Daily Links Archives: November, 2020

ICI's weekly "Money Market Fund Assets" report shows that money fund assets inched lower after a small increase last week, marking their 16th decrease in the last 17 weeks. Assets have fallen $465 billion since May 20, when they were at a record $4.789 trillion. ICI says, "Total money market fund assets decreased by $4.99 billion to $4.32 trillion for the week ended Tuesday, November 24.... Among taxable money market funds, government funds increased by $378 million and prime funds decreased by $3.27 billion. Tax-exempt money market funds decreased by $2.10 billion." ICI's stats show Institutional MMFs increasing $811 million and Retail MMFs decreasing $5.8 billion. Total Government MMF assets, including Treasury funds, were $3.648 trillion (84.4% of all money funds), while Total Prime MMFs were $567.7 billion (13.1%). Tax Exempt MMFs totaled $108.4 billion (2.5%). (Note that ICI's asset totals don't include a number of funds tracked by the SEC and Crane Data.) ICI shows money fund assets up a still massive $692 billion, or 19.1%, year-to-date in 2020, with Inst MMFs up $529 billion (23.4%) and Retail MMFs up $163 billion (11.9%). Over the past 52 weeks, ICI's money fund asset series has increased by $748 billion, or 21.3%, with Retail MMFs rising by $188 billion (14.0%) and Inst MMFs rising by $560 billion (25.8%). (Crane Data's separate and broader Money Fund Intelligence Daily data series shows total MF assets are down $37.4 billion in November, as of 11/24, to $4.690 trillion.) They explain, "Assets of retail money market funds decreased by $5.80 billion to $1.53 trillion. Among retail funds, government money market fund assets decreased by $2.43 billion to $1.15 trillion, prime money market fund assets decreased by $1.80 billion to $290.26 billion, and tax-exempt fund assets decreased by $1.57 billion to $97.74 billion. Retail assets account for just over a third of total assets, or 35.5%, and Government Retail assets make up 74.7% of all Retail MMFs. ICI adds, "Assets of institutional money market funds increased by $811 million to $2.79 trillion. Among institutional funds, government money market fund assets increased by $2.79 billion to $2.50 trillion, prime money market fund assets decreased by $1.47 billion to 277.48 billion, and tax-exempt fund assets decreased by $528 million to $10.68 billion. Institutional assets, which broke below the $3.0 trillion level for the first time since April 22 at the end of August, accounted for 64.5% of all MMF assets, with Government Institutional assets making up 89.7% of all Institutional MMF totals.

We learned from Bloomberg that the $212 million DWS Government Cash Reserves Fund Institutional (BIRXX) has filed to liquidate. A Prospectus Supplement explains, "Upon the recommendation of DWS Investment Management Americas, Inc., the investment advisor for DWS Government Cash Reserves Fund Institutional, a feeder fund of Government Cash Management Portfolio, the Board of Trustees of Deutsche DWS Money Market Trust has authorized, on behalf of the fund, the fund's termination and liquidation, which will be effective on or about January 22, 2021. Accordingly, the fund will redeem all of its outstanding shares on the Liquidation Date. The liquidation will be effected according to a Plan of Liquidation and Termination. The costs of the liquidation, including the notification to shareholders, will be borne by the fund, subject to any applicable voluntary or contractual undertaking, then in effect, by the Advisor to waive or reimburse certain operating expenses of the fund. Shareholders who elect to redeem their shares prior to the Liquidation Date will receive the net asset value per share (normally, $1.00) on such redemption date for all shares they redeem. Shareholders whose shares are redeemed automatically on the Liquidation Date will receive the net asset value per share (normally, $1.00) for all shares they own on the Liquidation Date. As the Liquidation Date approaches, the fund's assets not already converted to cash or cash equivalents will be converted to cash or cash equivalents and the fund will not be pursuing its investment objective." The filing adds, "The fund will be closed to new investors effective immediately. Retirement plans that currently offer the fund as an investment option may continue to offer the fund to their participants until the Liquidation Date and the fund will continue to accept subsequent investments and dividend reinvestments for existing accounts until the Liquidation Date, except that subsequent investments made by check or Automated Clearing House debit entries will no longer be accepted by the fund beginning two weeks prior to the Liquidation Date. Shareholders who redeem shares using the checkwriting redemption privilege offered by the fund are advised to stop using this privilege at least two weeks prior to the Liquidation Date to ensure that any redemption checks are presented to the fund for payment on or prior to the Liquidation Date since any such redemption checks presented to the fund after the Liquidation Date will not be honored." The fund also filed a Form N-CR, indicating a capital contribution, which states, "In anticipation of the liquidation of the Fund on or about 1/22/2021, DWS Investment Management Americas, Inc. is making a capital contribution to the Fund in the amount noted above [$283.2 thousand]. This amount will offset historical capital losses. The purpose of the capital contribution is to seek to ensure a $1.00 share price for shareholders upon liquidation." DWS is the 19th largest manager of money market funds with $33.6 billion. In mid-2016, the fund converted from a Prime MMF to a Govt MMF.

