Daily Links Archives: August, 2021

Fitch Ratings published two press releases announcing AAA ratings on two Texas LGIPs, or local government investment pools. The first, "Fitch Rates TexasTERM Local Government Investment Pool - TexasDAILY Portfolio 'AAAmmf'," tells us, "Fitch Ratings has assigned an 'AAAmmf' money market fund (MMF) rating to the TexasTERM Local Government Investment Pool - TexasDAILY Portfolio (TexasDAILY). The local government investment pool was established pursuant to the TexasTERM Common Investment Contract under Chapters 791 and 2256 of the Texas Government Code for the benefit of Texas local governments. The pool is governed by a board of trustees of representatives of those units of local government who are participants. On Sept. 7, 2021, the TexasTERM Local Government Investment Pool will rebranded as the Texas Range Investment Program. PFM Asset Management LLC (PFMAM) serves as the pool's investment adviser and administrator. TexasDAILY was established to invest excess funds of its participants in various high-quality investments, in accordance with the Common Investment Contract. TexasDAILY seeks to maintain a stable NAV of $1.00. The pool was first established on Sept. 18, 2000. Fitch used a July 30, 2021 portfolio to complete the analysis for the assigned rating." It adds, "The pool invests primarily in direct obligations of the U.S. government and its agencies, repurchase agreements backed by U.S. government and agency obligations, FDIC-insured certificates of deposit (CDARs) and supranational securities. Based on the portfolio, Fitch calculated TexasDAILY's Portfolio Credit Factor (PCF) to be 0.02, which is consistent with Fitch's 'AAAmmf' criteria of 1.50 or less. TexasDAILY is one of three portfolio's offered by the TexasTERM pool to provide local government entities access to investment vehicles focused on the safety and preservation of principal, liquidity and commensurate investment income." The second release, "Fitch Rates TexasTERM Local Government Investment Pool - TexasDAILY Select 'AAAmmf'," explains, "Fitch Ratings has assigned a 'AAAmmf' money market fund (MMF) rating to the TexasTERM Local Government Investment Pool- TexasDAILY Select (TexasDAILY Select). The local government investment portfolio will be offered pursuant to the TexasTERM Common Investment Contract under Chapters 791 and 2256 of the Texas Government Code for the benefit of Texan local governments and is governed by a board of trustees of representatives of those units of local government who are participants. At the time of TexasDAILY Select's launch the TexasTERM Local Government Investment Pool will rebrand to be known as the Texas Range Investment Program. PFM Asset Management LLC (PFMAM) will serve as the pool's investment adviser and administrator. TexasDAILY Select will be established to invest excess funds of its participants in various high-quality investments, in accordance with the Common Investment Contract. TexasDAILY Select will seek to maintain a stable NAV of $1.00. The fund is expected to be launched on Sept. 7, 2021, at which time the rebranding from TexasTERM to Texas Range will also occur. Fitch used a representative portfolio to complete the analysis for the assigned rating."

As we announced in June, we've cancelled our European Money Fund Symposium in Paris, France, and instead we're hosting a slimmed down (and free) virtual European Money Fund Symposium Online on Oct. 21, 2021 (from 9:30-Noon Eastern or 2:30-5pm London time). Our Paris European Money Fund Symposium has been rescheduled to next year, Sept. 27-28, 2022. Watch for more details on the latter in coming months, and we hope you'll join us online October 21 for our EMFS Online. (Register here.) European Money Fund Symposium Online is a 2 1/2 hour free virtual update on Euro, Sterling and USD money funds domiciled in Ireland, France and Luxembourg. It features the following sessions and speakers: Welcome to European MF Symposium (Peter Crane of Crane Data), European MMF Update: Ireland, France, UK (Vanessa Robert of Moody’s Investors Service, Alastair Sewell of Fitch Ratings and Andrew Paranthoiene of S&P Global Ratings), Regulatory, ESG & Ultra-Short Issues (Veronica Iommi of IMMFA, James Vincent of Goldman Sachs Asset Mgmt., and Rob Sabatino of UBS Asset Mgmt.), Senior Portfolio Manager Perspectives (Deborah Cunningham of Federated Hermes, Joe McConnell of J.P. Morgan Asset Mgmt., and Paul Mueller of Invesco). Also, with just over 3 weeks to go, we continue to make preparations for our Money Fund Symposium conference, which will take place live, Sept. 21-23, 2021, at The Loews Philadelphia. We're