32.5 billion YTD to L257.4B. U.S. Dollar (USD) money funds (191) account for half (50.1%) of the "European" money fund total, while Euro (EUR) money funds (94) make up 16.1% and Pound Sterling (GBP) funds (115) total 30.2%. We summarize our latest "offshore" money fund statistics and our Money Fund Intelligence International Portfolio Holdings (which went out to subscribers Monday), below.
Offshore USD MMFs yield 0.05% (7-Day) on average (as of 12/11/20), down from 1.59% on 12/31/19 and 2.29% at the end of 2018. EUR MMFs yield -0.65% on average, compared to -0.59% at year-end 2019 and -0.49% on 12/31/18. Meanwhile, GBP MMFs yielded 0.02%, down from 0.64% as of 12/31/19 and 0.64% at the end of 2018. (See our latest MFI International for more on the "offshore" money fund marketplace. Note that these funds are only available to qualified, non-U.S. investors.)
Crane's December MFII Portfolio Holdings, with data as of 11/30/20, show that European-domiciled US Dollar MMFs, on average, consist of 22.1% in Commercial Paper (CP), 15.0% in Certificates of Deposit (CDs), 17.6% in Repo, 32.3% in Treasury securities, 11.7% in Other securities (primarily Time Deposits) and 1.3% in Government Agency securities. USD funds have on average 33.5% of their portfolios maturing Overnight, 6.7% maturing in 2-7 Days, 12.9% maturing in 8-30 Days, 12.6% maturing in 31-60 Days, 12.6% maturing in 61-90 Days, 17.4% maturing in 91-180 Days and 4.3% maturing beyond 181 Days. USD holdings are affiliated with the following countries: the US (42.5%), France (12.7%), Japan (8.1%), Canada (7.3%), Germany (5.0%), Sweden (4.2%), the U.K.(4.2%), the Netherlands (3.6%), Belgium (2.3%), Australia (2.2%), Switzerland (1.9%), Norway (1.3%), Singapore (1.1%) and Abu Dhabi (1.0%).
The 10 Largest Issuers to "offshore" USD money funds include: the US Treasury with $181.7 billion (32.3% of total assets), Fixed Income Clearing Corp with $21.4B (3.8%), BNP Paribas with $18.3B (3.3%), Barclays PLC with $14.2B (2.5%), Mizuho Corporate Bank Ltd with $13.5B (2.4%), Credit Agricole with $13.0B (2.3%), Mitsubishi UFJ Financial Group Inc. with $12.5B (2.2%), RBC with $11.5B (2.1%), JP Morgan with $11.0B (2.0%) and Societe Generale with $10.6B (1.9%).
Euro MMFs tracked by Crane Data contain, on average 39.7% in CP, 17.9% in CDs, 23.7% in Other (primarily Time Deposits), 13.4% in Repo, 5.2% in Treasuries and 0.1% in Agency securities. EUR funds have on average 32.2% of their portfolios maturing Overnight, 6.9% maturing in 2-7 Days, 8.9% maturing in 8-30 Days, 18.7% maturing in 31-60 Days, 13.4% maturing in 61-90 Days, 13.6% maturing in 91-180 Days and 6.4% maturing beyond 181 Days. EUR MMF holdings are affiliated with the following countries: France (36.4%), Japan (11.0%), the U.S. (9.4%), Germany (7.8%), Sweden (5.0%), Belgium. (4.1%), the U.K. (3.6%), Switzerland (3.6%), China (3.5%), Canada (3.4%), the Netherlands (2.3%), Supranational (2.0%) and Austria (1.8%).
The 10 Largest Issuers to "offshore" EUR money funds include: Credit Agricole with E8.3B (6.2%), BNP Paribas with E7.1B (5.3%), BPCE SA with E6.1B (4.5%), Societe Generale with E5.7B (4.2%), Republic of France with E5.6B (4.1%), Citi with E4.7B (3.5%), Mizuho Corporate Bank Ltd with E4.3B (3.2%), Credit Mutuel with E4.2B (3.1%), Mitsubishi UFJ FInancial Group with E3.7B (2.8%) and Sumitomo Mitsui Banking Corp with E3.6B (2.7%).
The GBP funds tracked by MFI International contain, on average (as of 11/30/20): 33.4% in CDs, 19.4% in CP, 23.2% in Other (Time Deposits), 21.8% in Repo, 1.9% in Treasury and 0.3% in Agency. Sterling funds have on average 38.9% of their portfolios maturing Overnight, 9.8% maturing in 2-7 Days, 5.8% maturing in 8-30 Days, 12.7% maturing in 31-60 Days, 12.2% maturing in 61-90 Days, 15.6% maturing in 91-180 Days and 5.0% maturing beyond 181 Days. GBP MMF holdings are affiliated with the following countries: France (20.3%), the U.K. (18.6%), Japan (17.1%), Canada (9.7%), the U.S. (5.0%), Sweden (4.4%), the Netherlands (4.2%), Germany (4.1%), Australia (2.8%), Spain (2.6%) and Abu Dhabi (2.4%).
The 10 Largest Issuers to "offshore" GBP money funds include: the UK Treasury with L17.7B (8.3%), Mizuho Corporate Bank Ltd with L11.0B (5.1%), BNP Paribas with L10.4B (4.9%), Mitsubishi UFJ Financial Group Inc with L10.0B (4.7%), Barclays PLC with L8.4B (3.9%), RBC with L8.3B (3.9%), Sumitomo Mitsui Banking Corp with L8.0B (3.7%), BPCE SA with L7.4B (3.4%), Agence Central de Organismes de Securite Social with L7.3B (3.4%) and Credit Agricole with L6.9B (3.2%).
