Even more minor money market funds are falling by the wayside both in the U.S. and Europe. A Prospectus Supplement filing for BBH U.S Government Money Market Fund says the manager will merge its $78 million "`Regular Shares" (BBMXX) into its $3.8 billion "Institutional Shares" (BBSXX). Regarding the "Conversion and Re-Designation of Regular Shares to Institutional Shares and Closure of Regular Share Class," they state, "The BBH Trust's Board of Trustee's has approved a one-time conversion of the BBH U.S. Government Money Market Fund's Regular Share Class to the Fund's Institutional Share Class to occur on February 26, 2021. On the Effective Date, the Fund's Regular Share Class will be converted, re-designated and renamed 'Institutional Share Class.'" (For more on liquidations, see our Feb. 18 Crane Data News, "SunAmerica Liquidating AIG Govt MMF" and additional hotlinks at the end of the article.)
BBH, the 35th largest MMF manager (of 65), explains, "The Board has also approved a waiver of the Fund's Institutional Share Class investment minimum for existing Regular Share Class shareholders as of the date of the supplement. Following the Effective Date, the rights, privileges or expenses of existing shareholders of Fund's Regular Share Class will be the same as the rights, privileges or expenses of shareholders of the Institutional Share Class. Additionally, as of the close of business on the Effective Date, the Fund's Regular Share Class shares will no longer be offered and all references to the Regular Share Class are removed from the Prospectus."
The filing adds on the "Closure of the BBH U.S. Government Money Market Fund Regular Share Class to Investments," "Effective close of business on February 18, 2021, the Fund's Regular Share Class is closed to investments; however, the Regular Share Class's closure to investments does not restrict any shareholders from redeeming shares. The Fund's ability to enforce the closure of the Regular Share Class to purchases with respect to certain retirement plan accounts and accounts held by financial intermediaries may vary depending on systems capabilities, applicable contractual and legal restrictions and cooperation of those retirement plans and intermediaries."
Northern Trust Asset Management also will hold a shareholder meeting on the merger of its Northern Trust Money Market Fund into its U.S. Government MMF. (See our Dec. 15, 2020 News, "Northern Drops Other Prime Shoe, Exits Muni Too.") The notice says, "You are cordially invited to attend a Special Meeting of Shareholders of the Money Market Fund, a series of Northern Funds, to be held on March 31, 2021 at 9:00 A.M. (Chicago time). In light of the public health concerns regarding the coronavirus (COVID-19) pandemic, the meeting will be held in a virtual format only. Shareholders will not be able to attend the meeting in person. At this important meeting, you will be asked to approve a Plan of Reorganization that provides for the reorganization of the Money Market Fund, a series of the Trust, into the U.S. Government Money Market Fund, also a series of the Trust. If approved by shareholders of the Acquired Fund, the reorganization is expected to be completed on or about April 9, 2021."
It tells us, "NTI believes that the shareholders of the Acquired Fund may benefit from the larger, combined assets of one combined fund, a lower risk profile and a better opportunity for future growth by combining the Acquired Fund's assets with the Acquiring Fund. The Acquiring Fund is a government money market fund with better commercial viability than the Acquired Fund, which is a prime money market fund, with a higher risk profile than the Acquiring Fund and minimal growth prospects in the current low interest rate environment. The reorganization is also expected to benefit NTI and its affiliate, The Northern Trust Company, by creating efficiencies from the operation of only the Acquiring Fund after the reorganization.... NTI also considered the future prospects of the Acquired Fund if the reorganization is not effected, including the possibility that the Acquired Fund might be liquidated. After considering NTI's recommendation, the Board concluded that the reorganization would be in the best interests of the Acquired Fund and the Acquiring Fund and their respective shareholders and that their respective shareholders' interests would not be diluted as a result of the reorganization."
In other MMF liquidation news, JPMorgan liquidated its JPM GBP Gilt CNAV Fund, a European-domiciled fund. A release entitled, "Fitch Withdraws JPMorgan GBP Gilt CNAV Fund's Money Market Fund Rating on Fund Liquidation," reads, "Fitch Ratings has withdrawn JPMorgan Liquidity Funds - GBP Gilt CNAV Fund's 'AAAmmf' rating. Fitch has withdrawn the fund's rating as it was liquidated on 16 February 2021, and the agency will no longer provide ratings or analytical coverage."
