On Friday, mutual fund news source ignites published the article, "Sponsors Waived $3.1B in Money Fund Fees in 2020." They write, "Money market fund sponsors waived $3.1 billion in fees last year, according to Investment Company Institute data. An economic slowdown spurred by the coronavirus pandemic led the Federal Reserve to cut short-term interest rates twice last March, to zero, after about two years of keeping the benchmark rate above 1.5%. With those cuts, yields tumbled, and a growing number of money funds began waiving fees to avoid zero or negative yields." We quote from their piece, and we also review the latest MFI International statistics on European money fund assets, yields and portfolio holdings, below. (Note: We're still taking registrations for this week's Money Fund University ($250), our "basic training" event, which takes place the afternoons of Jan. 21-22. Crane Data Subscribers and MFU Attendees may visit the "Money Fund University 2021 Download Center" to access conference materials and recordings in coming days.)
Ignites explains, "As of December, 94% of all money fund share classes waived a portion of expenses, ICI data shows. That compares to 68% in January 2020. The annual figures for total waivers encompass fees waived for any reason, not just those connected to keeping yields above zero. The overall increase last year in money fund assets also pushed up the total amount of fees waived. Investors piled into money funds in March amid liquidity concerns, adding about $700 billion to the products that month, according to Crane Data."
They continue, "The funds finished the year with $4.2 trillion in assets, up from $3.6 billion as of year-end 2019, ICI data shows. The 100 largest money funds charged an average expense ratio of 13 basis points in December 2020, according to Crane Data. A year earlier, the average was 27 bps. But the seven-day average yield for the 100 largest money funds was 2 bps as of Dec. 31, according to Crane Data. That's down from 131 bps a year earlier. 'That pain is spread across various entities,' says Peter Crane, CEO of Crane Data. 'Distribution fees are always the first to get cut,' he adds, noting that those cuts are normally shared with intermediaries."
Ignites also writes, "Roughly 60% of the waiver is borne by the asset manager, and distributors shoulder the rest, says Neal Epstein, VP and senior credit officer at Moody's. But increased assets in money funds, at least for the largest managers, compensates to some extent for the lost fee revenue, he says. This holds true for BlackRock, according to CFO Gary Shedlin. Almost 40% of gross money fund fee waivers are shared with distributors, he said Thursday during a call with analysts. The firm's cash management products, including money funds, garnered about $9 billion in net inflows in the fourth quarter, Shedlin said. The firm waived about $30 million in fees during the fourth quarter to support the yields on those products, he added. Shedlin expects fee waivers to increase this year."
The piece tells us, "Crane also expects total money fund fee waivers to increase in 2021, but he says it's hard to predict by how much, given all of the variables involved. The Federal Reserve has said that it plans to keep rates low for the next several years. Since fee waivers have hit revenues and regulators expect to further scrutinize the product, some industry players may decide to leave the business altogether, says Rory Callagy, senior credit officer at Moody's. This would give more market share to the leading players in an already concentrated industry, he says."
Finally, ignites adds, "The 10 largest money fund sponsors managed nearly 70% of total industry assets as of Dec. 31, according to Crane Data. However, assets in money funds may decline in 2021 as 'yield-sensitive' investors move their money to other products, Crane says. 'We're definitely in for some erosion [in assets],' he says. 'I'd guess money funds are in for a 5% decline [in total assets], maybe flat, but .. there's a ton of variables there, too.'"
In other news, Crane Data's latest MFI International shows that assets in European or "offshore" money market mutual funds moved substantially higher in 2020. These U.S.-style funds, domiciled in Ireland or Luxembourg and denominated in US Dollars, Pound Sterling and Euros, increased by $182.8 billion in 2020 and are up $27.4 billion over the last 30 days (when translated into dollars). They're down $3.1 billion (-0.3%) year-to-date in 2021 (through 1/14/21). Offshore US Dollar money funds, which broke over $500 billion last January, were up $41.3 billion in 2020 (8.3%). They're up $26.7 billion over the last 30 days and $600 million YTD to $536.3 billion. Euro money funds skyrocketed, up E58.7B in 2020 (59.5%). They're up E215 million over the past month but down E5.3 billion to E152.0 billion YTD. GBP money funds rose L31.6B in 2020, and have risen by L340 million over 30 days and L2.0 billion YTD to L258.6B. U.S. Dollar (USD) money funds (191) account for half (50.6%) of the "European" money fund total, while Euro (EUR) money funds (94) make up 16.5% and Pound Sterling (GBP) funds (119) total 29.4%. We summarize our latest "offshore" money fund statistics and our Money Fund Intelligence International Portfolio Holdings (which went out to subscribers Friday), below.