making safety preparations and expect our attendees to be vaccinated or to test negative. We'll of course adhere to whatever health policies the hotel and city have in place at the time and will adjust our plans if necessary. (The hotel and city are currently requiring masks, but masks are not required within our session and exhibit areas. There are no restrictions on size or events in Pennsylvania currently.) We'll offer recorded or virtual sessions for those that can't make it, and let us know if you'd like to hear more about our preparations. We'll also offer refunds, or credits for next year's show, (and will include access to this year's recordings) for any reason at any time. Again, Crane's Money Fund Symposium, the largest gathering of money market fund managers and cash investors in the world, is still scheduled to take place September 21-23, 2021 at The Loews Hotel, in Philadelphia, Pa. The latest agenda is available and registrations are still being taken. (We'll be tweaking the agenda in coming days as some speakers may not be able to make it due to travel restrictions, so ask Pete for the latest update or if you might be interested in subbing in as a speaker.) Money Fund Symposium attracts money fund managers, marketers and servicers, cash investors, money market securities dealers, issuers, and regulators. Visit the MF Symposium website at www.moneyfundsymposium.com) for more details. Registration is $750, and discounted hotel reservations are available. Full refunds will be given for any cancels for any reason, and thanks to our sponsors for their support ... and patience! We hope you'll still join us in Philadelphia in September! We'd like to encourage attendees, speakers and sponsors not to wait for the last minute to register and make hotel reservations (today is the last day for our discounted rate), but we of course understand if you want to wait to monitor conditions. Finally, mark your calendars for our next Money Fund University which is scheduled for Jan. 20-21, 2022, in Boston, Mass and our next Bond Fund Symposium, which is scheduled for Mar. 28-29, 2022 in Newport Beach, California. Let us know if you'd like more details on any of our events, and we hope to see you in Philadelphia in September or in Boston or Newport Beach in 2022!

The Federal Reserve Bank of New York updated its list of "Reverse Repo Counterparties." The statement says, "The following have been added to the list of reverse repo counterparties, effective August 26, 2021 -- Federated Hermes Capital Reserves Fund, Federated Hermes Municipal Obligations Fund, Federated Hermes Tax-Free Obligations Fund, Northern Funds - U.S. Government Select Money Market Fund and Schwab Variable Share Price Money Fund." The NY Fed's current list of "Money Market Funds" now includes: AllianceBernstein: AB Fixed-Income Shares, Inc., AB Government Money Market Portfolio; BlackRock Liquidity Funds: FedFund, T-Fund, TempCash, TempFund, Money Market Master Portfolio and Treasury Money Market Master Portfolio; BNY Mellon Investment Adviser: Dreyfus Cash Management, Dreyfus Government Cash Management, Dreyfus Institutional Preferred Government Money Market Fund, Dreyfus Treasury and Agency Liquidity Money Market Fund, Dreyfus Treasury Obligations Cash Management; Capital Research and Management Company: American Funds U.S. Government Money Market Fund and Capital Group Central Fund Series, Capital Group Central Cash Fund; Charles Schwab Investment Management: Schwab Government Money Fund, Schwab Treasury Obligations Money Fund, Schwab Value Advantage Money Fund and Schwab Variable Share Price Money Fund; Columbia Management Investment Advisers: Columbia Short-Term Cash Fund, a series of Columbia Funds Series Trust II; Deutsche Investment Management Americas: Government Cash Management Portfolio; Dimensional Fund Advisors LP: The DFA Short Term Investment Fund of The DFA Investment Trust Company; Federated Investment Management: Edward Jones Money Market Fund, Federated Hermes Capital Reserves Fund, Federated Hermes Government Obligations Fund, Federated Hermes Government Obligations Tax-Managed Fund, Federated Hermes Government Reserves Fund, Federated Hermes Inst Prime Obligations Fund, Federated Hermes Inst Prime Value Obligations Fund, Federated Hermes Municipal Obligations Fund, Federated Hermes Prime Cash Obligations Fund, Federated Hermes Tax-Free Obligations Fund, Federated Hermes Treasury Obligations Fund, Federated Hermes Trust for U.S. Treasury Obligations and Federated Hermes U.S. Treasury Cash Reserves; Fidelity Management & Research Company: Fidelity Colchester Street Trust: Government Portfolio, Fidelity