After almost two years of zero interest rates caused by the coronavirus pandemic, money fund yields skyrocketed in 2022, rising from 0.02% to 3.60% (and still rising), based on our Crane 100 Money Fund Index. While this was no doubt the biggest story of 2022, money funds also spent a lot of time discussing the SEC's Money Fund Reform Proposal (from December 2021). (We're still waiting for the final rules to come out any day now.) Other major themes of the past year included: the pivot of ESG money funds towards Social MMFs, carnage in the stock and bond fund markets and asset outflows from ultra-shorts, the increase in yields in European and worldwide markets, and the end of fee waivers. Below, we excerpt from a number of our biggest and most representative news stories of 2022 to remind readers and to highlight the major trends of the past year. (Note: As a reminder, register ASAP for our Money Fund University, Dec. 15-16 in Boston, Mass, at the Hyatt Regency. Clients and friends are also welcome to stop by Crane Data's Holiday Cocktail Party at MFU on 12/15 from 5-7pm!)
Crane Data's Top 10 Stories of 2022 include (in chronological order): "Rolling w/Reform Changes IV: Recap of '21 Exits & Entries, ESG & News" (1/4/22); "ESMA Proposes Reforms to European Money Market Fund Regulations" (2/22/22); "Dreyfus Announces New BOLD D&I Share Class with Howard University" (3/1/22); "BlackRock: Redemption Fee Simpler Than Swing Pricing; Sliding Scale" (4/21/22); "Money Fund Yields Break 0.50%; Fidelity Hikes Sweep Rate; ICI Holdings" (5/17/22); "AFP's 2022 Liquidity Shows Deposits, MMFs, T-Bills Still Kings of Cash" (6/17/22); "Schwab CFO Crawford Discusses Cash 'Sorting,' End of Fee Waivers in Q2" (8/3/22); "Third 75's a Charm for Fed, Rates Head to 3%; Money Funds in the News" (9/22/22); "European MMFs Jump on Sterling Surge, Euro Yields Positive; MFII Holds" (10/18/22); "Money Funds Hot and Getting Hotter: Barron's, and, WSJ, FT Feature Articles" (10/24/22). (As a bonus #11, see too: "Fed Hikes 6th Time; Rates Head to 4%; Prime Over $1 Tril.; More Swing" (11/3/22).)
Early in 2022, we reported on reform changes, news and moves of the previous year (many of these trends continued into this year). Our Jan. 4 story, "Rolling w/Reform Changes IV: Recap of '21 Exits & Entries, ESG & News," told readers, "In January 2016, money market mutual funds were in the midst of a series of dramatic changes ahead of October 2016's Money Fund Reforms, the biggest changes to money fund regulations since their introduction in October 1970. Five years ago, we ran the story, 'Rolling w/Reform Changes II: Recap of '15 Announcements, '16 Plans,' which reviewed a number of major changes among the largest managers that took place during 2015. As in the past year, exits from Prime MMFs and fund repositioning were notable trends. Today, we examine the Covid-19 driven changes and general fund actions over the past year, as we prepare for potential regulatory changes and more fund lineup shifts in the New Year."
For more stories related to reforms, check out these news pieces, "SEC Proposes MMF Reforms: More Liquidity, No Gates/Fees, Swing Pricing" (12/16/21); "More Reforms: SEC Commissioners Comment on Controversial Proposal" (12/27/21); and "Kitchen Sink II: SEC Doubles Down on Disclosures in MF Reform Proposal" (12/29/21). See also last year's "Top 10 List" and Dec. 10, 2021 News, "Top 10 Stories of 2021: More Regulations; Zero Yields; ESG; Changes?" (Note: Readers may also review "Crane Data's News," "Link of the Day" and "Money Fund Intelligence Archives" for more stories from the past year, 5 years and decade-plus.)
