Daily Links Archives: December, 2019

On Thursday, fund news source ignites published the article "UBS Eliminates Money Funds for Most Sweeps," which says, "Investors at UBS can no longer use the wirehouse's money market funds as their sweep option, according to a recent regulatory disclosure. UBS discontinued its money market funds as a sweep option effective Nov. 18, according to regulatory disclosures filed this week. Fund shares were sold last month, and their proceeds were deposited at UBS Bank, the firm's bank affiliate, one brochure states. Two money market funds used by the sweep program, the UBS RMA Government Money Market Fund and the UBS Liquid Assets Government Fund, both saw significant outflows the day the change took effect. The RMA Fund bled $4.3 billion that day, while the Liquid Assets Fund lost $1.3 billion, according to daily flow data posted on the UBS website." The piece explains, "With UBS's switch, now nearly every brokerage defaults to a bank deposit option for its sweep program, says Peter Crane, CEO of Crane Data. Edward Jones removed its money market fund as a sweep option for new brokerage accounts in February, following similar moves by Charles Schwab, Merrill Lynch and Morgan Stanley." The ignites article quotes our Peter Crane, "Brokerages, for a couple years now, have been focused on getting rid of [legacy money fund assets] and moving as much as they can into bank deposits, which are much more profitable for them.... It's pretty clear, the brokerages keep shoveling money into the banks, but investors keep moving it back into money market funds."

Money fund assets inched up in the latest week, after skyrocketing the prior week and plunging the week before that. The increase represents the 29th gain out of the past 33 weeks. ICI's latest "Money Market Fund Assets" report shows that MMF totals have increased by $532 billion, or 17.4%, year-to-date in 2019. Over the past 52 weeks, ICI's money fund asset series has increased by $670 billion, or 23.0%, with Retail MMFs rising by $233 billion (20.9%) and Inst MMFs rising by $437 billion (24.4%). ICI writes, "Total money market fund assets increased by $2.37 billion to $3.58 trillion for the eight-day period ended Wednesday, December 4, the Investment Company Institute reported.... Among taxable money market funds, government funds increased by $1.31 billion and prime funds increased by $817 million. Tax-exempt money market funds increased by $242 million." ICI's weekly series shows Institutional MMFs falling $1.5 billion and Retail MMFs increasing $3.9 billion. Total Government MMF assets, including Treasury funds, were $2.664 trillion (74.4% of all money funds), while Total Prime MMFs were $776.7 billion (21.7%). Tax Exempt MMFs totaled $138.8 billion, 3.9%. They explain, "Assets of retail money market funds increased by $3.89 billion to $1.35 trillion. Among retail funds, government money market fund assets increased by $1.87 billion to $762.94 billion, prime money market fund assets increased by $1.56 billion to $460.52 billion, and tax-exempt fund assets increased by $462 million to $125.94 billion." Retail assets account for over a third of total assets, or 37.7%, and Government Retail assets make up 56.6% of all Retail MMFs. The release adds, "Assets of institutional money market funds decreased by $1.52 billion to $2.23 trillion. Among institutional funds, government money market fund assets decreased by $564 million to $1.90 trillion, prime money market fund assets decreased by $739 million to $316.14 billion, and tax-exempt fund assets decreased by $219 million to $12.81 billion." Institutional assets accounted for 62.3% of all MMF assets, with Government Institutional assets making up 85.2% of all Institutional MMF totals. Crane Data's separate Money Fund Intelligence Daily series shows overall money fund assets up $8.3 billion month-to-date (through 12/4) to $3.919 trillion. (We're projecting that this series will break the $4.0 trillion level by the end of this year!) Prime MMF assets are down $119M MTD, while Government assets are up $8.2B.

A Prospectus Supplement filing for Wells Fargo Government Money Market Fund and Wells Fargo Treasury Plus Money Market Fund tells us, "At a meeting held on November 21-22, 2019, the Board of Trustees of Wells Fargo Funds Trust unanimously approved the elimination of the Sweep Class shares of the Funds. Effective at the close of business on November 22, 2019, the Sweep Class shares of the Funds are closed to investment. The elimination of the Sweep Class shares is expected to occur on or about November 29, 2019, upon the redemption in full of all assets in the Sweep Classes. After this date, all references to Sweep Class shares in the Funds' prospectus and SAI will be removed." Wells Fargo continues to offer a Sweep class on its 100% Treasury Money Market Funds (WFA10). According to our Brokerage Sweep Intelligence publication, Wells Fargo Advisors is paying 0.05% on brokerage sweep cash balances under $1 million, versus a yield of 0.92% for the Wells Fargo 100% US Treasury Sweep money market fund. (The latter is available only to select accounts.)

