A record-shattering and turbulent year, 2020 made it hard to sum its events up in just ten stories. This past year saw money fund assets skyrocket to a record $5 trillion as investors made a "dash for cash" following the Covid-19 shutdowns across the globe. Yields returned to zero in 2020 after a series of emergency cuts made by the Fed, their second straight year of decline. The tumultuous year showcased continued liquidations and consolidations, particularly in the Prime space, and, despite a growing industry consensus that money market funds weathered the storm well, talk about looming reforms in the space. We've selected some of the most important news stories of 2020 below to represent the major trends over the past year. (Note: Thanks to those who attended our Money Fund Wisdom Demo & Training yesterday! We hope you found it worthwhile. For those that missed it, you can see the replay here, and watch for the Powerpoint to be posted to our Webinar page tomorrow.)

Crane Data's Top 10 Stories of 2020 include (in chronological order): "Franklin, Legg Mason Deal Signals More Consolidation; More Liquidations" (2/20/20); "Fed MMMF Liquidity Facility Adds CDs, VRDNs; OCC Revises STIF Rules" (3/24/20); "Money Fund Assets Break $5.0 Trillion; Crane Featured in Ignites Piece" (4/30/20); "Yields Inch Towards Zero, Outflows; T Rowe Waivers; Weekly Holdings" (5/27/20); "Worldwide MF Assets Hit $7.7 Trillion in Q1; U.S., Chinese MMFs Surge" (6/24/20); "Federated Hermes Files to Enter "Social" or "Impact" Money Fund Space" (8/19/20); "Vanguard Prime Money Market Fund Going Government; ICI's July Trends" (8/28/20); "FDIC: Deposits Gain Record $2.4 Trillion YTD; Yields Close in on Zero" (9/1/20); "ICI's Stevens Keynotes Crane Event, Says Money Funds Didn't Drive Crisis" (10/29/20); and, finally, "European MFS Online: IMMFA's Iommi Says MMFs Resilient During Crisis" (11/23/20).

Early in 2020, we reported on the continued liquidations and consolidations in the MMF space. Our Feb. 20 story, "Franklin, Legg Mason Deal Signals More Consolidation; More Liquidations," explains, "Last year, we saw Federated take over PNC's fund business and Invesco absorb OppenheimerFunds, and now it appears we'll see more fund consolidation in 2020. A press release entitled, 'Franklin Templeton to Acquire Legg Mason, Creating $1.5 Trillion AUM Global Investment Manager,' tells us, 'Franklin Resources ... operating as Franklin Templeton ... announced that it has entered into a definitive agreement to acquire Legg Mason, Inc.... The acquisition of Legg Mason and its multiple investment affiliates ... will establish Franklin Templeton as one of the world's largest independent, specialized global investment managers with a combined $1.5 trillion in assets.... The combined footprint of the organization will significantly deepen Franklin Templeton's presence in key geographies and create an expansive investment platform that is well balanced between institutional and retail client AUM.'" (See also, "Sweeps Big Part of Morgan Stanley, E*Trade Purchase; Rates Flat Again.")

Among the hottest topics of 2020 was the Fed and Treasury rescue of the economy (and money markets) during the March Madness of the total global shutdown. Our March 24 piece, "Fed MMMF Liquidity Facility Adds CDs, VRDNs; OCC Revises STIF Rules," comments, "The Federal Reserve pulled out all the stops to support the money markets Monday, as its Money Market Mutual Fund Liquidity Facility, announced March 18, reached full force and was expanded to include almost all major asset classes owned by MMFs (CDs and VRDNs were the keys adds over the weekend. The move appears to be ratcheting down the level of danger in the money markets substantially, though we're not out of the woods yet. Prime outflows have decreased for 5 days in a row and weekly liquid assets increased noticeably Monday. The recently posted 'Money Market Mutual Fund Liquidity Facility FAQs' explains, 'How will this program support money market mutual funds (MMMFs)? In the days prior to the initiation of the program, some MMMFs experienced significant demands for redemptions by investors. Under ordinary circumstances, they would have been able to meet those demands by selling assets. Recently, however, many money markets have become extremely illiquid due to uncertainty related to the coronavirus outbreak. Pursuant to Section 13(3) of the Federal Reserve Act, and with prior approval of the Secretary of the Treasury, the Board of Governors of the Federal Reserve System (Board) authorized the Federal Reserve Bank of Boston (FRBB) to establish the MMLF. In addition, the Secretary of the Treasury, using the Exchange Stabilization Fund, will provide $10 billion of credit protection to FRBB. The MMLF will assist MMMFs in meeting demands for redemptions by households and other investors, enhancing overall market functioning and the provision of credit to households, businesses and municipalities.'"