Our February 22 story, "ESMA Proposes Reforms to European Money Market Fund Regulations" highlights the possibility of further money market fund reforms in Europe. It reviews the press release, "ESMA Proposes Reforms to Improve Resilience of Money Market Funds," which tells us, "The European Securities and Markets Authority (ESMA), the EU's securities markets regulator, is issuing an Opinion containing proposed reforms to the regulatory framework for EU Money Market Funds (MMFs) under the Money Market Funds Regulation (MMFR). The proposals will improve the resilience of MMFs by addressing in particular liquidity issues and the threshold effects for constant net asset value (CNAV) MMFs." See ESMA's "Final Report - ESMA Opinion on the Review of the Money Market Fund Regulation" and their "Final Report - Guidelines on Stress Test Scenarios Under the MMF Regulation 2021."
Our March 1 News, "Dreyfus Announces New BOLD D&I Share Class with Howard University" discusses the launch of a newer type of 'directed charity' share class. We wrote, "After 2-month pause following the release of the SEC's Money Fund Reform Proposals, the D&I and ESG money market fund space appears to be heating up again. A new press release entitled, 'Dreyfus launches BOLD shares supporting Howard University,' tells us, 'Dreyfus Cash Investment Strategies (Dreyfus), BNY Mellon Investment Management's affiliated liquidity manager, ... announced a partnership with Howard University to help support its students in their educational journey with the launch of a new BOLD share class for the Dreyfus Government Cash Management fund. Offered through Dreyfus' largest money market fund, 10% of the BOLD shares net revenue, with a minimum of $300,000, will be donated to Howard's Graduation Retention Access to Continued Excellence (GRACE) Grant annually.'"
In April, we published, "BlackRock: Redemption Fee Simpler Than Swing Pricing; Sliding Scale," one of the major comments to the SEC on its proposed reforms. It starts, "Earlier this week, we excerpted from recent 'Comments on Money Market Fund Reform' posted by the SEC, including one from the largest money fund manager, Fidelity Investments and one from mutual fund trade group ICI. Today, we quote from the second largest MMF manager, BlackRock. Elizabeth Kent and Jonathan Steel write, 'BlackRock supports the Securities and Exchange Commission's efforts to continue to improve the resiliency and transparency of United States money market funds. The proposal, which incorporates certain feedback from market participants in response to the December 2020 President's Working Group Paper on potential MMF reform options, represents a positive step toward the Commission's goal of making MMFs more resilient during periods of stress.'"
See also these "comment letter" stories: "Comment Period Ends on SEC Reform Proposal; Allspring PM Commentary" (4/13/22); "Fidelity Comment Blasts SEC on Swing Pricing, Negative Yield Proposals" (4/19/22); "ICI's Pan Comments on Latest SEC MMF Reforms; ICI Holdings Summary" (4/20/22); "JP Morgan Comments on Reforms: Tiered Liquidity Fee Not Swing Pricing" (4/25/22); "Federated Hermes' MMF Reform Comments; Discretionary Liquidity Fee" (4/26/22); "Morgan Stanley, Dreyfus Comment on SEC's Money Fund Reform Proposal" (4/27/22); and "Keeping the Comments Coming: Allspring, SSGA, Capital Group Talk Regs" (4/28/22).
At the end of May, we started discussing Fed rate hikes in, "Money Fund Yield Break 0.50%; Fidelity Hikes Sweep Rate; ICI Holdings." This piece says, "It's been almost 2 weeks since the Federal Reserve raised its Federal funds rate by another 50 basis points, and money market fund yields continue to climb higher after a big jump last week. While they've yet to reflect the full 50 basis point increase (and may not entirely due to the last of the fee waivers being reduced), yields have risen noticeably since the March 16 25 bps hike and the May 4 50 bps hike. Our flagship Crane 100 Money Fund Index started March 2022 at 0.02% (where is had been pinned for 2 years), rose to 0.13% the week following the March hike, and has jumped to 0.52% as of Friday, 5/13. Brokerage sweep rates have also started to move. Our latest Brokerage Sweep Intelligence shows most brokerages still paying 0.01% yields (on FDIC insured deposits), but several brokerages raised rates this week."
