BNY Mellon took steps to streamline its asset management subsidiaries and focus each on particular asset classes, and moved to consolidated its cash under its Dreyfus unit. A press release entitled, "BNY Mellon Investment Management to Enhance the Specialist Investment Capabilities of Insight, Newton and Dreyfus Cash Investment Strategies," explains, "BNY Mellon Investment Management ... and four of its investment firms today announced plans to realign Mellon Investments Corporation's capabilities in fixed income, equities and multi-asset, and liquidity management with Insight Investment, Newton Investment Management and Dreyfus Cash Investment Strategies, respectively."
It continues, "The decision, made in partnership with the investment firms, will enhance their respective specialist capabilities, and strengthen their research platforms and global reach. The transition of Mellon's capabilities is expected to be completed by the third quarter of 2021, subject to regulatory approvals. There will be no change to the firms' investment processes or philosophies during the transition period as a result of the changes announced today."
Hanneke Smits, CEO of BNY Mellon Investment Management comments, "In the face of a rapidly changing investment environment, well-resourced specialist expertise with global research capabilities are needed to deliver the outcome-focused solutions clients expect.... The realignment of Mellon's investment capabilities with Insight, Newton and Dreyfus CIS is part of our commitment to providing our clients with a range of investment strategies that meet their current and evolving objectives."
The release explains, "The transition of Mellon's fixed income investment teams will enable Insight to solidify its position as a leading global fixed income solutions and liability-driven investment (LDI) manager with $1.1 trillion in AUM. Mellon's $105.2 billion in fixed income capabilities across stable value, municipal, efficient beta and taxable fixed income strategies are highly complementary to Insight's investment expertise. The investment processes share considerable common ground and the combined team will have enhanced collective coverage of the U.S., the world's largest and most diverse fixed income market."
It also says, "Mellon's deep experience in managing institutional cash for its separately managed account clients complements Dreyfus CIS' existing suite of money market mutual funds, UCITS funds and collective investment vehicles. The integration of investment teams is designed to provide a holistic offering for our clients."
Stephanie Pierce, CEO of ETF, Index and Cash Investment Strategies at BNY Mellon Investment Management, tells us, "This combination will provide clients with consolidated access to industry-leading liquidity solutions, backed by nearly 50 years of expertise and leadership across the entire cash ecosystem.... This is one of several enhancements to better serve the evolving needs of our clients with a comprehensive, scalable and flexible suite of liquidity solutions."
Finally, BNY Mellon adds, "The integration of Mellon's cash capabilities with Dreyfus CIS will offer clients a comprehensive platform of institutional liquidity solutions with over $300 billion in AUM across investment vehicles.... As a result of the plans to realign Mellon's investment capabilities, Des Mac Intyre, Mellon's current CEO, has decided to leave the firm at the end of February 2021." (For more, see our Nov. 19, 2020 Crane Data News, "Dreyfus Consolidates Money Funds, Sticks w/Prime; OFR Annual Report.")
In other news, Wells Fargo Asset Management's latest monthly "Portfolio Manager Commentary"" states, "Money markets had settled into well-defined trading ranges in the second half of 2020, but the veneer of stability cracked for the first time as they slipped to lower yields in late January, led by the repo market. The Secured Overnight Financing Rate (SOFR), the Federal Reserve's most comprehensive repo market index, averaged between 0.082% and 0.087% each month from August to December 2020. In January, it averaged 0.071%, and more ominously in the last half of January the average was 0.052%."
They tell us, "Because the repo market is as transparent as mud, it's hard to say exactly what caused the move and whether it will stick. What we can say is that as reserves grow -- both through the Fed's ongoing $120-billion-per-month quantitative easing securities purchases as well as the U.S. Treasury spending down its cash balance at the Fed -- there will be ever more cash looking for a home. However, we also know that reserves have a welcoming home at the Fed, where they earn 0.10% -- the Interest on Excess Reserves (IOER) rate the Fed pays -- in unlimited size, and nothing that can be invested there should be placed elsewhere at lower rates. Given that, and since reserves were little changed in January, all we can say for sure right now is that cash unrelated to banking reserves likely drove repo rates lower. Treasury bill yields followed repos lower, tightening by 1 to 2 basis points (bps; 100 bps equal 1.00%). Their near-term fate will be tied to the repo market as well."
On the "Prime sector," Wells comments, "January is a notoriously slow month in the prime money market space. Many issuers get squared away on funding before the end of the year, with much of that issuance maturing farther into the new year. Consequently, issuers aren't actively seeking term funding. At the same time, investors who built up liquidity for possible year-end cash needs are now searching for investments once the calendar turns. While we often see this type of supply/demand imbalance push rates lower in January, couple that this year with a decreasing yield environment and pressure on repo rates to find that rates available in the marketplace are restrained, to say the least.... With the fall in repo levels exacerbating the decline in very short maturity paper, the yields on time deposits and short commercial paper have fallen in lockstep with the repo decline."