An April story, "Money Fund Assets Break $5.0 Trillion; Crane Featured in Ignites Piece," hit on another major theme of early 2020 -- massive asset inflows into MMFs. We wrote, "Money market mutual fund assets broke the $5.0 trillion level for the first time ever on Tuesday, April 27, according to Crane Data's Money Fund Intelligence Daily publication. Money fund assets continued to rise sharply in April, up an enormous $432.9 billion month-to-date through April 28 to $5.023 trillion, after a breathtaking increase of $624.9 billion in March. In March and April combined, money fund assets have risen by an eye-popping $1.058 trillion! Government funds jumped $349.4 billion MTD in April to $3.870 trillion (after a surge of $790.4 billion in March), Prime funds saw assets rise $76.4 billion, retaking the $1.0 trillion level early this week, to $1.012 trillion in April through 4/28 (after falling $159.6 billion in March). Tax-Exempt assets increased $7.1 billion to $141.0 billion MTD (after falling $5.8 billion in March)." (See also, "MMF Assets Up $1 Trillion YTD; Deposits Up $1T Too; Ultra-Shorts Plunge.")

Our piece "Yields Inch Towards Zero, Outflows; T Rowe Waivers; Weekly Holdings" explains, "Money market fund yields once again inched lower in the latest week with our flagship Crane 100 down 3 basis points (through Friday, May 22) to 0.16%. The Crane 100 MF Index fell below the 1.0% level in mid-March and below the 0.5% level in late March, and is down from 1.46% at the start of the year and down from 2.23% at the beginning of 2019. While a number of money funds have already hit the zero floor, most continue to show some yield. According to our Money Fund Intelligence Daily, as of Friday, 5/22, 393 funds (out of 852 total) yielded 0.00% or 0.01% with assets of $1.316 trillion, or 25.7% of the total. There were 156 funds yielding between 0.02% and 0.10%, totaling $992.1B, or 19.4% of assets; 173 funds yielded between 0.11% and 0.25% with $1.647 trillion, or 32.2% of assets; 101 funds yielded between 0.26% and 0.50% with $837.5 billion in assets, or 16.4%; 24 funds yielded between 0.51% and 0.99% with $325.7 billion in assets or 6.4%; no funds yield over 1.00%." (See also, "Northern Liquidating Prime Obligs; NY Fed on PDCF; Weekly Port Holds" and "Northern Drops Other Prime Shoe, Exits Muni Too; MFI Intl Holdings.")

We covered the record breaking Global MMF asset totals in our June 24 piece, "Worldwide MF Assets Hit $7.7 Trillion in Q1; U.S., Chinese MMFs Surge." It comments, "The Investment Company Institute's latest 'Worldwide Regulated Open-Fund Assets and Flows, First Quarter 2020' release shows that money fund assets globally rose by $750.6 billion, or 10.8%, in Q1'20 to a record $7.688 trillion. The increase was driven by big gains in U.S. and China- based money funds. MMF assets worldwide have increased by $1.611 trillion, or 26.5%, the past 12 months, and money funds in the U.S. now represent 56.4% of worldwide assets. We review the latest Worldwide MMF totals, below. (Note: Let us know if you'd like to see our latest Money Fund Intelligence International product, which tracks "offshore" money market funds domiciled in Europe and outside the U.S.)."

In August, we wrote an update on the "Social" or "Impact" space, which was big again in 2020 (like in 2019). Our News piece, "Federated Hermes Files to Enter "Social" or "Impact" Money Fund Space, said, "Last week, the Board of Federated Hermes Government Obligations Tax-Managed Fund voted to convert it into a 'Social' or 'Impact' money market fund, we learned from mutual fund news source ignites and from a Prospectus Supplement filing. The ignites article, '$7.5B Federated Hermes Fund Adds Diversity Target for Trading,' explains, 'The $7.5 billion Federated Hermes Government Obligations Tax-Managed Fund will 'generally seek' to direct trades to women-, minority- and veteran-owned broker-dealers starting on Oct. 1.... The change applies to all three of the fund's share classes. Several other government money funds have also adopted similar trading policies in recent years.' Federated's fund will become the third 'social' money fund, joining Goldman Sachs and Dreyfus in offering funds that attempt to drive trading business through minority brokerages; it also joins a number of ESG money market funds focused on environmental investment screens."