Colchester Street Trust: Money Market Portfolio, Fidelity Colchester Street Trust: Treasury Portfolio, Fidelity Hereford Street Trust: Fidelity Government Money Market Fund, Fidelity Hereford Street Trust: Fidelity Money Market Fund, Fidelity Newbury Street Trust: Fidelity Treasury Money Market Fund, Fidelity Phillips Street Trust: Fidelity Government Cash Reserves, Fidelity Revere Street Trust: Fidelity Cash Central Fund, Fidelity Revere Street Trust: Fidelity Securities Lending Cash Central Fund, Fidelity Salem Street Trust: Fidelity Series Government Money Market Fund and VIP Government Money Market Portfolio; Franklin Advisers: The Money Market Portfolio; Goldman Sachs Asset Management: Goldman Sachs Financial Square Government Fund, Goldman Sachs Financial Square Money Market Fund, Goldman Sachs Financial Square Prime Obligations Fund, Goldman Sachs Financial Square Treasury Obligations Fund and Goldman Sachs Financial Square Treasury Solutions Fund; HSBC Global Asset Management (USA): HSBC U.S. Government Money Market Fund; Invesco Advisers: STIT Government and Agency Portfolio and STIT Treasury Portfolio; J.P. Morgan Investment Management: JPMorgan Liquid Assets Money Market Fund, JPMorgan Prime Money Market Fund, JPMorgan Tax Free Money Market Fund, JPMorgan U.S. Government Money Market Fund and JPMorgan U.S. Treasury Plus Money Market Fund; Legg Mason Partners Fund Advisor: Western Asset/Government Portfolio, Western Asset/Liquid Reserves Portfolio and Western Asset/U.S. Treasury Reserves Portfolio; Morgan Stanley Investment Management: Morgan Stanley Institutional Liquidity Funds Government Portfolio, Morgan Stanley Institutional Liquidity Funds Government Securities Portfolio, Morgan Stanley Institutional Liquidity Funds Prime Portfolio, Morgan Stanley Institutional Liquidity Funds Treasury Portfolio and Morgan Stanley Institutional Liquidity Funds Treasury Securities Portfolio; Northern Trust Investments: NTAM Treasury Assets Fund, Northern Funds - U.S. Government Money Market Fund, Northern Funds - U.S. Government Select Money Market Fund, Northern Institutional Funds - Government Portfolio, Northern Institutional Funds - Government Select Portfolio and Northern Institutional Funds - Treasury Portfolio; RBC Global Asset Management (U.S.): RBC Funds Trust, U.S. Government Money Market Fund; SSgA Funds Management: Institutional Liquid Reserve Portfolio, Institutional US Gov. Money Market Fund, a series of the State Street Master Funds, State Street Navigator Securities Lending Government Money Market Portfolio and State Street Treasury Plus Money Market Portfolio; T. Rowe Price Associates: T. Rowe Price Government Money Fund, Inc., T. Rowe Price Government Reserve Fund, T. Rowe Price Treasury Reserve Fund and T. Rowe Price U.S. Treasury Money Fund; UBS Asset Management (Americas): Government Master Fund, Limited Purpose Cash Investment Fund, Prime Master Fund and Treasury Master Fund; U.S. Bancorp Asset Management: First American Government Obligations Fund and First American Treasury Obligations Fund; The Vanguard Group: Vanguard Treasury Money Market Fund, Vanguard Market Liquidity Fund and Vanguard Cash Reserves Federal Money Market Fund; Wells Fargo Funds Management: Wells Fargo Government Money Market Fund, Wells Fargo Heritage Money Market Fund, Wells Fargo Money Market Fund and Wells Fargo Treasury Plus Money Market Fund and Wilmington Funds Management: Wilmington U.S. Government Money Market Fund. The NY Fed describes the "Eligibility criteria of the program, "In order to be eligible to become a reverse repo counterparty, a firm must be either: A state or federally chartered bank or savings association (or a state or federally licensed branch or agency of a foreign bank) with total assets equal to or greater than $30 billion, or reserve balances equal to or greater than $10 billion on the last quarter for which relevant reports are available; or A government-sponsored enterprise; or An SEC-registered 2a-7 fund that has, measured at each month-end for the most recent six consecutive months, either net assets of no less than $2 billion or an average outstanding amount of RRP transactions of no less than $500 million. Firms must already have arrangements in place to operate in the triparty repo market, in transactions collateralized by U.S. government debt, agency debt and agency mortgage-backed securities. Firms must be able to execute RRPs with securities margined at 100% (i.e. the value of the securities provided by the New York Fed will equal the funds provided by the counterparty)." (See here for the NY Fed's latest "Repo and Reverse Repo Operations".)

