The SEC released its latest quarterly "Private Funds Statistics" report this week, 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 lower in the latest reported quarter (Q4'22) at $318 billion (down from $331 billion in Q3'22 and up from $313 billion in Q4'21). We also briefly review the part of the SEC's latest MMF Reforms which addresses "Amendments to Form PF Reporting Requirements for Large Liquidity Fund Advisers," below. (Note: For those attending our European Money Fund Symposium, Sept. 25-26, 2024 in Edinburgh, please make your hotel reservations ASAP! Our discount expires next week.)
The SEC's "Introduction" tells us, "This report provides a summary of recent private fund industry statistics and trends, reflecting data collected through Form PF and Form ADV filings. Form PF information provided in this report is aggregated, rounded, and/or masked to avoid potential disclosure of proprietary information of individual Form PF filers. This report reflects data from First Calendar Quarter 2021 through Fourth Calendar Quarter 2022 as reported by Form PF filers." (Note: Crane Data believes the largest portion of these liquidity fund assets are securities lending reinvestment pools.)
The tables in the SEC's "Private Funds Statistics: Fourth Calendar Quarter 2022," with the most recent data available, show 71 Liquidity Funds (most of which are "Section 3 Liquidity Funds," which are Liquidity Funds from advisers with over $1 billion total in cash), down 7 from last quarter and down 8 from a year ago. (There are 50 Section 3 Liquidity Funds out of the 71 Liquidity Funds.) The SEC receives Form PF reports from 34 Liquidity Fund advisers (21 of which are Section 3 Liquidity Fund advisers), down 5 from last quarter and down 5 from a year ago.
The SEC's table on "Aggregate Private Fund Net Asset Value" shows total Liquidity Fund assets at $318 billion, down $13 billion from Q3'22 and up $5 billion from a year ago (Q4'21). Of this total, $316 billion is in Section 3 (large manager) Liquidity Funds. The SEC's table on "Aggregate Private Fund Gross Asset Value" shows total Liquidity Fund assets at $321 billion, down $14 billion from Q3'22 and up $3 billion from a year ago (Q4'21). Of this total, $319 billion in is Section 3 (large manager) Liquidity Funds.
A table on "Beneficial Ownership for Section 3 Liquidity Funds" shows $108 billion is held by Other (34.1%), $56 billion is held by Private Funds (17.8%), $65 billion is held by Unknown Non-U.S. Investors (20.6%), $14 billion is held by SEC-Registered Investment Companies (4.3%), $10 billion is held by Insurance Companies (3.0%) and $2 billion is held by Non-Profits (0.8%).
The tables also show that 70.7% of Section 3 Liquidity Funds have a liquidation period of one day, $302 billion of these funds may suspend redemptions, and $275 billion of these funds may have gates. WAMs average a short 27 days (26 days when weighted by assets), WALs are 46 days (47 days when asset-weighted), and 7-Day Gross Yields average 3.65% (3.90% asset-weighted). Daily Liquid Assets average about 53% (54% asset-weighted) while Weekly Liquid Assets average about 61% (67% asset-weighted).
Overall, these portfolios appear shorter with a heavier Treasury exposure than money market funds in general; almost half of them (36.0%) are fully compliant with Rule 2a-7. When calculating NAVs, 72.0% are "Stable" and 28.0% are "Floating." For more, see our Jan. 27, 2022 News, "SEC Proposes Amendments to Form PF Large Liquidity Fund Reporting."
We've been discussing the SEC's Money Market Fund Reforms for weeks, but we've yet to write about the other part, the the "Amendments to Form PF Reporting Requirements for Large Liquidity Fund Advisers." The release says, "Separately, the amendments will also modify certain reporting forms that are applicable to money market funds and large private liquidity funds advisers."
The "Fact Sheet" explains, "In addition, the Commission adopted amendments to Form PF, the confidential reporting form for certain SEC-registered investment advisers to private funds, to require additional information regarding the liquidity funds they advise that is generally aligned with the amended reporting for money market funds. These amendments were proposed by the Commission in January 2022."
The full final rules tell us, "The Commission is also amending Form PF, the confidential reporting form for certain SEC-registered investment advisers to private funds to require additional information regarding the liquidity funds they advise. Liquidity funds are private funds that seek to maintain a stable NAV (or minimize fluctuations in their NAVs) and thus can resemble money market funds. The amendments to section 3 of Form PF will provide a more complete picture of the short-term financing markets in which liquidity funds invest and enhance the Commission's and the Financial Stability Oversight Council's ('FSOC') ability to assess short-term financing markets and facilitate our oversight of those markets and their participants. This, in turn, is designed to enhance investor protection efforts and systemic risk assessment. `We have consulted with FSOC to gain input on these amendments to help ensure that Form PF continues to provide FSOC with information it can use to assess systemic risk."
It adds, "In a January 2022 release proposing amendments to Form PF, the Commission proposed changes to section 3 of Form PF that were intended to require large liquidity fund advisers to report substantially the same information that the Commission had proposed money market funds to report on Form N-MFP. The proposed amendments to section 3 of Form PF included requirements for additional and more granular information regarding large liquidity fund operational information and assets, portfolio holdings, financing, and investor information as well as a new item concerning the disposition of portfolio securities. Consistent with the final amendments to Form N-MFP, we are adopting largely as proposed the amendments to section 3 of Form PF, with some modifications to better tailor the reporting to private liquidity funds and remain consistent with the final requirements for money market funds under amended Form N-MFP."
