As we wrote earlier this month (and reprint here), our January MFI issue recognizes the top performing money funds, ranked by total returns, for calendar year 2021, as well as the top funds for the past 5-year and 10-year periods. We present the funds below with our annual Money Fund Intelligence Awards. These are given to the No. 1‐ranked funds based on 1-year, 5-year and 10-year returns, through Dec. 31, 2021, in each of our major fund categories — Prime Institutional, Government Institutional, Treasury Institutional, Prime Retail, Government Retail, Treasury Retail and Tax‐Exempt. (Note: We're still taking registrations ($250) for our upcoming Money Fund University Online, which takes place the afternoons of Jan. 20-21. Crane Data Subscribers and MFU Attendees may visit the "Money Fund University 2022 Download Center" to access conference materials and recordings.)

The Top-Performing Prime Institutional fund (and fund overall) was BlackRock Cash Inst MMF SL (BRC01) and JPMorgan Sec Lending MM Agency SL (VSLXX), which returned 0.09%, Excluding private and internal funds, the best performer in 2021 was DWS ESG Liquidity Inst (ESGXX) with a return of 0.08%. Among Prime Retail funds, JPMorgan Liquid Assets Capit (CJLXX) had the best return in 2021 (0.04%). The Top‐Performing Govt Institutional fund in 2021 was Fidelity Flex Govt Money Market Fund (FLGXX), which returned 0.09%. Davis Government MMF A (RPGXX) was the Top Government Retail fund over 1‐year with a return of 0.04%. Northern Trust AM Treas Assets Fund (NOR01) and T Rowe Price Treas Reserve Fund (TRP02) ranked No. 1 in the Treasury Institutional class with a return of 0.05%. Allspring 100% Treas MM A (WFTXX) was No. 1 among Treasury Retail funds, returning 0.02%.

For the 5‐year period through Dec. 31, 2021, BlackRock Cash Inst MMF SL (BRC01) took top honors for the best performing Prime Institutional money fund with a return of 1.32%. DWS ESG Liquidity Cap (ESIXX) ranked first (1.27%) when private funds were excluded. Fidelity Inv MM: MM Port Inst (FNSXX) ranked No. 1 among Prime Retail with an annualized return of 1.22%. Fidelity Series Govt Money Market Fund (FGNXX) ranked No. 1 among Govt Institutional funds with a return of 1.12%, while Vanguard Federal Money Mkt Fund (VMFXX) ranked No. 1 among Govt Retail funds over the past 5 years with a return of 1.04%. BlackRock Cash Treas MMF SL (BRC03) ranked No. 1 in 5‐year performance among Treasury Inst funds with a return of 1.04%. JPMorgan US Trs Plus MM IM (MJPXX) was first excluding internal funds (1.02%). Vanguard Treasury Money Market (VUSXX) ranks No. 1 among Treasury Retail funds with a return of 1.04%.

The highest performers of the past 10 years and No. 1 among Prime Inst MMFs were both BlackRock Cash Inst MMF SL (BRC01) and DWS ESG Liquidity Cap (ESIXX), which returned 0.80%. Fidelity Inv MM: MM Port Inst (FNSXX), which returned 0.72%, was best among Prime Retail. Dreyfus Inst Pref Govt Plus MF (DRF03) and UBS Liquid Assets Govt Fund (UBS02), returned 0.61% and ranked No. 1 among Govt Inst funds. Vanguard Federal Money Mkt Fund (VMFXX) ranked No. 1 among Govt Retail funds, returning 0.55%. BlackRock Cash Treas MMF SL (BRC03) and Fidelity Inv MM: Treas Port Inst (FRBXX) returned the most among Treasury Inst funds over the past 10 years at 0.56% and 0.53%, respectively. Vanguard Treasury Money Market (VUSXX) ranked No. 1 among Treasury Retail money market funds at 0.55%.

We're also giving out awards for the best-performing Tax-Exempt money funds. Fidelity Tax-Exempt Capital Res (FERXX) ranked No. 1 among T-E funds over 1-year with a return of 0.07%. Federated Hermes Muni Obligs WS (MOFXX) ranked No. 1 for the 5-year and 10-year period ended Dec. 31, 2021, with returns of 0.84% and 0.48%, respectively.

