Money fund expense ratios hit their lowest level ever, falling to an average of 0.10%, as measured by our Crane 100 Money Fund Index and our broader Crane Money Fund Average, as of February 28, 2021. The previous record low for monthly annualized charged expense ratios was 0.11% in November 2014. Crane Data revises its monthly expense data and gross yield information after the SEC updates its latest Form N-MFP data the morning of the 6th business day of the new month. (They posted this info Monday morning, so we revised our monthly MFI XLS spreadsheet and historical craneindexes.xlsx averages file to reflect the latest expenses, gross yields, portfolio composition and maturity breakout late yesterday.) Visit our "Content" page for the latest files, and see below for the review of the latest N-MFP Portfolio Holdings data.
Our Crane 100 Money Fund Index, a simple average of the 100 largest taxable money funds, shows an average charged expense ratio (Exp%) of 0.10%, down from 0.11% last month. The average is down from 0.27% on Dec. 31, 2019, so we estimate that funds are waived approximately 17 bps, or almost two-thirds of full charged expenses. The Crane Money Fund Average, a simple average of all taxable MMFs, also shows a charged expense ratio of 0.10% as of Feb. 28, 2021, down 2 basis points from the month prior and down from 0.40% at year-end 2019.
Prime Inst MFs expense ratios (annualized) now average 0.14% (down 0.01% from last month), Government Inst MFs expenses average 0.08% (down 0.02% from the month prior), Treasury Inst MFs expenses also average 0.08% (down 0.02% from last month). Treasury Retail MFs expenses currently sit at 0.08%, (down 0.03% from the month prior), Government Retail MFs expenses yield 0.07% (down 0.02% over the month). Prime Retail MF expenses are 0.17% (down 0.01% from the month prior). Tax-exempt expenses were also lower, now averaging to 0.10% (down 0.01% from last month).
Gross 7-day yields were also lower, falling to 0.11% on average in the month ended Feb. 28, 2021. The Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 743), shows a 7-day gross yield of 0.12%, down 2 basis points from the previous month. The Crane Money Fund Average is down 1.61% from 1.73% at the end of 2019. The Crane 100's 7-day gross yield also fell 2 basis points in February, ending the month at 0.12%, down 1.61% from year-end 2019.
According to our revised MFI XLS and Crane Index numbers, we now estimate that annualized revenue for all money funds is approximately $4.587 billion (as of 2/28/21). Our estimated annualized revenue totals have fallen from $5.401 billion last month, from $6.028 trillion at the start of 2020 and from $10.642 trillion at the start of 2019. Thus, we'd estimate that fee waivers are currently costing fund managers, and their distribution partners, over $6.0 trillion annually. (That's at these levels. Of course, charged expenses and gross yields are driven by a number of variables, and increasing Treasury supply should alleviate some of the pressures from this past month.)
Nonetheless, severe fee waivers and heavy fee pressure should continue as long as the Fed keeps yields pinned to almost zero. For more, see our Jan. 19, 2021 Crate Data News, "Ignites: MMFs Waive $3.1B in Fees; MFI Intl: Euro MMFs Up 60% in 2020." Their piece explains, "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."
They also wrote, "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."
Ignites added, "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."
In related news, Crane Data's latest monthly Money Fund Portfolio Holdings statistics will be sent out Tuesday, and we'll be writing our normal monthly update on the February 28 data for Wednesday's News. But we also published a separate and broader Portfolio Holdings data set based on the SEC's Form N-MFP filings on Monday. (We continue to merge the two series, and the N-MFP version is now available via Holding file listings to Money Fund Wisdom subscribers.) Our new N-MFP summary, with data as of Feb. 28, 2021 includes holdings information from 1,067 money funds (down six from last month), representing assets of $4.862 trillion (up from $4.827 trillion). Prime MMFs now total $921.5 billion, or 19.0% of the total. We review the new N-MFP data below.
Our latest Form N-MFP Summary for All Funds (taxable and tax-exempt) shows Treasury holdings totaled $2.450 trillion (down from $2.488 trillion), or a massive 50.4% of all holdings. Repurchase Agreement (Repo) holdings in money market funds totaled $1.084 trillion (up from $1.005 trillion), or 22.3% of all assets, and Government Agency securities totaled $651.9 billion (down from $665.4 billion), or 13.4%. Holdings of Treasuries, Government agencies and Repo (almost all of which is backed by Treasuries and agencies) combined total $4.186 trillion, or a stunning 86.1% of all holdings.
Commercial paper (CP) totals $271.7 billion (up from $267.4 billion), or 5.6% of all holdings, and the Other category (primarily Time Deposits) totals $192.0 billion (up from $174.9 billion), or 3.9%. Certificates of Deposit (CDs) total $132.2 billion (down from $141.8 billion), 2.7%, and VRDNs account for $80.2 billion (down from $84.7 billion last month), or 1.6% of money fund securities.
Broken out into the SEC's more detailed categories, the CP totals were comprised of: $182.3 billion, or 3.7%, in Financial Company Commercial Paper; $43.4 billion or 0.9%, in Asset Backed Commercial Paper; and, $46.0 billion, or 0.9%, in Non-Financial Company Commercial Paper. The Repo totals were made up of: U.S. Treasury Repo ($588.0B, or 12.1%), U.S. Govt Agency Repo ($438.3B, or 9.0%) and Other Repo ($58.1B, or 1.2%).
The N-MFP Holdings summary for the 208 Prime Money Market Funds shows: CP holdings of $266.3 billion (up from $262.1 billion), or 28.9%; Treasury holdings of $210.2 billion (down from $240.7 billion), or 22.8%; Other (primarily Time Deposits) holdings of $145.4 billion (up from $131.1 billion), or 15.8%; CD holdings of $132.2 billion (down from $141.8 billion), or 14.3%; Repo holdings of $119.8 billion (down from $120.7 billion), or 13.0%; Government Agency holdings of $28.8 billion (down from $44.5 billion), or 4.2% and VRDN holdings of $8.9 billion (down from $9.2 billion), or 1.0%.
The SEC's more detailed categories show CP in Prime MMFs made up of: $182.3 billion (up from $179.9 billion), or 19.8%, in Financial Company Commercial Paper; $43.4 billion (down from $45.9 billion), or 4.7%, in Asset Backed Commercial Paper; and $40.6 billion (up from $36.3 billion), or 4.4%, in Non-Financial Company Commercial Paper. The Repo totals include: U.S. Treasury Repo ($26.7 billion, or 2.9%), U.S. Govt Agency Repo ($35.0 billion, or 3.8%), and Other Repo ($58.1 billion, or 6.3%).