A June story, "AFP's 2022 Liquidity Shows Deposits, MMFs, T-Bills Still Kings of Cash," highlighted parts of AFP's latest liquidity survey, which shows that bank deposits and money funds still dominate the cash world. It starts, "The Association For Financial Professionals, a group representing corporate treasurers, published its '2022 AFP Liquidity Survey'" (See AFP's press release and our June 15 Link of the Day, 'AFP Releases Liquidity Survey.')
Our August 3 update, "Schwab CFO Crawford Discusses Cash 'Sorting,' End of Fee Waivers in Q2," explains, "Charles Schwab & Co. recently hosted a '2022 Summer Business Update,' which discussed the brokerage company's latest quarter and mentioned cash and money markets in a number of places. (See Crane Data's July 25 Link of the Day, 'Schwab Earnings Driven by Rates.') CFO Peter Crawford comments, 'Our performance was obviously helped by higher interest rates across the curve, which boosted our net interest margin and BDA [bank deposit account] yield and eliminated money fund fee waivers by the end of the quarter.'"
In September, we wrote about rate hikes yet again in, "Third 75's a Charm for Fed, Rates Head to 3%; Money Funds in the News." This piece says, "The Federal Reserve raised short-term interest rates for the 5th time this year and hiked by 75 basis points for the third time in a row. The Federal funds target rate is now in a range from 3.0% to 3.25%, its highest level since 2008. Money fund yields should surge in coming days and should break 2.5% on average and approach 3.0% in coming weeks.'"
In October, we published, "European MMFs Jump on Sterling Surge, Euro Yields Positive; MFII Holds," which states, "Crane Data's latest Money Fund Intelligence International shows that assets in European or 'offshore' money market mutual funds jumped over the past month to $1.018 trillion led by a surge in GBP funds. European MMF assets broke back above $1 trillion level on Oct. 4 for the first time since early August, but they remain below their record high of $1.101 trillion in mid-December 2021. These U.S.-style money funds, domiciled in Ireland or Luxembourg but denominated in US Dollars, Pound Sterling and Euros, increased by $44.4 billion over the 30 days through 10/14. (Note that the increase in the U.S. dollar has caused Euro and Sterling totals to decline when they're translated back into dollars.) The totals are down $45.0 billion (-4.2%) year-to-date."
Another October News piece, "Money Funds Hot and Getting Hotter: Barron's, WSJ, FT Feature Articles," starts off, "Money market mutual funds are hot and getting hotter, with articles on them appearing in Barron's, The Wall Street Journal and the Financial Times.... Barron's piece, 'Yields on Money-Market Mutual Funds Near 3%. How to Buy In,' explains, 'Cash hasn't looked this good in money-market mutual funds for a long time. Yields are averaging 2.77% [now 3.60%], up from 0.02% in early January, according to Crane Data. Retail money funds could soon cross the 3% threshold, assuming that the Federal Reserve keeps raising its benchmark federal-funds rate. 'Money funds follow the Fed, so there's no mystery of where yields are going,' says Peter Crane, president and publisher of Crane Data and Money Fund Intelligence. 'You haven't seen 3% to 4% yields since prior to the [2008-09] financial crisis,' he adds.'" (See also November's, "Fed Hikes 6th Time; Rates Head to 4%; Prime Over $1 Tril.; More Swing.")
For more 2022 (and soon 2023) News (and prior years going back to 2006), see Crane Data's News Archives. We'll continue to provide daily updates on the money fund marketplace in the coming year, so keep reading our News and Link of the Day commentaries in 2023. Let us know if you need web access (unlimited access is for subscribers only), or if you'd like to see our latest Money Fund Intelligence, Bond Fund Intelligence or MFI Daily publications. Thanks to all of our readers and subscribers for your support in 2022, and we wish you all the best in the coming year. Merry Christmas, Happy Holidays and Happy New Year!
