The May issue of our flagship Money Fund Intelligence newsletter, which was sent to subscribers Friday morning, features the articles: "Comments to SEC on MMF Reforms Support Liquidity Fee," which discusses the feedback on pending regulatory changes; "Fidelity Letter Blasts SEC on Swing Pricing, Negative Yields," which quotes from the largest fund manager's feedback to the Commission; and, "Earnings Reports Show Fee Waivers Retreating in Q1'22," which reviews the latest reports on the return of fees in MMFs. We also sent out our MFI XLS spreadsheet Friday morning, and we've updated our database with 4/30/22 data. Our May Money Fund Portfolio Holdings are scheduled to ship on Tuesday, May 10, and our May Bond Fund Intelligence is scheduled to go out on Friday, May 13. (Note: Our MFI, MFI XLS and Crane Index products are all available to subscribers via our Content center.)

MFI's "Comments article says, "The big news over the past month was the release of most of the major 'Comments on Money Market Fund Reform' sent to the SEC in response to its Money Fund Reform Proposal. Following the April 11 deadline, dozens of letters were posted, including entries from 17 of the 20 largest managers of MMFs. Click on the name for comments from each of the managers here: Fidelity (see article), BlackRock, Vanguard, J.P. Morgan, Federated Hermes, Morgan Stanley, Dreyfus, Northern, Allspring, SSGA, American Funds, Schwab, First American, Invesco, T. Rowe Price, HSBC and Western. (Goldman Sachs, UBS and DWS didn't submit letters.)

It continues, "ICI's letter, which reflects most fund managers' thoughts, tells us, 'Any new reforms for money market funds should be measured and appropriately calibrated, taking into account data, the costs and benefits these funds provide to investors, the economy, and the short-term funding markets.... We strongly disagree with the proposed swing pricing requirement (and the related proposed disclosure and reporting requirements). Swing pricing fails to reflect how money market funds are managed, would not advance the SEC's goals of enhancing money market fund resiliency and by extension financial stability, would likely strip money market funds of features that are key to investors ... and would impose excessive costs to overcome unnecessary and complex structural challenges. Indeed, swing pricing will fundamentally alter the product and its appeal ..., cause fund sponsors to stop offering the product, and is neither supported by the data nor necessary."

Our "Fidelity Letter" excerpts explain, "Fidelity's comment, written by Chief Legal Officer Cynthia Lo Bessette, tells us, 'Fidelity Investments appreciates the opportunity to provide comments to the Securities and Exchange Commission on its proposed rule and form amendments relating to money market funds.... [S]tresses highlighted certain vulnerabilities in segments of the money market fund industry as well as the need to reconsider certain aspects of Rule 2a-7. Fidelity is encouraged that the SEC has sought to solve for these vulnerabilities in the Proposal by bolstering liquidity requirements and by reevaluating its prior support for temporary suspensions of redemptions (commonly referred to as 'gates')."

It continues, "Fidelity is also encouraged that the SEC did not propose other, more pernicious, reform options that would significantly disrupt the money market fund industry and, in turn, the smooth functioning of the capital markets. It is evident that the SEC, at least in portions of the Proposing Release, accounted for the feedback provided by the industry in response to the report of the President's Working Group on Financial Markets (the 'PWG') on potential reform options for money market funds."

Our "Earnings" piece states, "The latest batch of quarterly earnings calls and reports offers a glimpse into the state of fee waivers, which have begun falling precipitously (and should be almost gone in the current quarter). BlackRock CFO Gary Shedlin comments, 'We incurred approximately $75 million of gross discretionary yield support waivers in the first quarter. However, waivers for our flagship funds were essentially removed following rate hikes ... in March. Recall that approximately 50% of gross fee waivers are generally shared with distributors, so the benefit to base fees is partially offset by higher distribution expense."

Shedlin also tells us, "BlackRock's cash management platform saw net outflows of $27 billion, driven by redemptions from offshore prime and U.S. government MMFs, in line with the broader industry. BlackRock has steadily grown our share of the cash management industry by leveraging our scale and delivering innovative distribution and risk management solutions for clients."

MFI also includes the News brief, "Fed Hikes by 50 Bps; MMF Yields Poised to Surge Towards 1.0%." It quotes the Fed's Statement, "[T]he Committee decided to raise the target range for the federal funds rate to 3/4 to 1 percent and anticipates that ongoing increases in the target range will be appropriate." Our Crane 100 Index yields 0.21%, but should move over 0.50% within days and towards 0.70% in weeks.

Another News brief, "April Portfolio Holdings: Fed Repo Jumps; Treasuries, TDs Plunge," tells us, "Our March 31 data shows that Repo jumped while Treasuries and Other (Time Deposits) plunged last month. Repo remained the largest segment, while Treasuries remained No. 2. (MMF holdings of Fed repo surged to $1.651 trillion.) Agencies were the third largest segment, CP remained fourth, ahead of CDs, Other/Time Deposits and VRDNs."

Finally, a sidebar, "WSJ: Managers Shift to Cash," explains, "The Wall Street Journal writes about 'cash' in 'Wall Street Finds New Value in Cash as Global Fears Weigh on Markets.' The article says, 'Worries about the war in Ukraine, China's Covid-19 outbreak, a U.S. or European recession and surging global inflation are making a long-spurned asset increasingly popular with Wall Street's top money managers these days: cash. As stock and bond prices have retreated from records in the tumult of headlines, more asset managers said they are looking to move funds into low-‚Äčrisk, cash-like assets."

Our May MFI XLS, with April 30 data, shows total assets decreased $74.3 billion to $4.974 trillion, after increasing $24.1 billion in April, decreasing $34.6 billion in February and decreasing $128.1 billion in January. Assets increased $104.6 billion in December, $49.7 billion in November and $20.5 billion October. MMFs also increased $878 million in September and $27.9 billion in August. Our broad Crane Money Fund Average 7-Day Yield was up 5 bps to 0.14%, and our Crane 100 Money Fund Index (the 100 largest taxable funds) was up 6 bps to 0.21%. (Yields should jump today and begin reflecting Wednesday's Fed hike.)

On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA and the Crane 100 both were both higher at 0.40% and 0.42%, respectively. Charged Expenses averaged 0.26% and 0.20% for the Crane MFA and the Crane 100. (We'll revise expenses Monday once we upload the SEC's Form N-MFP data for 4/30/22.) The average WAM (weighted average maturity) for the Crane MFA was 26 days (down 2 days from previous month) while the Crane 100 WAM fell to 26 days. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)

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