Money market fund yields hit record lows in the latest week -- our flagship Crane 100 declined by one basis point to 0.02%, tying the all-time record low levels of 2013-2014. The Crane 100 Money Fund Index fell below the 1.0% level in mid-March and below the 0.5% level in late March. It is down from 1.46% at the start of the year and down from 2.23% at the beginning of 2019. Almost three-quarters of all money funds and over a half of MMF assets have since landed on the zero yield floor, though many continue to show some yield. According to our Money Fund Intelligence Daily, as of Friday, 11/20, 618 funds (out of 853 total) yield 0.00% or 0.01% with assets of $2.399 trillion, or 51.2% of the total. There are 207 funds yielding between 0.02% and 0.10%, totaling $1.889 trillion, or 40.3% of assets; 28 funds yielded between 0.11% and 0.25% with $400.7 billion, or 8.5% of assets. No funds yield over 0.23%. The Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 673), shows a 7-day yield of 0.02%, unchanged in the week through Friday, 11/20. The Crane Money Fund Average is down 45 bps from 0.47% at the beginning of April. Prime Inst MFs were flat at 0.05% in the latest week and Government Inst MFs were also flat at 0.02%. Treasury Inst MFs were unchanged at 0.02%. Treasury Retail MFs currently yield 0.01%, (unchanged in the last week), Government Retail MFs yield 0.01% (unchanged), and Prime Retail MFs yield 0.03% (unchanged), Tax-exempt MF 7-day yields were also unchanged at 0.01%. (Let us know if you'd like to see our latest MFI Daily.) Our Crane Brokerage Sweep Index, which hit the zero floor seven and a half months ago, remains at 0.01%. The latest Brokerage Sweep Intelligence, with data as of November 20, showed no changes. RW Baird offers a rate of 0.02% for its 100K tier, all other major brokerages offer rates of 0.01% for balances of $100K. No brokerage sweep rates or money fund yields have gone negative to date, but this could become a distinct possibility in coming weeks or months. Crane's Brokerage Sweep Index has been flat for the last 31 weeks at 0.01% (for balances of $100K). Ameriprise, E*Trade, Fidelity, Merrill Lynch, Morgan Stanley, Raymond James, Schwab, TD Ameritrade, UBS and Wells Fargo all currently have rates of 0.01% for balances at the $100K tier level (and almost every other tier too).

Barron's published, "Global Central Bankers Cite The Risks of Backstopping Money Market Funds," which discusses "the latest report from the Financial Stability Board ... currently run by Randal Quarles, the U.S. Federal Reserve Bank's vice chairman for supervision." They write, "[T]he world's central bankers would like to see the U.S. federal government more thoroughly consider the risks of regularly backstopping the $4 trillion money market fund industry. The report titled 'Holistic Review of the March Market Turmoil' seeks to explain the financial meltdown prompted by the coronavirus, and address the potential policy implications." (See our Nov. 18 News, "FSB Reviews March Market Turmoil, Targets Short-​Term Funding Markets.") The piece explains, "This March, prime funds suffered some $125 billion in outflows, representing 11% of their assets and the FSB's concern is redemptions would have -- absent government assistance -- sparked the fund equivalent of a systemic destabilizing run on the bank. Thus, `what was really a private-sector fund-related problem became a systemic one the Fed and taxpayers in the public sector had to solve. In March, the Fed created the Money Market Mutual Fund Liquidity Facility (MMLF) to stabilize funds." Barron's tells us, "The continued existence of such publicly-financed facilities is a major concern of the FSB report.... Yet the report acknowledges that the existing security measures in money markets and other funds don't solve the underlying structural problems.... Ironically, regulators put some of those structures in place in response to the last money market liquidity crisis in 2008-09 -- a regulatory shift in 2016 allowing money funds to impose a 2% redemption fee if liquid assets fell below 30% of a fund's portfolio, and to gate redemptions for up to 10 days. Yet those structures seem to have made things worse.... Yet eliminating those structures will put us right back to the zero-safeguard system we had before. All of which suggests some form of government backstop for money market funds is probably here to stay. 'The [FSB's] comment about moral hazard is just a nod to the old world,' says Peter Crane, president of money fund tracker Crane Data. [The Fed and regulators] keep saying 'we shouldn't be doing this,' and then, 'We're gonna keep doing it, and we're gonna wade in four more feet and see what happens. It's past the point where government intervention isn't a viable option.'" They add, "Some money fund managers say pinning the liquidity crisis on money funds is unfair. 'The fact that policymakers had to rescue nearly every part of the financial sphere hasn't stopped many pundits from -- again -- making money funds the scapegoat,' says Deborah Cunningham [of] Federated Hermes.... 'It was the broader market, especially both commercial paper and CD primary- and secondary-market trading, that froze.' She argues that money funds during the liquidity crunch 'actually alleviated the pressure,' and that no funds imposed fees or gated redemptions.'" Finally, Barron's says, "Yet other managers have become concerned enough about fund liquidity to exit parts of the business. Fidelity, which manages over $860 billion in money funds, liquidated its institutional prime funds this August. 'Our view is that during periods of market stress, institutional prime funds will continue to be susceptible to large, sudden redemptions -- this is not a fund product design issue that can be remedied by requiring more liquidity or decoupling the potential for redemption gates and fees from funds' weekly liquidity levels,' explains Fidelity representative Adam Banker. 'Similarly, a permanent liquidity backstop provided by the Federal Reserve is not an appropriate response for money market funds or any other investment product where investors bear the risk of investment performance.' Crane doesn't see the revocation of gate fees or the 30% liquidity requirement being either probable or imminent. He points out that even after the severer 2008 crash, these were minor reforms which took years to pass. 'The last thing [regulators] want is the critique that they're loosening regulations to be levied at them,' he says. Moreover, the FSB has no jurisdiction over money funds. The Securities & Exchange Commission does.... Since Biden is from Pennsylvania, and depends on its political support, Crane sees no changes happening as powerhouse money fund managers such as Vanguard and Federated Hermes call Pennsylvania home: 'Pennsylvania's money fund country.'"