Offshore USD MMFs yield 0.04% (7-Day) on average (as of 01/14/20), down from 1.59% on 12/31/19 and 2.29% at the end of 2018. EUR MMFs yield -0.67% on average, compared to -0.59% at year-end 2019 and -0.49% on 12/31/18. Meanwhile, GBP MMFs yielded 0.01%, 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 12/31/20, show that European-domiciled US Dollar MMFs, on average, consist of 23.0% in Commercial Paper (CP), 14.5% in Certificates of Deposit (CDs), 19.2% in Repo, 34.5% in Treasury securities, 7.5% in Other securities (primarily Time Deposits) and 1.3% in Government Agency securities. USD funds have on average 28.8% of their portfolios maturing Overnight, 5.8% maturing in 2-7 Days, 12.9% maturing in 8-30 Days, 15.6% maturing in 31-60 Days, 12.2% maturing in 61-90 Days, 19.0% maturing in 91-180 Days and 5.7% maturing beyond 181 Days. USD holdings are affiliated with the following countries: the US (45.0%), France (12.7%), Canada (10.2%), Japan (7.4%), Germany (4.8%), Sweden (3.7%), the U.K. (3.5%), Australia (2.6%), Switzerland (1.9%) and the Netherlands (1.9%).
The 10 Largest Issuers to "offshore" USD money funds include: the US Treasury with $195.1 billion (34.7% of total assets), Fixed Income Clearing Corp with $21.3B (3.8%), BNP Paribas with $19.3B (3.4%), RBC with $16.3B (2.9%), Societe Generale with $15.0B (2.7%), Toronto-Dominion Bank with $11.7B (2.1%), Mitsubishi UFJ Financial Group Inc. with $11.6B (2.1%), Credit Agricole with $10.7B (1.9%), Bank of Nova Scotia with $10.7B (1.9%) and Sumitomo Mitsui Banking Corp with $9.2B (1.6%).
Euro MMFs tracked by Crane Data contain, on average 43.1% in CP, 17.7% in CDs, 18.4% in Other (primarily Time Deposits), 10.0% in Repo, 10.3% in Treasuries and 0.4% in Agency securities. EUR funds have on average 26.4% of their portfolios maturing Overnight, 4.9% maturing in 2-7 Days, 19.3% maturing in 8-30 Days, 15.6% maturing in 31-60 Days, 10.2% maturing in 61-90 Days, 18.6% maturing in 91-180 Days and 4.9% maturing beyond 181 Days. EUR MMF holdings are affiliated with the following countries: France (37.7%), Japan (12.4%), the U.S. (8.4%), Sweden (5.9%), Germany (5.1%), Switzerland (4.4%), Canada (4.4%), Belgium (3.2%), the U.K. (2.6%) and the Netherlands (2.4%).
The 10 Largest Issuers to "offshore" EUR money funds include: Republic of France with E12.2B (8.6%), BNP Paribas with E6.9B (4.9%), Credit Mutuel with E6.2B (4.3%), Societe Generale with E6.0B (4.3%), Credit Agricole with E5.5B (3.8%), Sumitomo Mitsui Banking Corp with E5.1B (3.6%), Zürcher Kantonalbank with E4.8B (3.4%), BPCE SA with E4.6B (3.3%), Svenska Handelsbanken with E4.4B (3.1%) and Mitsubishi UFJ Financial Group Inc with E4.2B (3.0%).
The GBP funds tracked by MFI International contain, on average (as of 12/31/20): 32.8% in CDs, 24.4% in CP, 19.3% in Other (Time Deposits), 19.1% in Repo, 4.1% in Treasury and 0.3% in Agency. Sterling funds have on average 33.0% of their portfolios maturing Overnight, 9.5% maturing in 2-7 Days, 12.1% maturing in 8-30 Days, 14.0% maturing in 31-60 Days, 10.1% maturing in 61-90 Days, 15.8% maturing in 91-180 Days and 5.6% maturing beyond 181 Days. GBP MMF holdings are affiliated with the following countries: the U.K. (20.0%), France (19.9%), Japan (15.6%), Canada (10.2%), the U.S. (6.1%), Sweden (4.3%), Switzerland (3.5%), Germany (3.1%), Australia (2.6%), and Spain (2.4%).
The 10 Largest Issuers to "offshore" GBP money funds include: the UK Treasury with L23.2B (10.6%), Mitsubishi UFJ Financial Group Inc with L10.3B (4.7%), Sumitomo Mitsui Banking Corp with L9.7B (4.4%), BNP Paribas with L9.4B (4.3%), RBC with L8.8B (4.0%), Agence Central de Organismes de Securite Sociale with L7.8B (3.6%), Standard Chartered Bank with L7.6B (3.5%), BPCE SA with L6.9B (3.2%), Sumitomo Mitsui Trust Bank with L6.3B (2.9%) and Mizuho Corporate Bank Ltd with L6.2B (2.8%).