On August 28, we covered the biggest of the Prime exits in, "Vanguard Prime Money Market Fund Going Government; ICI's July Trends." The article states, "Vanguard Group, the second largest manager of money market mutual funds with $482.3 billion, announced that it is converting its $125.3 billion Vanguard Prime Money Market Fund into a Government MMF, the third major exit from the Prime space since the coronavirus shutdown froze the commercial paper market in March and the first Prime Retail fund to convert since Money Market Fund Reforms went into effect in 2016. Their release, 'Vanguard Announces Changes to Money Market Fund Lineup,' tells us, 'Vanguard today announced the following changes to its taxable money market fund lineup: Vanguard Prime Money Market Fund will be reorganized into a government money market fund and renamed Vanguard Cash Reserves Federal Money Market Fund.... Vanguard Treasury Money Market Fund has reopened to new investors.'"

Our article, "FDIC: Deposits Gain Record $2.4 Trillion YTD; Yields Close in on Zero," highlights the huge $2+ trillion jump in bank deposits early this year. We write, "The Federal Deposit Insurance Corporation published its latest 'Quarterly Banking Profile' last week (see the release here), which reviews Q2 statistics on the banking industry in the U.S and shows a huge jump in deposits and drop in bank net interest margins. It states, 'Net interest income was $131.5 billion in second quarter 2020, down $7.6 billion (5.4 percent) from a year ago. This marks the third consecutive quarter that net interest income declined on a year-over-year basis. Most of the decline was driven by the three largest institutions, as less than half (42.2 percent) of all banks reported lower net interest income from a year ago. The average net interest margin (NIM) for the banking industry declined below the 3 percent level, or down 58 basis points from a year ago to 2.81 percent.'"

In October, our piece, "ICI's Stevens Keynotes Crane Event, Says Money Funds Didn't Drive Crisis," explains, "On Tuesday, we hosted our latest virtual event, 'Crane's Money Fund Symposium Online,' which featured a series of presentations and discussions on money market mutual fund topics. The Keynote speech, entitled, 'Covid's Impact on Money Markets,' was given by Investment Company Institute President & CEO Paul Schott Stevens, and included a preview of an upcoming 'Report of the COVID-19 Market Impact Working Group on Money Markets.' We quote from Stevens' comments below. (Watch for more coverage next week and in our November MFI, and thanks again to our attendees, excellent speakers and sponsors! If you missed it, the recording is available here or via Crane Data's Webinar page." (See also, "BlackRock's Novick, AMF's Cazenave Talk Runs, Regs at SEC Roundtable" and "SEC's Blass on Push for More MMF Reforms; Vanguard Liquidating PA, NJ."

Finally, we gave an update on European MMFs in our late November article, "European MFS Online: IMMFA's Iommi Says MMFs Resilient During Crisis." We write, "Crane Data hosted its most recent virtual event, European Money Fund Symposium Online Thursday, which featured a series of discussions on European and 'offshore' money market mutual fund topics. During our 'Major Issues in European MMFs' panel, Veronica Iommi of the Institutional Money Market Funds Association gave a 'brief 2020 update on money market funds in Europe from IMMFA's perspective with a focus on the impact of the covid-19 pandemic [and] our role as a voice to the industry.' We quote from her remarks below. (Thanks again to our EMFS Online attendees, speakers and sponsors! The replay is available here in case you missed it.)"

Iommi explained, "IMMFA is the Institutional Money Market Funds Association, originally formed 20 years ago. It's the only trade association in Europe dedicated to money market funds. Our core objective is to promote and support the development and integrity of the money market funds industry. We do this by engaging with policymakers and regulators, educating investors, providing regular data on members funds and overarching all of this, providing a centralized point of contact information and expertise for relevant stakeholders. Our members comprise full members, which are fund managers who manage at least one fund meeting the IMMFA criteria, and associate members which provide services to IMMFA managers or funds such as fund administrators or rating agencies." (See also, "ICI Ops on RDM, Negative Yields; N-MFP Holdings: Treasuries Still Half").

For more 2020 (and soon 2021) 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 2021. 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 2020, and we wish you all the best in the coming year. Merry Christmas and Happy New Year!

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