ICI's weekly "Money Market Fund Assets" report shows that money fund assets rose for the first time in 15 weeks. Assets have fallen $460 billion since May 20, when they were at a record $4.789 trillion. ICI says, "Total money market fund assets increased by $2.14 billion to $4.33 trillion for the week ended Wednesday, November 18.... Among taxable money market funds, government funds increased by $9.64 billion and prime funds decreased by $6.70 billion. Tax-exempt money market funds decreased by $799 million." ICI's stats show Institutional MMFs rising $3.6 billion and Retail MMFs decreasing $1.5 billion. Total Government MMF assets, including Treasury funds, were $3.648 trillion (84.3% of all money funds), while Total Prime MMFs were $571.0 billion (13.2%). Tax Exempt MMFs totaled $110.5 billion (2.6%). (Note that ICI's asset totals don't include a number of funds tracked by the SEC and Crane Data.) ICI shows money fund assets up a still massive $697 billion, or 19.2%, year-to-date in 2020, with Inst MMFs up $528 billion (23.3%) and Retail MMFs up $169 billion (12.3%). Over the past 52 weeks, ICI's money fund asset series has increased by $803 billion, or 22.9%, with Retail MMFs rising by $197 billion (14.7%) and Inst MMFs rising by $606 billion (27.9%). (Crane Data's separate and broader Money Fund Intelligence Daily data series shows total MF assets are down $36.5 billion in November, as of 11/18, to $4.691 trillion.) They explain, "Assets of retail money market funds decreased by $1.50 billion to $1.54 trillion. Among retail funds, government money market fund assets increased by $1.00 billion to $1.15 trillion, prime money market fund assets decreased by $2.04 billion to $292.06 billion, and tax-exempt fund assets decreased by $464 million to $99.31 billion. Retail assets account for just over a third of total assets, or 35.6%, and Government Retail assets make up 74.6% of all Retail MMFs. ICI adds, "Assets of institutional money market funds increased by $3.64 billion to $2.79 trillion. Among institutional funds, government money market fund assets increased by $8.64 billion to $2.50 trillion, prime money market fund assets decreased by $4.66 billion to $278.95 billion, and tax-exempt fund assets decreased by $335 million to $11.21 billion. Institutional assets, which broke below the $3.0 trillion level for the first time since April 22 at the end of August, accounted for 64.4% of all MMF assets, with Government Institutional assets making up 89.6% of all Institutional MMF totals.

U.K.-based Treasury Today wrote recently about "Building ESG considerations into MMFs," which tells us, "Sustainability and environmental, social and governance (ESG) considerations are increasingly becoming an important focus for corporations around the world.... For corporate treasurers, one area where this topic is becoming a particular focus is that of short-term investments. As such, money market funds (MMFs) are increasingly taking steps to incorporate sustainability and ESG considerations into their products." They write, "Natalie Cross, Senior Client Portfolio Manager at Invesco, says that as companies make changes to their corporate ESG policies and business strategies, 'these are increasingly becoming key considerations for many treasurers. Investment policies and guidelines now frequently include ESG requirements and form part of their due diligence process when considering which MMFs they utilise.' As a result, she says, the firm is increasingly being asked to demonstrate how it is addressing ESG factors within the management of its MMFs. Jonathan Curry, Global CIO Liquidity & CIO Americas at HSBC Global Asset Management, likewise reports growing interest from treasurers on this subject -- although as he points out, the level of interest does vary, depending on where a company is on the journey of defining its wider sustainability goals. 'We see this played out most keenly in the disparity of investor expectations as to the extent to which ESG considerations can have an impact on portfolios and their outcomes,' he says. For those at the start of that journey, with a less fully defined philosophy on sustainability, he says: 'we see interest in ESG named products with simpler formulaic approaches such as exclusionary screens applied to specific sectors.' Meanwhile, firms with well-developed philosophies 'are more focused on the impact of a strategy and how it can contribute more meaningfully to achieving their corporate sustainability goals, such as net-zero commitments or reducing their carbon output.'" The piece continues, "Cross says that ESG integration, combined with active engagement, 'are the pillars of our ESG approach.' She adds: 'We have built a holistic framework that analyses qualitative inputs, quantitative impacts, investment decisions, and active ownership.' ... For HSBC Global Asset Management, meanwhile, Curry says the firm is focusing on two key areas: Sharing expertise with investors on ESG integration and the benefits it can have in terms of identifying and mitigating risks arising from ESG factors. Actively developing a market-leading ESG MMF investment strategy that will support investors looking for an investment solution that goes beyond ESG integration." The article adds, "Looking forward, Cross says that ESG 'will continue to be a core factor in the decision-making process for treasurers, with growing emphasis placed upon this element.' ... Curry says the focus on sustainable investing 'is here to stay, and will continue to grow due to increasing levels of investor demand for sustainably invested MMFs, calls for greater transparency on investments and growing stakeholder engagement in all areas of sustainability.' But he also notes that the specific areas of focus will vary between different MMF providers -- and that simpler ESG screening methodologies, such as screening out specific sectors, 'may have very little impact given the A1/P1 investible universe of MMFs and the high weighting of portfolios to financial institutions, sovereigns and government agencies.' As such, he says, the firm's focus is on 'delivering a more innovative solution' that will address these shortcomings." See also Treasury Today's "Women in Treasury Spotlight: Geeta Sharma, BlackRock".