The Wall Street Journal writes that "U.S. Authorities Probing Deutsche Bank’s DWS Over Sustainability Claims." The article, which doesn't mention money market funds or the $570 million DWS ESG Liquidity Fund specifically, says, "U.S. authorities are investigating Deutsche Bank AG's asset-management arm, DWS Group, after the firm's former head of sustainability said it overstated how much it used sustainable investing criteria to manage its assets, according to people familiar with the matter. The probes, by the Securities and Exchange Commission and federal prosecutors, are in early stages, the people said. Authorities' examination of DWS comes after The Wall Street Journal reported that the $1 trillion asset manager overstated its sustainable-investing efforts. The Journal, citing documents and the firm's former sustainability chief, said the firm struggled with its strategy on environmental, social and governance investing and at times painted a rosier-than-reality picture to investors." The article tells us, "A spokesman for the U.S. attorney's office in Brooklyn, which is handling the probe, declined to comment. A spokesman for the SEC declined to comment. A DWS spokesman said the firm doesn't comment on questions related to litigation or regulatory matters. A spokesman for Deutsche Bank declined to comment. The Wall Street Journal reported earlier this month that DWS told investors that ESG concerns are at the heart of everything it does and that its ESG standards are above the industry average. But it has struggled to define and implement an ESG strategy, according to its former sustainability chief and internal emails and presentations.... DWS said in its 2020 annual report released in March that more than half of its $900 billion in assets at the time were invested using a system where companies are graded based on ESG criteria. An internal assessment done a month earlier said only a fraction of the investment platform applied the process, called ESG integration. The assessment added there was no quantifiable or verifiable ESG-integration for key asset classes at DWS. Desiree Fixler, at the time DWS's sustainability chief, told the Journal that she believed DWS misrepresented its ESG capabilities." The Journal piece adds, "A DWS spokesman said the firm stood by its annual report and that an investigation by a third-party firm found no substance to Ms. Fixler's allegations. He said standards for defining ESG assets are constantly evolving, and that DWS has been seen by the market as being more conservative than most of its competitors in the definition. ESG has become a huge business for asset managers. Assets in ESG funds surpassed $2 trillion globally in the second quarter, almost tripling in three years, according to Morningstar. Regulators say they may require advisers to disclose more about the criteria and data they use to pick ESG investments." Crane Data currently tracks 28 Social, ESG, Minority or Veteran-affiliated MMFs with $64.5 billion (as of 7/31/21), representing 1.3% of the total $4.8 trillion in taxable MMFs. (For more on ESG and MMFs, see our August 19 News, "BlackRock Expands ESG Lineup; Files for New Bancroft, Cabrera Shares.")

