The May issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Friday morning, features the articles: "Cash Big Topic on Q1 Earnings Calls: BlackRock, Schwab, BNY," which discusses the huge shift in assets from bank deposits to MMFs; "Federated Hermes Talks Record Assets, LGIPs, ETFs," which quotes from the company's Q1'23 earnings call; and, "ICI Myths on Money Funds vs. Bank Deposits, Fed RRP," which dispels some recent criticisms of MMFs. We also sent out our MFI XLS spreadsheet Friday a.m., and we've updated our Money Fund Wisdom database with 4/30/23 data. Our May Money Fund Portfolio Holdings are scheduled to ship on Tuesday, May 9, and our May Bond Fund Intelligence is scheduled to go out on Friday, May 12.
MFI's "Cash Big Topic on Q1 Earnings Calls: BlackRock, Schwab, BNY" article says, "Quarterly earnings reports from major financial companies are shedding more light upon the huge March shift in assets from bank deposits to money market mutual funds. BlackRock's Q1'23 earnings call included a number of comments on the cash super-spike. (See the transcript here.) CFO Martin Small comments, 'Negative revenue impacts were partially offset by the elimination of discretionary money market fund fee waivers and higher securities lending revenue. BlackRock's cash management platform saw $8 billion of net inflows in the quarter. Flows were driven by surging demand for our cash management solutions in March as clients diversified away from deposits and enhance cash yields.'"
The piece continues, "He explains, 'We're actively working with clients on their liquidity management strategies, providing technology, market and operational insights and, of course, delivering a full range of cash management capabilities.'"
Our BFS "profile" piece states, "Federated Hermes, the 6th largest manager of money funds, reported Q1’23 earnings and hosted its latest earnings conference call late last week. President & CEO J. Christopher Donahue comments in a press release, 'Federated Hermes' record assets under management were driven by money market asset increases accompanied by further increases across nearly all other long-term asset classes from the previous quarter, demonstrating once again the value of our diversified business mix. As interest rates continued their rise and as investors considered regional banking issues, many withdrew deposits from small and medium-sized banks and continued to embrace the benefits of money market funds -- high credit quality, short duration, diversification, transparency, daily liquidity and market yields. Federated Hermes had positive net flows into a range of our money market products -- from government to prime.'"
It continues, "The release says, 'Money market assets were a record $505.8 billion at March 31, 2023, up $85.2 billion or 20% from $420.6 billion at March 31, 2022 and up $29.0 billion or 6% from $476.8 billion at Dec. 31, 2022. Money market fund assets were $357.3 billion at March 31, 2023, up $77.8 billion or 28% from $279.5 billion at March 31, 2022 and up $21.4 billion or 6% from $335.9 billion at Dec. 31, 2022.... Revenue increased $57.4 million or 18% primarily due to a decrease in voluntary fee waivers related to certain money market funds in order for those funds to maintain positive or zero net yields (voluntary yield-related fee waivers) and an increase in revenue due to higher average money market assets [vs. a year ago].'"
Our "ICI Myths on Money Funds vs. Bank Deposits, Fed RRP" piece states, "Mutual fund trade association, the Investment Company Institute (ICI) recently posted a 'Viewpoint' entitled, 'Three Myths and Facts about Bank Deposits, Bank Lending, and Money Market Funds,' which argues against the media's misperception that the shift from bank deposits to money market funds is harming the real economy by reducing lending. Chief Economist Sean Collins writes, 'Following the difficulties at Silicon Valley Bank (SVB), Signature Bank, and Credit Suisse in early March 2023, a number of media reports cited analysts who suggested that money market funds (MMFs) are drawing deposits away from banks, adding to stresses at banks and preventing them from lending more to businesses and consumers.... This narrative, though colorful and attention-grabbing, needs fact-checking.'"
MFI states "He cites 'Myth #1: In March 2023, $422 billion flowed into government MMFs, which became 'dead money' in the Fed's RRP facility that banks could otherwise have lent to businesses and households.' Collins responds with, 'Fact #1: Government MMFs recycled over 70 percent of the $422 billion back into the banking system, either directly or indirectly. As assets in government MMFs climbed in March, those funds invested an additional $190.5 billion in debt issued by Federal Home Loan Banks, which in turn lent the proceeds to banks. Government MMFs also raised by $112.4 billion their investments in repo, providing additional funding to banks or their broker subsidiaries. Only $68.5 billion of the increase was invested in the Fed's RRP.'"
MFI also includes the News brief, "Fed Hikes 10th Time to 5.00-5.25%." It tells us, "The release, 'Federal Reserve issues FOMC statement,' says, '[T]he Committee decided to raise the target range for the federal funds rate to 5 to 5-1/4 percent.' Our Crane 100 Money Fund Index (7-Day Yield) rose just 3 bps in April to 4.64%, but it should jump next week and push towards 5.0%."
Another News brief, "MMF Assets Break $5.7 Trillion," explains, "Crane Data's MFI XLS shows MMFs jumping another $56.8 billion in April to a record $5.685 trillion. Our MFI Daily shows assets jumping another $63.6 billion the first 3 days of March, breaking $5.7 trillion and rising to a record $5.729 trillion Wednesday."
A sidebar, "SEC: Private Funds $333 Bil.," states, "The SEC released its latest quarterly 'Private Funds Statistics' report late last month, which summarizes Form PF reporting and includes some data on 'Liquidity Funds,' or pools which are similar to but not money market funds. The publication shows overall Liquidity fund assets were higher in the latest reported quarter (Q3'22) at $333 billion (up from $328 billion in Q2'22 and up from $302 billion in Q3'21)."
Another sidebar, "FP Hits Brokerage Sweep" states, "Financial Planning magazine published a piece, 'The wealth management industry's $1T conflict of interest,' which explains, '[T]he brokerage industry's widespread and lucrative practice of cash sweeps has drawn extensive regulatory scrutiny and the ire of consumer advocates since it started around 2000. As long as the firms fully disclose the conflict of interest, though, there is nothing illegal about rolling up clients' uninvested cash into bank accounts that pay brokerage firms the vast majority of rising interest yields that feed the industry's bottom line more every time the Fed raises rates.'"
Our May MFI XLS, with April 30 data, shows total assets increased $56.5 billion to $5.685 trillion, after increasing $345.1 billion in March, $56.0 billion in February, $22.5 billion in January, $70.2 billion in December and $55.4 billion in November. MMFs rose $42.2 billion in October, $1.7 billion in September, $2.3 billion in August, $26.0 billion in July and $31.9 billion in June. They decreased $10.7 billion in May 2022.
Our broad Crane Money Fund Average 7-Day Yield was up 6 bps to 4.52%, and our Crane 100 Money Fund Index (the 100 largest taxable funds) was up 3 bps to 4.64% in April. On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA and the Crane 100 both were both higher at 4.81% and 4.75%, respectively. Charged Expenses averaged 0.38% and 0.27% for the Crane MFA and the Crane 100. (We'll revise expenses on Monday once we upload the SEC's Form N-MFP data for 4/30/23.) The average WAM (weighted average maturity) for the Crane MFA was 18 days (up 1 day from previous month) while the Crane 100 WAM was up 1 at 16 days. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