Crane Data published its latest Weekly Money Fund Portfolio Holdings statistics Tuesday, which track a shifting subset of our monthly Portfolio Holdings collection. The most recent cut (with data as of November 13) includes Holdings information from 72 money funds (up 2 from two weeks ago), which represent $2.239 trillion (down from $2.240 trillion) of the $4.642 trillion (48.2%) in total money fund assets tracked by Crane Data. (Note that our Weekly MFPH are e-mail only and aren't available on the website. For our latest monthly Holdings, see our November 12 News, "November MF Portfolio Holdings: Repo, Agencies, Treas Plunge; TDs Up.") Our latest Weekly MFPH Composition summary again shows Government assets dominating the holdings list with Treasury totaling $1.237 trillion (down from $1.247 billion two weeks ago), or 55.2%, Repurchase Agreements (Repo) totaling $523.7 billion (up from $504.7 billion two weeks ago), or 23.4% and Government Agency securities totaling $291.8 billion (down from $299.3 billion), or 13.0%. Commercial Paper (CP) totaled $63.2 billion (up from $62.4 billion), or 2.8%, and Certificates of Deposit (CDs) totaled $60.4 billion (down from $62.7 billion), or 2.7%. The Other category accounted for $32.8 billion or 1.5%, while VRDNs accounted for $30.1 billion, or 1.3%. The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $1.240 trillion (55.4% of total holdings), Federal Home Loan Bank with $144.3B (6.4%), BNP Paribas with $69.4B (3.1%), Fixed Income Clearing Corp with $68.8B (3.1%), Federal Farm Credit Bank with $58.6B (2.6%), Federal National Mortgage Association with $52.2B (2.3%), RBC with $39.0B (1.7%), Federal Home Loan Mortgage Corp with $34.7B (1.5%), JP Morgan with $30.9B (1.4%) and Credit Agricole with $30.2B (1.3%). The Ten Largest Funds tracked in our latest Weekly include: JP Morgan US Govt MM ($171.1 billion), Goldman Sachs FS Govt ($170.3B), BlackRock Lq FedFund ($164.2B), Wells Fargo Govt MM ($162.2B), Fidelity Inv MM: Govt Port ($146.1B), BlackRock Lq T-Fund ($103.0B), JP Morgan 100% US Treas MMkt ($98.7B), Morgan Stanley Inst Liq Govt ($86.3B), Goldman Sachs FS Treas Instruments ($81.5B) and First American Govt Oblg ($77.5B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary, or our Bond Fund Portfolio Holdings data series.)

A Prospectus Supplement filing for BMO Institutional Prime Money Market Fund tells us about a "Fund Liquidation," saying, "On November 11, 2020, the Board of Directors of BMO Funds, Inc. approved a Plan of Liquidation for the BMO Institutional Prime Money Market Fund, subject to shareholder approval, upon the recommendation of BMO Asset Management Corp. to liquidate and dissolve the Fund. After considering a variety of factors, the Board concluded that it was in the best interests of the Fund and its shareholders that the Fund be liquidated and dissolved. Shareholders will receive a proxy statement discussing the Board's decision to recommend the liquidation and dissolution of the Fund and requesting that shareholders vote to approve the Plan at a special meeting of shareholders. If the Plan is approved by shareholders, the Fund will be liquidated on December 23, 2020 or such other date as determined by management." It explains, "Any shareholders who have not redeemed their shares prior to the Liquidation Date will have their shares redeemed in cash and will receive a check representing their proportionate interest in the net assets of the Fund as of the Liquidation Date. Shareholders (other than tax-qualified plans or tax-exempt accounts) will recognize gain or loss for tax purposes on the redemption of their Fund shares in the liquidation.... The Board also approved the Adviser's recommendation to limit new investments in the Fund. Accordingly, effective November 13, 2020 the Fund will close to new investors except that retirement plans that have approved the inclusion of the Fund as an investment option for participants prior to the Closing Date may purchase Fund shares on behalf of existing and new participants. Existing shareholders may continue to purchase Fund shares following the Closing Date. The Adviser may, for any reason, make additional exceptions, limit, reject or otherwise modify an exception, and reopen the Fund to new shareholders at any time." The manager will continue to run Prime Retail MMFs. See also MarketWatch's article, "Prime money-market funds on the regulatory hot seat," which says, "Stung by the second severe market selloff in a decade that required the federal government to come to the rescue, financial market regulators are looking at additional reforms of Wall Street. This time, with COVID-19 hobbling the economy and markets stressed especially early in the crisis, it’s the non-bank sector under the microscope. In 2008, it was the 'too-big-to-fail' bank sector that got the brunt of the attention from Washington. One thing that the two financial crises have in common is that investors ran from money market funds at the first hint of trouble. The outflows put stress on the entire system of short-term funding, such as municipal finance.... In 2020, investors appear to have run from money market funds before the gates could be triggered."

Reuters writes that, "EU says changes needed to bolster money market funds post-COVID." (Note: To hear more on these issues, register for our upcoming European Money Fund Symposium Online, which takes place Thursday, Nov. 19 from 10am-12pm Eastern, or 3-5pmGMT.) Their article tells us, "Fund managers must improve readiness for shocks after the fallout from COVID-19 on markets in March and changes are needed to make money market funds more resilient, the European Union's securities watchdog said on Friday. Markets suffered bouts of extreme volatility in March as countries went into lockdown to fight the pandemic, tipping economies into steep recession. Funds exposed to real estate and corporate debt showed they were able to respond adequately to redemption pressures with only a limited number of temporary suspensions, the European Securities and Markets Authority (ESMA) said following its review of the sector. It said that 0.4% of assets under management in corporate debt and real estate funds were temporarily suspended at the end of March, double the figure for all funds." It continues, "But echoing concerns from regulators in Britain and the United States, ESMA singled out money market funds (MMF) that only avoided suspension in March because central banks injected billions of euros and dollars to avoid markets freezing up. 'I think further reforms of MMFs are needed. However, at this stage, there is no common view on which changes should be contemplated, and we need to assess various policy options very carefully,' ESMA Chair Steven Maijoor said. Regulators from the Group of 20 Economies (G20) will set out potential reforms next week for 'non-banks' like money market funds in light of the March turmoil in markets. ESMA's review found 'shortcomings that must be addressed' to enhance real estate and corporate debt funds' preparedness to future shocks. 'We have identified a number of priority areas that funds and supervisors should focus on to address potential liquidity risks in the fund sector,' Maijoor said. 'We also encourage swift proposals to amend the EU legislative framework to ensure that liquidity management tools are widely available to asset managers across the EU,' Maijoor said. Macroprudential rules, like banks already have, to take sector-wide action in the asset management sector during market shocks, were also needed, he added." (See ESMA's press release here.)