Today, we quote from another comment letter in response to the Financial Stability Board's "Policy proposals to enhance money market fund resilience: Consultation Report". The world's largest manager of money market funds writes, "Fidelity Investments appreciates the opportunity to provide comments to the Financial Stability Board on its consultation report on Policy Proposals to Enhance Money Market Fund Resilience published on June 30, 2021. Fidelity has long served as a leading provider of money market funds and has extensive experience managing funds in both normal and stressed market conditions. Fidelity first began managing and offering money market funds in 1974. `Fidelity remains the largest provider of money market funds with approximately $894 billion in assets under management as of July 31, 2021, representing approximately 18 percent of the U.S. money market fund industry." Chief Legal Officer Cynthia Lo Bessette explains, "Based on our history of managing and distributing a broad array of money market funds held by millions of fund investors, we believe we are uniquely qualified to provide insights into the events of March 2020 and to offer views on the various reform measures described in the FSB Report. Fidelity previously provided comments to the U.S. Securities and Exchange Commission on the reform options outlined in the President's Working Group Report, many of which are reiterated in the FSB's Report. We applaud the work of the FSB and the PWG as productive steps in considering potential reform measures, however, we caution that any reform measures should be narrowly constructed to address the events of 2020, carefully considered to ensure they preserve the availability of money market funds and do not impose harmful unintended consequences on investors or the global economy. As we learned in 2020 in the U.S., fees and gates were not only ineffective at deterring redemptions but accelerated the timing of redemptions given institutional investors' prioritization of access to their capital above all else." She comments, "As detailed below in our responses to selected questions in the FSB Report, we believe that: Regulators should proceed cautiously and carefully when considering further structural reforms to U.S. money market funds, which are already subject to extensive regulation, testing, oversight, and reporting requirements. Any reforms that regulators determine to implement for U.S. money market funds should be narrowly tailored to address the vulnerabilities exposed in March 2020, which were focused on liquidity pressures in institutional prime money market funds. By contrast, U.S. government and retail prime funds, which did not experience similar vulnerabilities and have performed well during periods of volatility, including March 2020, should be excluded entirely from further rounds of reform." The letter adds, "To address the structural vulnerabilities experienced by U.S. institutional prime funds resulting from liquidity pressures, we recommend that regulators consider eliminating the strict tie between current liquidity thresholds and the imposition of fees and gates, in combination with requiring a higher percentage of Weekly Liquid Assets for those funds. We do not believe that these reforms are necessary for any other U.S. money market funds. In the event that these reforms are considered for retail prime funds, which we disagree with, we urge that any new Weekly Liquid Asset percentages be calibrated appropriately by fund type. The reform options that do not solve for liquidity related vulnerabilities in U.S. institutional prime funds, which include swing pricing, minimum balance at risk, removal of the stable net asset value, capital buffers, and variants thereof, should be rejected for the numerous reasons we detail below. We note that swing pricing, in particular, has garnered additional attention lately among policymakers and academics. In addition to the substantial operational challenges with implementing it in the United States, swing pricing is based on flawed assumptions about the motivations that drive investors to redeem from money market funds, negating further consideration as a reform option. Even if those assumptions were correct, as we demonstrate below, swing pricing is unlikely to move the NAV of a U.S. money market fund sufficiently to impact redemption behavior."

CNBC.com writes, "The world's second-largest stablecoin is undergoing a massive change." Their article says, "Digital currency company Circle had claimed its stablecoin, USD Coin, was backed 1:1 by actual dollars in a bank account. In July, it was revealed this was no longer the case, with Circle disclosing in an 'attestation' from auditors Grant Thornton that cash made up just over 60% of USD Coin's reserves. The other 40% was backed by various forms of debt securities and bonds. What constitutes a stablecoin's reserves is important.... [T]hey're pegged to an existing currency like the U.S. dollar or the euro.... Now, Circle says it's changing the makeup of USD Coin's reserves once again, with just cash and U.S. Treasury bonds underpinning the stablecoin." CNBC's piece explains, "Centre, a consortium founded by Circle and crypto exchange Coinbase which developed the stablecoin, unveiled the change on Sunday." They comment in a blog post, "Mindful of community sentiment, our commitment to trust and transparency, and an evolving regulatory landscape, Circle, with the support of Centre and Coinbase, has announced that it will now hold the USDC reserve entirely in cash and short duration US Treasuries." CNBC.com adds, "Tether, the largest stablecoin with $75 billion in circulation, has drawn scrutiny from regulators amid fears it doesn't have enough assets to support its peg to the greenback. Earlier this year, tether's issuer revealed that just 2.9% of its reserves were held in cash. The vast majority of its reserves were made up of commercial paper, a form of unsecured, short-term debt that's riskier than government bonds. This sparked fears that a sudden mass redemption of tether tokens could destabilize short-term credit markets."