As a reminder to readers, Crane's Money Fund University will be held January 23-24 at the Renaissance Providence Downtown Hotel. The 10th annual Money Fund University will cover the history of money funds, interest rates, regulations (Rule 2a-7), ratings, rankings, money market instruments such as commercial paper, CDs and repo, and portfolio construction and credit analysis. We also include segments on offshore money funds and ultra-short bond funds. Money Fund University's comprehensive program is good for anyone -- beginners and experienced professionals looking for a refresher -- alike. The agenda is available online and we are still accepting registrations. (We're also willing to "comp" tickets for large Crane Data or sponsor clients, so let us know if you're interested.) Crane Data is also making plans for its fourth annual ultra-short bond fund event, Bond Fund Symposium, which will take place March 23-24, 2020 at the Hyatt Regency in Boston. Crane's Bond Fund Symposium offers a concentrated and affordable educational experience, as well as an excellent networking venue, for bond fund and fixed-income professionals. Registrations are now being accepted ($750) and sponsorship opportunities are available. Mark your calendars for our big show, Crane's Money Fund Symposium, which will be held June 24-26, 2020, at the Hyatt Regency Minneapolis. We're now taking registrations and the preliminary agenda will soon be available at: www.moneyfundsymposium.com. Finally, we've also set the dates and location for our next European Money Fund Symposium. It is scheduled for Sept. 17-18, 2020, in Paris, France. Let us know if you'd like more details on any of our events, and we hope to see you in Providence, Boston, Minneapolis or Paris in 2020!

The San Francisco Chronicle writes "Robinhood drops plan to start a bank; brokerage clients still waiting for interest on cash." The article says, "Robinhood won't be opening a bank after all. The Menlo Park brokerage firm, which made a splash offering free online stock trading popular with Millennials, said it is withdrawing its application to start a federally insured bank. The venture-backed company got in hot water almost a year ago when it advertised 'checking and savings accounts' yielding 3%, on its website." The piece explains, "The accounts were not bank accounts and were not insured by the Federal Deposit Insurance Corp.... But the [SIPC] CEO ... Steve Harbeck, said they would not be protected because his company only protects cash used to buy securities.... Robinhood quickly took down references to checking and savings accounts, saying in a blog post that its announcement 'may have caused some confusion.' Instead, it said it would offer 'cash management accounts.' In April, the company said it had applied for a bank charter with the Office of the Comptroller of the Currency." The Chronicle adds, "On Oct. 8, it announced it will begin offering a cash management program within its brokerage account and started a wait-list for the feature. It said clients' 'uninvested cash' would be moved to 'program banks that pay you 2.05% APY as of October 8, 2019.' In an email, Robinhood said the program banks are Goldman Sachs Bank, HSBC, Wells Fargo, Citibank, Bank of Baroda and U.S. Bank. 'Your uninvested cash at these program banks is eligible for FDIC insurance up to a total of $1.25 million -- or up to $250,000 per bank, subject to FDIC rules,' Robinhood said in an announcement." Finally, they write, "This feature is still not available and Robinhood would not say when it will be. Uninvested cash in client accounts now earns zero. The promised rate on its cash management account is down to 1.8% as rates in general have fallen in response to recent Federal Reserve rate cuts. Robinhood said in a statement that it is 'voluntarily' withdrawing its application for a national bank charter but wouldn't say why. It said it will 'focus on increasing participation in the financial system and challenging the industry to better serve everyone.' A spokesman said the move was unrelated to the commission cuts."

A Prospectus Supplement for Putnam Money Market Fund tells us, "All Putnam retail open-end funds, except for Putnam Diversified Income Trust, Putnam Dynamic Asset Allocation Equity Fund, George Putnam Balanced Fund, Putnam Global Income Trust, Putnam High Yield Fund, Putnam Income Fund, Putnam Mortgage Opportunities Fund, Putnam Mortgage Securities Fund and Putnam Short Term Investment Fund. Effective November 25, 2019 (the 'Effective Date'), class M shares of each fund will no longer be available for purchase. Class M shares of each fund acquired prior to the Effective Date will convert automatically to class A shares on the Effective Date."