ICI released its latest "Money Market Fund Assets" report, which shows that money funds fell for the 14th week in a row. Assets have fallen $462 billion since May 20, when they were at a record $4.789 trillion. ICI says, "Total money market fund assets decreased by $8.13 billion to $4.33 trillion for the week ended Wednesday, November 11.... Among taxable money market funds, government funds decreased by $2.18 billion and prime funds decreased by $5.24 billion. Tax-exempt money market funds decreased by $709 million." ICI's stats show Institutional MMFs falling $7.6 billion and Retail MMFs increasing $573 million. Total Government MMF assets, including Treasury funds, were $3.638 trillion (84.1% of all money funds), while Total Prime MMFs were $577.7 billion (13.4%). Tax Exempt MMFs totaled $111.3 billion (2.6%). (Note that ICI's asset totals don't include a number of funds tracked by the SEC and Crane Data.) ICI shows money fund assets up a still massive $695 billion, or 19.1%, year-to-date in 2020, with Inst MMFs up $524 billion (23.2%) and Retail MMFs up $171 billion (12.5%). Over the past 52 weeks, ICI's money fund asset series has increased by $755 billion, or 21.5%, with Retail MMFs rising by $187 billion (13.9%) and Inst MMFs rising by $568 billion (26.1%). (Crane Data's separate and broader Money Fund Intelligence Daily data series shows total MF assets are down $42.5 billion in November (as of 11/10) to $4.685 trillion.) They explain, "Assets of retail money market funds decreased by $573 million to $1.54 trillion. Among retail funds, government money market fund assets increased by $2.12 billion to $1.15 trillion, prime money market fund assets decreased by $2.08 billion to $294.10 billion, and tax-exempt fund assets decreased by $620 million to $99.77 billion. Retail assets account for just over a third of total assets, or 35.6%, and Government Retail assets make up 74.4% of all Retail MMFs. ICI adds, "Assets of institutional money market funds decreased by $7.55 billion to $2.79 trillion. Among institutional funds, government money market fund assets decreased by $4.30 billion to $2.49 trillion, prime money market fund assets decreased by $3.17 billion to $283.61 billion, and tax-exempt fund assets decreased by $88 million to $11.54 billion. Institutional assets, which broke below the $3.0 trillion level for the first time since April 22 at the end of August, accounted for 64.4% of all MMF assets, with Government Institutional assets making up 89.4% of all Institutional MMF totals.

Please join us next week for our latest virtual event, European Money Fund Symposium Online, which will take place Thursday, Nov. 19 from 10am-12pm Eastern (3-5pmGMT). Crane Data's Peter Crane will host a series of presentations and discussions on European and "offshore" money market mutual fund topics. Segments include: Money Funds in Ireland & European Regulations with Irish Funds' Patrick Rooney; a French & Continental Money Fund Update with Moody's Vanessa Robert, Fitch's Alastair Sewell and S&P's Emelyne Uchiyama; and a Major Issues in European MMFs panel with IMMFA's Veronica Iommi, J.P. Morgan Asset Management's Joe McConnell and Goldman Sachs Asset Management's James Vincent. The event is free to attendees. Also, register for our Money Fund Wisdom Demo & Training, which will take place Wednesday, Dec. 16 from 1pm-2pm ET and will feature a product tutorial and demo on our product "suite" Money Fund Wisdom and our Money Fund Intelligence products. While we're still unsure if we'll be able to resume in-person conferences in 2021, we're preparing nonetheless. Mark your calendars for our next Money Fund University, scheduled (virtually) for the afternoons of Jan. 21-22, 2021, and our next Bond Fund Symposium , scheduled for March 25-26, 2021, in Newport Beach, Calif. (or online). Our "big show," Money Fund Symposium , was cancelled this year, but we're planning for June 23-25, 2021 in Philadelphia. Our next live European Money Fund Symposium will be held October 21-22, 2021 in Paris, France. Crane Data Subscribers or Attendees may access past conference and webinar materials at the bottom of our "Content" page, or see links to our latest events from the "Conferences" menu option. Let us know if you'd like more information about any of our shows, and we hope to see you back out on the road in 2021! Finally, our Peter Crane will also be presenting on money market funds & short term markets at an upcoming CFANY webinar, "Still Lower for Even Longer: What Will Its Impact Be?"

A press release entitled, "State Street Fund Connect Celebrates 20 Years of Continuous Innovation in Money Market Fund Trading" tells us, "State Street Corporation (STT) celebrates the 20th anniversary of its Fund Connect platform -- the leading global trading, analytics and cash management tool with access to more than 400 money market funds from leading providers. To celebrate the milestone, Fund Connect has introduced a platform upgrade with an all new user interface experience, featuring the addition of a 'widget enabled' customizable dashboard. Fund Connect entered the market as one of the first providers of an all-encompassing cash management platform. Over the past two decades, the platform has continually evolved to stay at the forefront of regulatory, industry and client needs. The portal developed several first-to-market capabilities including: end to end electronic trading, risk management functionality, automated trade settlement, and a single, global, multi-currency platform supported by local personnel in the US, EMEA and APAC." Martine Bond, head of State Street's Globallink platform, comments, "Over the past two decades, Fund Connect has focused on delivering a best-in-class, integrated platform that saves countless hours and introduces new levels of efficiencies for clients who have come to rely on us day-in and day-out. Our leading industry position is a testament to our team's ability to continuously innovate and refine the platform based on our clients' evolving needs." The release explains, "State Street has redesigned the Fund Connect platform to enhance the overall user experience and has incorporated several new streamlined functionalities, which include: A no-code, customizable dashboard allowing clients to create their own user experience; Improved page navigation and modernized graphics; and, Expanded reporting capabilities with real-time systematic updates." Gregory Fortuna, head of State Street's GlobalLink Solutions, adds, "Our team has stayed one step ahead of the digital revolution throughout the past 20 years with a key focus on building a continually evolving experience for our clients. We want to empower clients with choice and flexibility around trading styles and entry points, delivering that through cutting-edge open architecture technology. As we build on the platform, we want to continue to innovate, creating operational efficiencies through customizable, integrated solutions." State Street writes, "The latest version of this platform is now available to all current clients across the globe. Fund Connect is available for all short-term liquidity investors including corporations, asset managers, universities, insurance companies, financial intermediaries and alternative asset managers." Finally, Daniel Paredes, Senior Analyst of Treasury at Biogen, comments, "Fund Connect is an incredibly user-friendly, simple tool that facilitates our needs. As a small Treasury team, we require straightforward solutions that are constant and reliable. Fund Connect exceeds our expectations in every way."