We've been quoting from comment letters in response to the FSB's "Policy proposals to enhance money market fund resilience: Consultation Report" over the past week, following the August 16 deadline for feedback and the posting of letters. Today, we quote from Vanguard's response. Ricardo Delfin, Principal and Global Head of Regulatory and Public Policy, writes, "Vanguard respectfully submits its comments to the Financial Stability Board (FSB) in response to its consultative report with policy proposals to enhance money market fund resilience (Consultation Report). Vanguard has managed money market mutual funds (MMFs) since 1981. On behalf of our shareholders, who currently invest approximately $349 billion in our MMFs, we are deeply committed to working with U.S. and global financial regulatory authorities and standard-setting bodies to strengthen the money market industry for the benefit and further protection of investors. To accomplish this, we believe a combination of fund structural reforms and market structure reforms is necessary, as discussed in our responses to the Consultation Report." The comment explains, "MMFs are an important choice for retail investors' cash management and principal preservation needs. In March 2020, the economic shock of the COVID-19 pandemic led to an unprecedented flight to liquidity and safety by investors and other market participants. Government MMFs had significant inflows as investors sought the principal preservation, stability, and safety that they offer.... Institutional prime MMFs, however, suffered significant outflows necessitating additional government support of prime funds and the underlying commercial paper (CP) markets in which they invest. Given the different dynamics between these funds and their underlying assets, we agree with regulators' desire to focus on reforming prime MMFs. We also believe underlying market structure reforms are essential to strengthening the short-term funding markets." Vanguard tells the FSB, "Based on the significant redemptions experienced by prime MMFs during the COVID crisis, we recommend that additional reforms focus on risks inherent in prime MMFs and related vulnerabilities in the short-term funding markets. As explained in greater detail in the questions that follow, we recommend the following MMF structural reforms: floating the NAV for all (retail and institutional) prime MMFs, eliminating fees/gates to reduce the incentive for investors to run, and imposing higher liquidity requirements. In combination with these prime MMF structural reforms, we recommend market structure reforms that focus on improving the underlying fixed income market functioning in a crisis.... Given the repeated issues in prime MMFs deriving from their stable NAV (in 2008) and gates and fees (in 2020) -- and exacerbated by market structure weaknesses -- we believe that fund policy reforms should focus directly on the structural weaknesses of these funds, as well as broader market structure weaknesses. As described above, Vanguard supports a simple approach to prime MMF reforms -- floating the NAV of both institutional and retail prime MMFs, eliminating gates and fees, imposing higher liquidity requirements, and implementing a combination of U.S. Treasury and other fixed income market structure reforms designed to improve market functioning in a crisis." They add, "We believe this approach directly addresses the nature of the problems, and is far superior to other reform options, such as capital buffers, minimum balance at risk (MBR), or swing pricing -- all of which would create a host of new challenges and unintended consequences. It would be a mistake to impose bank-like policy measures, such as capital requirements and MBR, on mutual funds. Instead, we urge regulators to focus on addressing these core structural weaknesses and improving the underlying market functioning in a crisis. Imposing capital, MBR, or swing pricing requirements does not address that fundamental challenge."

A posting on website JDSupra and written by Foreside, entitled, "Sharing Revenue Can Give RIAs a Generous Share of Compliance Problems," says, "Although it's good to share, sharing revenue can cause compliance problems for a Registered Investment Advisor ('RIA'). On August 2, 2021, the SEC resolved an enforcement action against a Missouri-based RIA, which was accused of breaching its fiduciary duty to advisory clients. The SEC's complaint alleged that the RIA failed to disclose the following three types of compensation paid to the advisory firm's affiliated broker-dealer: Mutual fund revenue sharing; Cash sweep revenue sharing; and Fee mark-ups. The broker-dealer shares common ownership and management with the RIA." In an "Overview of revenue sharing compliance issues," the piece explains, "The SEC's enforcement action articulates the compliance mistakes made by the RIA. The SEC's action can be found here. For a number of years, the RIA's affiliated broker-dealer received revenue sharing payments from an unaffiliated clearing broker. Those revenue sharing payments were tied to advisory clients' investments in certain mutual funds. The funds selected by the RIA were generally more expensive than lower-cost share classes of the same mutual funds offered on the clearing broker's platform. In addition, the RIA's affiliated broker-dealer received compensation arising from the mark-up of fees by the clearing broker. The RIA did not adequately disclose the payments to its affiliated broker or the associated conflicts of interest." The article comments, "The RIA did not fulfill its duty to seek best execution for clients' transactions because it failed to select share classes of funds that gave clients more bang for their buck. Furthermore, the RIA failed to adopt and implement written compliance policies and procedures that were reasonably designed to prevent violations of the Investment Advisers Act of 1940 and its rules. The SEC's enforcement action charged that the RIA's affiliated broker-dealer received three types of compensation that the advisory firm did not fully or adequately disclose." It adds, "The SEC determined that the RIA made recommendations to clients regarding sweep products that would temporarily hold uninvested cash in sweep accounts. A sweep account is a money market mutual fund or bank account used by broker-dealers to hold uninvested cash, such as incoming deposits, dividends and investment returns, until the RIA or the investor decides how to invest the money. Money market funds usually invest in short term and highly liquid securities with minimal credit risk. They are frequently used in sweep accounts. The RIA had an incentive to recommend cash sweep products that brought revenue to its affiliated broker-dealer. The affiliated broker-dealer received the most revenue from certain money market funds available on the clearing broker's platform. Those funds returned lower yields to clients. The RIA did not provide full and fair disclosure of all material facts regarding its conflicts of interest. Those conflicts arose when advisory clients invested in a money market fund on the clearing broker's platform made revenue sharing payments to the affiliated broker-dealer."

