The June issue of our flagship Money Fund Intelligence newsletter, which was sent to subscribers Tuesday morning, features the articles: "Money Fund Yields Climb, Pulling Sweeps, Deposits Up," which discusses the jump in money fund rates; "ICI 2022 Fact Book Shows Money Fund Trends in '21," which covers the Investment Company Institute's annual statistical guide; and, "Bank of England, FCA Paper Reviews Money Funds in UK," which reviews regulatory discussions in Europe. We also sent out our MFI XLS spreadsheet Tuesday morning, and we've updated our database with 5/31/22 data. Our June Money Fund Portfolio Holdings are scheduled to ship on Thursday, June 9, and our June Bond Fund Intelligence is scheduled to go out on Tuesday, June 14. (Note: Our MFI, MFI XLS and Crane Index products are all available to subscribers via our Content center.)
MFI's "Yields Climb article says, "Money market fund yields continue to inch higher after a surge in early May following the Fed's 50-basis-point move. Our flagship Crane 100 Money Fund Index, which ended May at 0.57%, rose to 0.59% in the week ended Friday, June 3. The average had been 0.55% the prior week, 0.21% on April 29, 0.15% on March 31 and 0.02% on February 28 (where it had been for almost 2 years prior)."
It continues, "Brokerage sweep deposit rates have also begun inching higher, with Fidelity Investments hiking its FDIC-insured brokerage sweep rate to 0.25% from 0.01% last month. Our latest Brokerage Sweep Intelligence shows the average rate (on FDIC insured deposits) inched up to 0.05%, up from 0.01% a month ago. Money fund yields should jump higher again next month if, as expected, the Fed raises rates by another 50 bps. Whether bank deposits keep pace, and how much money begins flowing info money funds, are now the major questions in the space."
Our "ICI 2022 Fact Book" excerpts explain, "The Investment Company Institute released its '2022 Investment Company Fact Book,' an annual compilation of statistics and commentary on the mutual fund space. Subtitled, 'A Review of Trends and Activities in the Investment Company Industry,' the latest edition reports that equity, bond fund and money market funds all saw assets increase nicely in 2021 (though 2022 year-to-date has been another matter). Overall, money funds assets were $4.756 trillion at year-end 2021, making up 17.6% of the $27.0 trillion in overall mutual fund assets. Retail investors held $1.480 trillion, while institutional investors held $3.276 trillion. We excerpt from the latest 'Fact Book' below."
It continues, "Discussing 'Worldwide' mutual funds (page 5), ICI writes, 'Money market funds -- which are generally defined throughout the world as regulated funds that are restricted to holding short-term, high-quality debt instruments -- saw their total net assets increase from $8.3 trillion to $8.8 trillion (6.2%). At year-end 2021, equity funds remained the largest category of worldwide regulated funds, accounting for 47% of net assets. Bond funds accounted for 19% of net assets, mixed/other funds for 21%, and money market funds for 12%.'
Our "BofE, FCA" piece states, "The Bank of England and Financial Conduct Authority published a discussion paper entitled, 'Resilience of Money Market Funds <i:https://www.fca.org.uk/publication/discussion/dp22-1.pdf>`_,' which reviews money funds in the U.K. and pending European money fund regulatory reforms. The paper says, 'This Discussion Paper (DP) is a contribution to an assessment of the vulnerabilities in MMFs and how much they contribute to risks to UK financial stability and investor protection. It aims to contribute to the debate about how to reduce such risks while also ensuring that the structure of the financial system and UK market support the needs of the real economy in a sustainable and robust way. It aims to gather views to inform the UK authorities’ development of MMF reform proposals, and where possible, to set out the UK authorities’ initial views on the possible effectiveness and proportionality of some reform options."
The paper continues, "In relation to MMFs, UK authorities aim to adopt policy measures following feedback received from this DP that will: i. Strengthen the resilience of MMFs and the financial system in supporting the UK economy. ii. Reduce the need for future extraordinary central bank interventions of the kind that occurred in March 2020 [and] iii. Support the provision of sustainable and robust cash management financial services that meet the needs of users including at times of financial stress."
MFI also includes the News brief, "Assets Down Slightly in May. MFI XLS shows assets falling $10.7 billion in May to $4.968 trillion (after falling $74.3 billion in April). ICI's weekly 'Money Market Fund Assets' shows assets flat after jumping the prior week (and declining 2 weeks before this)."
Another News brief, "May MF Portfolio Holdings: Treasuries Plummet, Time Deposits Higher. Our April 30 data show that Treasuries plunged again last month while Other (mostly Time Deposits) jumped. Repo remained the largest portfolio segment, while Treasuries remained in the No. 2 spot. (Fed repo inched higher to $1.662 trillion.) Agencies were the third largest segment, CP remained fourth, ahead of Other/Time Deposits, CDs and VRDNs."
A sidebar, "CAG's Pan on Prime MMFs," states, 'Capital Advisors Group’s Lance Pan asks, 'Will There Be a Renaissance for Prime Money Market Funds?.' He explains, 'April 11 marked the end of the comment period for the new round of money market fund (MMF) reforms proposed by the Securities and Exchange Commission (SEC). As the Fed is poised to hike rates aggressively in coming meetings, institutional cash investors are keenly aware that their deposit rates are not likely to keep pace. Might prime MMFs be an alternative? Will the amendments alter the utility and attractiveness of prime funds to institutional cash investors? Should investors plunge in before the new rules take effect?"
Finally, another sidebar, "Dreyfus' Tobin on Yields," explains, "Dreyfus recently hosted a webinar entitled, 'Money Market Funds, Rising Rates and Geopolitical Turmoil,' which featured CIO John Tobin and Credit Head Keith Lawler discussing rising rates, Treasury funds and bank deposits. Tobin tells us, 'I think the reason you're seeing a lot of dispersion is one, fund positioning, [and, two] cash flows. [Y]ou saw several funds extend in late Feb. and early March. [This was] still when ... we thought we were just going to get a series of 25's. [I]n a pretty dramatic twist or, ... hawkish pivot all of a sudden, this idea of going 50 and maybe multiple 50 [bps became the consensus] ... with the backdrop of, hey, we need to hit neutral rates by year end at a minimum. [It was an] unbelievable change of events in a matter of two months. So that's why I think you've seen as much dispersion in performance as we have ever seen."
Our June MFI XLS, with May 31 data, shows total assets decreased $10.7 billion to $4.968 trillion, after decreasing $74.3 billion in April, increasing $24.1 billion in March, 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 29 bps to 0.43%, and our Crane 100 Money Fund Index (the 100 largest taxable funds) was up 36 bps to 0.57% in May.
On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA and the Crane 100 both were both higher at 0.72% and 0.79%, respectively. Charged Expenses averaged 0.29% and 0.22% for the Crane MFA and the Crane 100. (We'll revise expenses Wednesday once we upload the SEC's Form N-MFP data for 5/31/22.) The average WAM (weighted average maturity) for the Crane MFA was 25 days (down 1 day from previous month) while the Crane 100 WAM stayed at 26 days. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