This weekend's Barron's asks "Prime Money-Market Funds Are Under Pressure. Could They Disappear?" The piece discusses the recent publication from J.P. Morgan. (See our Oct. 23 News, "JP Morgan Asks What If Prime MFs Disappear? Assets Decline 11th Week.") They write, "Prime money-market funds, which have $1 trillion in assets, were changed significantly by regulations addressing problems from the financial crisis. For instance, institutional prime funds do not hew to the traditional $1 per share net asset value. Prime funds invest in ultrashort-term corporate debt known as commercial paper.... So why might prime funds disappear? In short: They're becoming unprofitable to run. 'The Federal Reserve has taken short-term interest rates down close to zero, and they've told us that short-term rates will be very low for several years until they can get the inflation rate back up persistently, above 2%,' says Alex Roever, the report's co-author and JPMorgan's head of interest-rate strategy. That doesn't leave much room for money funds to be profitable for their management companies. More than 70% are providing fee waivers to avoid negative yields, the report notes. The average prime money fund yields just 0.03% according to Morningstar." Barron's explains, "Some have already decided to get out of the prime-fund business. Northern Trust liquidated its Northern Institutional Prime Obligations Portfolio this June after assets plummeted from $4.3 billion to $1.7 billion between February and May. Fidelity closed two institutional prime funds with $14 billion ... in June as well, and has since liquidated them. In August, Vanguard announced it was converting its $125 billion prime money fund into a government one." The article adds, "Not everyone says prime funds are endangered. 'It's certainly not a given that prime's going to disappear, and not even a given prime will shrink from this point on,' says Peter Crane, president of money-fund tracker Crane Data. In fact, the Crane Prime Institutional Money Fund Index, despite seeing outflows in March, has seen assets grow from $612 billion in early 2020 to $667 billion through the end of September. Meanwhile, the Crane Prime Retail Money Fund Index, has shrunk from $459 billion to $302 billion, but a significant portion of that came from Vanguard’s $125 billion fund leaving the space. 'The retail asset base [in money funds] is much more stable,' he says. 'Vanguard did not have a run in March, so it's a mystery why they're getting out.' But because Vanguard operates at cost, it has more difficulty waiving fees than competitors." They add, "It isn't even certain that outflows from prime money-market funds caused the liquidity crunch this March. Fund-industry trade group Investment Company Institute published a recent report noting that the yield spread on interbank lending widened significantly -- a mark of credit/liquidity distress -- during the March downturn prior to prime-fund outflows. Yet even if money-market funds didn't cause the liquidity crunch, that doesn't mean regulators shouldn't be concerned about panic selling. One way to ensure fund liquidity would be for the Fed to make permanent the Money Market Mutual Fund Liquidity Facility it created in March to support funds facing runs in the pandemic. 'That actually may make prime funds much more attractive than they've been heretofore,' Crane says."

The Investment Company Institute released its "Report of the Covid-19 Market Impact Working Group: Experiences of US Money Market Funds During the COVID-19 Crisis" Thursday. See their press release here: "ICI: Prime Money Market Funds Didn't Trigger Financial Turmoil in March," and watch for more coverage in coming days. `ICI also released its latest weekly "Money Market Fund Assets" report, which shows that money market fund assets fell yet again in the latest week, their thirteenth decline in a row and 21st decline over the past 24 weeks. Assets have fallen $454 billion since May 20, when they were at a record $4.789 trillion. ICI says, "Total money market fund assets decreased by $13.15 billion to $4.34 trillion for the week ended Wednesday, November 4.... Among taxable money market funds, government funds increased by $1.61 billion and prime funds decreased by $14.28 billion. Tax-exempt money market funds decreased by $477 million." ICI's stats show Institutional MMFs falling $22.8 billion and Retail MMFs increasing $9.7 billion. Total Government MMF assets, including Treasury funds, were $3.640 trillion (84.0% of all money funds), while Total Prime MMFs were $583.0 billion (13.4%). Tax Exempt MMFs totaled $112.0 billion (2.6%). (Note that ICI's asset totals don't include a number of funds tracked by the SEC and Crane Data.) ICI shows money fund assets up a still massive $703 billion, or 19.4%, year-to-date in 2020, with Inst MMFs up $532 billion (23.5%) and Retail MMFs up $171 billion (12.5%). Over the past 52 weeks, ICI's money fund asset series has increased by $780 billion, or 22.2%, with Retail MMFs rising by $193 billion (14.4%) and Inst MMFs rising by $587 billion (27.0%). (Crane Data's separate and broader Money Fund Intelligence Daily data series shows total MF assets are down $26.9 billion in November (as of 11/4) to $4.701 trillion.) They explain, "Assets of retail money market funds increased by $9.68 billion to $1.54 trillion. Among retail funds, government money market fund assets increased by $13.33 billion to $1.14 trillion, prime money market fund assets decreased by $3.02 billion to $296.17 billion, and tax-exempt fund assets decreased by $638 million to $100.39 billion. Retail assets account for just over a third of total assets, or 35.6%, and Government Retail assets make up 73.3% of all Retail MMFs. ICI adds, "Assets of institutional money market funds decreased by $22.83 billion to $2.79 trillion. Among institutional funds, government money market fund assets decreased by $11.72 billion to $2.50 trillion, prime money market fund assets decreased by $11.26 billion to $286.78 billion, and tax-exempt fund assets increased by $161 million to $11.63 billion. Institutional assets, which broke below the $3.0 trillion level for the first time since April 22 at the end of August, accounted for 64.4% of all MMF assets, with Government Institutional assets making up 89.3% of all Institutional MMF totals.