See the MFI Award Winner listings on page 6 of MFI, and see our latest Money Fund Intelligence XLS for more detailed rankings. The tables on page 6 show the No. 1 ranked money fund for each category based on 1-year, 5-year, and 10-year annualized total returns.

In other news, Capital Advisors Group recently published a new investment research piece titled, "Rates, Supply Chain, ESG and Stablecoins: Three (+1) Themes to Watch in 2022." They start by saying, "It has been our tradition to offer up three broad themes that will likely have the greatest impact on cash investments in the new year.... A year ago, our crystal ball told us that 2021 would be impacted by strong vaccine rollouts, ESG going mainstream, and SOFR replacing LIBOR as benchmarks. All three turned out to be right on point."

The section, "Stablecoins and Liquidity Market (In)stability," written by Lance Pan, begins, "In recent months, a class of crypto (or digital) currencies received increasing regulatory attention for their potential to cause unknown harm to short-term market stability. Governmental bodies including the Fed, the Treasury Department, the Securities and Exchange Committee (SEC), and the President's Working Group on Financial Markets have taken notice of stablecoins, previously an obscure corner of crypto space."

It tells us, "What's all this got to do with me, the boring cash investor, you may ask? Well, plenty. Think of stablecoins as unregulated shadow cash pools competing with the largest prime market funds for deposits and short-term investments, especially in commercial paper and similar credit instruments. With rapid growth and their association with the highly volatile crypto market, one or more of these collateral portfolios may need to be unwound quickly, leading to a liquidity crunch that could take investors of commercial paper and other liquid investments by surprise. How stablecoins evolve and how soon the regulators can catch up to them may be a meaningful risk concern in 2022."

Pan explains, "Unlike well-known but volatile crypto assets like Bitcoin and Ethereum, stablecoins are so named because they are designed to provide price stability by pegging values to real financial assets as collateral, including dollar denominated bank deposits and commercial paper and commodities. The practical purpose of a stablecoin is to serve as a medium of exchange between real money and crypto assets, facilitating the conversion and storage of funds on coin exchanges or in virtual wallets. In essence, stablecoins are to crypto traders what checking and money market accounts are to stock traders. If virtual and real money flow in their respective streams, cash investors need not be concerned with the crypto goings-on. But recent data shows that is not the case: stablecoins are gobbling up a lot of real liquid assets as collateral, essentially turning into large shadow money market funds without regulatory oversight."

He says, "According to CoinmarketCap.com, the top five stablecoins command a market cap of $151 billion. This compares to the combined balance of the five largest prime institutional money market funds of $97 billion." A footnote that sources Crane Data adds, "The five largest prime institutional money market funds (excluding internal portfolios) are: JPMorgan Prime ($43 billion), Morgan Stanley Institutional Liquidity Prime Institutional ($16 billion), JPMorgan Prime MM I ($15 billion), Federated Hermes Inst Prime Obligations IS ($12 billion) and State Street Inst Liquid Res Prem ($11 billion).

The research piece comments, "While cash investors are still focused on how to fix prime funds' run risk, the crypto coins, which dabble in the same liquid assets but loom larger by the day, can be a greater harm due to the lack of transparency in their holdings and lack of regulatory oversight. For example, Tether, the largest stablecoin, discloses its collateral portfolio valuation only quarterly. Of the $62.8 billion in assets it held as of June 30th, 2021, roughly 50% was in commercial paper and certificates of deposit, 24% in T-bills, 10% in cash and bank deposits, and the rest in other instruments. Of its CP and CD holdings, less than 48% were rated A-1 or better. USD Coin, the second largest coin, discloses its holdings monthly, which are said to be cash and cash equivalents in US dollar deposits and short-term liquid investments, but with no details offered."

It concludes, "US financial authorities including the Fed, Treasury and the SEC have taken notice of this potential threat to financial stability. Congress also held hearings on related subjects. We are, however, skeptical of an immediate and effective safety measure forthcoming. Investors wary of unexpected sources of instability in the cash investment world should keep an eye on the crypto space, particularly stablecoins' collateral values and their portfolio turnovers."

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