The August issue of our flagship Money Fund Intelligence newsletter, which was sent to subscribers Friday morning, features the articles: "MF Portfolio Holdings Review; Shift to Repo from Treasuries," which looks at the latest securities and composition held by MMFs; "Federated's Donahue Says Q2 High-Water Mark for Waivers," which quotes the latest on fee waivers from earnings calls; and, "Reviewing ESMA Comments: IMMFA, Irish Funds, EFAMA," which quotes from recent feedback to European regulators. We also sent out our MFI XLS spreadsheet Friday a.m., and have updated our Money Fund Wisdom database query system with 7/31/21 data. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our August Money Fund Portfolio Holdings are scheduled to ship on Tuesday, August 10, and our August Bond Fund Intelligence is scheduled to go out Friday, August 13.
MFI's lead article says, "Money fund portfolios continue their massive shift away from Treasuries and towards repo, especially Fed repo. So we thought it would be a good time to review Crane Data's Money Fund Portfolio Holdings data and information. Our last monthly cut, with data as of June 30, 2021, showed another huge increase in Repo holdings and a giant drop in Treasuries, and we expect our 7/31 data to show the trend continuing." (Our August holdings will ship on Tuesday, 8/10.)
It continues, "Money market securities held by Taxable U.S. money funds (tracked by Crane Data) inched higher by $1.5 billion to $4.949 trillion in June, after rising $30.2 billion in May. Treasury securities remained the largest portfolio segment, followed by Repo, then Agencies. CP remained fourth, ahead of CD, Other/Time Deposits and VRDNs."
Our "Federated's Donahue" piece reads, "On its latest quarterly earnings call, Federated Hermes spend a lot of time discussing fee waivers. CEO & President Chris Donahue comments, 'We believe that Q2 was the high-water mark for money market fund yield waiver impact. As we expected, the Fed raised the administered rates in mid-June, moving repo rates from zero to 5 basis points and interest on excess reserves from 10 to 15 bps.' We quote from the call below, and we also review other earnings calls that mentioned money fund fee waivers."
Donahue explains, "While the Fed movement was a step in the right direction, the money fund yield curve remains very flat, and we are experiencing more waivers for competitive purposes. Tom will update our yield waiver outlook for the third quarter. Taking a look now at recent asset totals, managed assets were approximately $638 billion, including $421 billion in money markets.... MMMF assets were at $293 billion."
CFO Tom Donahue tells us, "Total revenue for the quarter was down from the prior quarter due mainly to the impact of higher minimum yield and competitive waivers.... Now other revenue increases from Q1 included the impact of higher money market assets.... The decrease in distribution expense of $6.3 million, compared to the prior quarter was mainly due to the impact of minimum yield waivers, partially offset by higher distribution expense incurred for competitive purposes.' (See Federated's recent 'Domestic Fee Waiver Notice.')"
The "ESMA" article tells readers, "As we mentioned last month, over 30 comment letters have been posted in response to the European Securities and Markets Authority's (ESMA's) 'Consultation on EU Money Market Fund Regulation - Legislative Review.' We've reviewed several of these over the past few weeks, but below we excerpt highlights from the major fund industry association comment letters."
The piece continues, "The U.K.-based Institutional Money Market Fund Association writes, 'Although the overwhelming majority of IMMFA MMFs are LVNAV or PDC-NAV, IMMFA represents all fund types ... our members offer a range of funds.... We feel strongly that questions of how MMFs fared should be considered in the context of the broader ecosystem and that any proposed solutions should take this symbiosis into account, rather than isolating MMFs. The March crisis was the first test of the reforms introduced under EU MMFR. Those reforms proved instrumental in providing MMFs with the increased resilience which enabled them to pass this test. We note that MMFs continued to serve their purpose in preserving capital and providing liquidity, with no MMFs imposing gates or fees, and all IMMFA MMFs staying within ... collars."
MFI also includes the News brief, "MMF Assets Down Again," which says, "Money fund assets fell by $12.4 billion in July to $4.966 trillion, according to our MFI XLS. ICI's 'Money Market Fund Assets' report shows MMFs down $1.1 billion to $4.501 trillion in the latest week, but up $204 billion, or 4.7% YTD."
Another News brief, "TBAC Recommends MMF Reforms," tells readers, "The Treasury Borrowing Advisory Committee discussed MMF reforms. A 'presenting member argued that reforms should include removing the ties between MMFs liquidity mandates and redemption fees and gates, mandating that prime MMFs hold a higher degree of liquid assets, and using floating net asset values for all non-government MMFs to set clearer expectations of risks to MMF investors.'"
Our August MFI XLS, with July 31 data, shows total assets decreased $12.4 billion to $4.966 trillion, after decreasing $73.0 billion in June, increasing $74.0 billion in May and increasing $62.2 billion in April. Assets rose $151.0 billion in March, $30.8 billion in February and $5.6 billion in January. Assets decreased $6.7 billion in December, $11.7 billion in November, $46.8 billion in October, $121.2 billion in September, and $42.3 billion in August. Our broad Crane Money Fund Average 7-Day Yield inched higher to 0.02%, and our Crane 100 Money Fund Index (the 100 largest taxable funds) remained flat at 0.02%.
On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA and the Crane 100 both remained at 0.09%. Charged Expenses averaged 0.07% for the Crane MFA and the Crane 100. (We'll revise expenses Monday once we upload the SEC's Form N-MFP data for 7/31.) The average WAM (weighted average maturity) for both the Crane MFA and Crane 100 was 37 days (down one day from the previous month). (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