The Edge Malaysia published the article, "Fintech: The best of both worlds," which explains, "Investors may soon enjoy the benefits of parking their emergency funds in a fund that allows flexible withdrawals yet gives returns comparable to that of fixed deposits. Versa Asia Sdn Bhd, a financial technology (fintech) start-up, will launch a mobile application at end-November that will allow investors to put their money in a money market fund through their smartphone without any sales charge imposed. Versa wants to tackle distribution issues faced by money market funds through the app, enabling more retail investors to access such funds. The start-up has obtained conditional approval from the Securities Commission Malaysia (SC) to be a recognised market operator. The approval allows Versa to distribute capital market products, including money market unit trust funds, through e-services platforms." The CEO of Versa, Teoh Wei-Xiang, comments, "Versa will onboard investors through our app and they can invest in and withdraw their money from a money market fund online at any time." The piece continues, "There are many money market funds in the market. As at Sept 11, there were 93 such funds, according to The Edge-Lipper Fund Table. The average annual return of the 46 non-Islamic and 47 Islamic money market funds was 2.41% and 2.36% respectively." It adds, "The participation of individual investors, especially retail investors, is extremely low, says Teoh. 'Money market funds are dominated by corporate investors and high-net-worth individuals (HNWIs). I do not have the exact number, but it is safe to say that the retail participation in these funds is extremely low due to various reasons.'" The article asks, "Why? Firstly, fund houses are not active in pushing money market funds to investors. These funds are low-risk, low-return products that are sold without imposing sales charges on investors because any amount of additional charges imposed would immediately deem the returns unattractive.... Also, the profit margin earned from money market funds is low, as reflected by the annual management fee of these funds, which is only up to 0.5%. Fund houses need a much larger amount of investment to justify the cost of managing money market funds. As such, corporate investors, instead of individual investors, are the target customers for these funds, [Teoh] adds." Finally, it adds, "Versa does not have the license and capability to manage unit trust funds. As such, it is tying up with Affin Hwang Asset Management (AHAM) to let investors invest their money in AHAM's Enhanced Deposit Fund through the Versa app."

Crane Data published its latest Weekly Money Fund Portfolio Holdings statistics Tuesday, which track a shifting subset of our monthly Portfolio Holdings collection. The most recent cut (with data as of October 30) includes Holdings information from 70 money funds (down 22 from a week ago), which represent $2.240 trillion (down from $2.586 trillion) of the $4.772 trillion (46.9%) in total money fund assets tracked by Crane Data. (Note that our Weekly MFPH are e-mail only and aren't available on the website. For our latest monthly Holdings, see our October 13 News, "October MF Portfolio Holdings: CP, CDs, TDs Fall; Treasury, Repo Flat.") Our latest Weekly MFPH Composition summary again shows Government assets dominating the holdings list with Treasury totaling $1.247 trillion (down from $1.373 billion a week ago), or 55.6%, Repurchase Agreements (Repo) totaling $504.7 billion (down from $598.1 billion a week ago), or 22.5% and Government Agency securities totaling $299.3 billion (down from $338.7 billion), or 13.4%. Certificates of Deposit (CDs) totaled $62.7 billion (down from $77.5 billion), or 2.8% and, Commercial Paper (CP) totaled $62.4 billion (down from $97.1 billion), or 2.8%. The Other category accounted for $34.1 billion or 1.5%, while VRDNs accounted for $30.4 billion, or 1.4%. The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $1.247 trillion (55.6% of total holdings), Federal Home Loan Bank with $149.9B (6.7%), Fixed Income Clearing Corp with $69.4B (3.1%), BNP Paribas with $67.8B (3.0%), Federal Farm Credit Bank with $61.3B (2.7%), Federal National Mortgage Association with $52.4B (2.3%), RBC with $36.5B (1.6%), Federal Home Loan Mortgage Corp with $33.9B (1.5%), JP Morgan with $29.8B (1.3%) and Mitsubishi UFJ Financial Group Inc with $29.0B (1.3%). The Ten Largest Funds tracked in our latest Weekly include: JP Morgan US Govt MM ($169.6 billion), Goldman Sachs FS Govt ($167.8B), Wells Fargo Govt MM ($160.5B), BlackRock Lq FedFund ($155.5B), Fidelity Inv MM: Govt Port ($153.1B), BlackRock Lq T-Fund ($102.8B), JP Morgan 100% US Treas MMkt ($97.4B), Morgan Stanley Inst Liq Govt ($90.5), Goldman Sachs FS Treas Instruments ($89.1B) and Dreyfus Govt Cash Mgmt ($83.4B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary, or our Bond Fund Portfolio Holdings data series.)