As when Euro money market fund yields went negative years ago, we expect to see an exodus from lower-yielding Government GBP (Pound Sterling) MMFs. Our latest MFI International (with data as of Jan. 31) shows that assets in European or "offshore" government money market mutual funds are still very low. Our Euro Govt Index includes 6 funds holding assets of E104 million, while our GBP Govt Index includes 12 funds holding L8.5 billion. The offshore USD Govt Index is also small, featuring just 7 funds with assets of $8.4 billion.
One of the factors driving these exits is of course the near-zero yield environment. Money market fund yields continue to bottom out just above zero. Our flagship Crane 100 remained unchanged again in the last week at 0.02%. The Crane 100 Money Fund Index fell below the 1.0% level almost a year ago in mid-March, and below the 0.5% level in late March. (See our March 4, 2020 News, "Surprise Fed Cut to Push Yields Below 1.0 Percent.") Average yields remain at the rock-bottom levels they started 2021 with, and are down from 1.46% at the start of 2020 and down from 2.23% at the beginning of 2019. Three-quarters of all money funds and just over half of MMF assets have since landed on the zero yield floor (0.00 or 0.01%), though some continue to show some yield.
According to our Money Fund Intelligence Daily, as of Friday, 2/19, 644 funds (out of 855 total) yield 0.00% or 0.01% with assets of $2.465 trillion, or 51.9% of the total $4.749 trillion. There are 200 funds yielding between 0.02% and 0.10%, totaling $2.075 trillion, or 43.7% of assets; 11 funds yielded between 0.11% and 0.20% with $209.3 billion, or 4.4% of assets. No funds yield over 0.19%.
The Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 678), shows a 7-day yield of 0.02%, unchanged in the week through Friday, 2/19. The Crane Money Fund Average is down 45 bps from 0.47% at the beginning of April. Prime Inst MFs were unchanged at 0.04% in the latest week, Government Inst MFs were flat at 0.02%, and Treasury Inst MFs were unchanged at 0.01%. Treasury Retail MFs currently yield 0.01%, (unchanged in the last week), Government Retail MFs also yield 0.01% (unchanged in the last week), and Prime Retail MFs yield 0.02% (unchanged). Tax-exempt MF 7-day yields were also unchanged at 0.01%. (Let us know if you'd like to see our latest MFI Daily.)
The latest Brokerage Sweep Intelligence, with data as of February 19, showed no changes in the last week. All major brokerages, with the exception of RW Baird, offer rates of 0.01% for balances of $100K. No brokerage sweep rates or money fund yields have gone negative to date, but this could become a distinct possibility in coming weeks or months. Crane's Brokerage Sweep Index has been flat for the last 44 weeks at 0.01% (for balances of $100K). Ameriprise, E*Trade, Fidelity, Merrill Lynch, Morgan Stanley, Raymond James, Schwab, TD Ameritrade, UBS and Wells Fargo all currently have rates of 0.01% for balances at the $100K tier level (and almost every other tier too). RW Baird offers a rate of 0.02% for its balances of $100K.
One year ago, we covered the first brokerage merger of 2020 in our Feb. 25, 2020 News, "Sweeps Big Part of Morgan Stanley, E*Trade Purchase; Rates Flat Again." Morgan Stanley announced the close of the acquisition in an early October press release, writing, "Morgan Stanley... announced today that it has completed the acquisition of E*TRADE Financial Corporation (E*TRADE) in an all-stock transaction."
Schwab also announced the firm's acquisition of TD Ameritrade in October 2020. Their press release, "Schwab Completes Acquisition of TD Ameritrade," writes that the merger "[c]reates company with approximately $6 trillion in client assets across 28 million brokerage accounts." The integration is estimated to take place over the coming 18 to 36 months, and no word on the integration of their banks or sweep assets.