Schwab Money Funds recently published an "October 2020 Commentary," which tells us, "During the 3rd quarter on an industry wide basis, government, prime, and municipal money market funds experienced outflows, as money market fund yields declined, even while underlying market technical factors continued to improve. Actions taken by the Fed in the first-half of the year have been effective in providing ample liquidity and maintaining credit spreads at more normalized levels. Additionally, the reduction in the Fed Funds Rate earlier in the year continued to drive money market fund yields to historical lows. Despite the drop in yields, investors did not lose sight of money fund's appeal as a vehicle for capital preservation and daily liquidity. Due to the low yield environment, the lingering uncertainty of the pandemic and the upcoming election cycle, money fund providers, including Schwab, remain defensively positioned." Schwab's Linda Klingman and Rick Holland write, "Prime yields remained stable throughout the third quarter, but near historic lows. Spreads between prime and government securities are unusually tight across the curve for maturities ranging from one month to one year. This has made investing in government securities uncharacteristically attractive to prime funds, which have responded by allocating a percentage of fund assets to Treasury bills. During the third quarter, the Schwab Prime Money Funds extended their weighted average maturity (WAM) by placing investments further out on the curve, and shifting some investments from overnight government repo into term Treasury bills. Across the industry, prime MMFs continue to hold a significantly higher percentage of their portfolios in daily and weekly liquid assets than they did prior to the pandemic. Schwab's on-going focus on liquidity management provides substantial buffers above the daily and weekly regulatory minimums of 10% and 30%, respectively." They continue, "Although Treasury bill issuance remains high by historical standards, a key variable will be the supply/demand dynamics of any additional pandemic stimulus from Washington. Any new stimulus measures would likely be funded through the additional issuance of Treasury bills, which may create further support of higher yields. Prime MMF portfolio managers will continue to monitor the supply of MMF eligible, short term, high quality corporate debt, which is expected to be light, as banks and non-financial issuers remain flush with cash. This will likely keep prime, investible yields at low levels into the near future. Finally, we expect short term yields within the municipal sector to stay range-bound and to be increasingly influenced by taxable money market alternatives. Based on these and other factors related to the pandemic and the upcoming election, Schwab Money Funds are expected to remain defensively positioned and will continue to focus on liquidity and NAV stability." Finally, the update adds, "On September 24th, Charles Schwab launched six new Ultra money market fund share classes and standardized its management fee structure, in response to growing client demand and to reduce operating expense ratio complexity. More specifically, this launch included three Government/Treasury share classes and three Municipal share classes, each with a $1 million investment minimum and a 0.19% operating expense ratio cap. Additionally, all Schwab Money Funds standardized the management fee to 19 basis points, reducing the expense cap for the Investor Share classes ($1 minimums) to 34 basis points and the Schwab Government Money Fund - Sweep share class to 44 basis points. For additional details, please refer to the "Ultra Shares - Schwab Funds Announcement" on our website. Schwab's acquisition of TD Ameritrade was officially completed on October 6, 2020 and will create a company with approximately $6 trillion in client assets and 28 million brokerage accounts. The full integration is expected to last 18-36 months and we do not anticipate any material changes to the manner in which we manage our money fund operations or assets on behalf of our shareholders. We remain committed to providing our money market fund shareholders with stability of capital, liquidity and current income. The CSIM Money Market Investment Portfolio Strategist Team will continue to partner with Schwab client facing teams, in an effort to educate both clients and prospects about our suite of MMFs and the unique dynamics that play a critical role in our ability to offer these capital preservation strategies."

The Financial Times featured the article, "Money market funds brace for rules overhaul after Covid shock," which explains, "As the coronavirus pandemic rocked capital markets in March, US policymakers were confronted with a rapidly escalating crisis in a crucial part of the financial system: money market funds. Huge investor outflows from prime money market funds -- instruments that invest in corporate, agency and other short-term debt -- left managers scrambling to sell assets, threatening a vital source of funding for businesses across America. The Federal Reserve rushed to stem the bleeding, which sliced more than $100bn off the sector's assets, by effectively backstopping the market. The Fed's actions evoked memories of when it was forced to step in after the Reserve Primary fund 'broke the buck' in 2008 and triggered a run on money market funds. While the intervention helped to avert a fully fledged liquidity crunch this time around, the events raised difficult questions for policymakers, who had only recently introduced reforms designed to make the funds less vulnerable to destabilising runs. Regulators in the US and Europe are now under pressure to review whether rules that they introduced in the aftermath of the 2008 crisis are fit for purpose." The article tells us, "A fresh regulatory overhaul could have major reverberations for the sector, coming at a time when it is already struggling to navigate ultra-low interest rates. However, the funds' interconnections with the wider financial system means that policymakers have no choice, some analysts say." They quote Fitch Ratings' Alastair Sewell, "The unique niche money market funds inhabit, and the fact they were at the centre of the liquidity storm in March, mean they will be a high priority for regulators." The FT piece continues, "In Europe, several funds that operate a stable NAV came close to no longer being able to guarantee [sic] their €1 per share price, a move that would have resulted in losses for investors and potentially triggered further outflows, according to Fitch's Mr Sewell. Speaking anonymously, one senior European regulator said: '`It could have been a negative market event and destabilised market confidence, with consequences for financial stability.'" They add, "Neal Epstein, a senior analyst at Moody's in New York, points out that it was the Fed's intervention that ultimately prevented a liquidity crisis this year, suggesting that regulatory safeguards alone are not enough. 'It may make sense to institutionalise the role of the Fed as a lender of last resort,' he suggests. 'I doubt that anyone could have provided sufficient liquidity [to funds] when investors wanted to get out of risk assets.' Funds in Europe did not benefit directly from either central bank support or assistance from their banking parents. EU regulators have signalled that they intend to review this disparity with the US, where banks including Goldman Sachs and BNY Mellon stepped in to help their money market funds. Regardless of the approach they take to reforming the rules, policymakers will have to be conscious of the fact that money market funds are likely to be at the centre of an investor 'dash for cash' once again." See also, Reuters' odd piece, "Goldman money funds' liquidity buffer swells before U.S. election."