Over the past couple of days, we've quoted from some of the Financial Stability Board's "Public responses to consultation on policy proposals to enhance money market fund resilience". The comments page says, "On 30 June 2021, the FSB published Policy proposals to enhance money market fund resilience: Consultation Report. Interested parties were invited to provide written comments by 16 August 2021. The public comments received are available below. The FSB thanks those who took the time and effort to express their views. The FSB expects to publish the final policy proposals in October 2021." Today, we quote from a comment from Patomak Global Partners, a consulting firm which includes former SEC Commissioner Paul Atkins and former SEC Director Craig Lewis. They write, "In this letter, we highlight some general observations regarding MMFs and discuss the way these funds and their underlying investments performed during the market events of March 2020. We also examine the potential financial market risks of MMFs -- including systemic risk -- and address some of the specific policy proposals in the Consultation Report. Our letter seeks to emphasize the following points: 1) MMFs provide unique benefits as a cash management tool and are uniquely important to commercial paper markets. MMFs play a positive and important role in the global financial system. Banking regulations have resulted in banks turning away deposits, thus increasing the important role that MMFs play for investors. MMFs account for a large share of the buy-side market for CP, particularly for banks reliant on U.S. Dollar ('USD') wholesale funding. 2) Contrary to conventional thinking, the data shows that MMFs were quite resilient during March 2020, and the discussions of MMF vulnerabilities should focus on the stress-amplifying effects of the unintended consequences of current regulations. Retail MMFs and government MMFs did not exhibit any significant vulnerabilities during the market events of March 2020, and survey data shows that many institutional prime MMF investors actually increased their prime MMF holdings during this time as well. Redemptions by institutional investors from prime MMFs were largely driven due to the 'cliff effect' associated with liquidity thresholds that would trigger requirements for fund boards to consider imposing redemption gates." The letter says in its third point, "Market events of March 2020 underscore the need for a holistic look at risks associated with private short-term funding markets. Regulatory reform should be focused on the source of systemic risk -- the banking sector -- not MMFs. Redemptions from institutional MMFs did not trigger the March 2020 stress experienced in short-term lending markets. While improvements to MMF liquidity regulation can mitigate the modest amplifying effects that prime MMF redemptions can have on market stress, the primary focus of regulators should be the fragile funding sources of banks, particularly non-U.S. 'universal' banks." Finally, it adds, "As regulators contemplate future reforms, simple actions that address the root causes of 2020 market issues are preferable. Removing the SEC regulatory threshold that led to accelerated institutional prime MMF redemptions in favor of discretionary gating would go a long way towards addressing valid concerns about the stress-amplifying role that some MMFs can play. To directly address concerns about systemic risks related to short-term lending market risks, however, regulators should focus on improving banking sector regulations -- not the sideshow of MMFs."

"Companies Are Hoarding Record Cash Amid Delta Fears" says an article in Monday's Wall Street Journal. They write, "Companies are sitting on a record amount of cash amid lingering uncertainty about disruptions from Covid-19, defying expectations earlier this year that a waning pandemic would unleash a spending spree. Cash and short-term investments on corporate balance sheets globally are at an all-time high of $6.84 trillion, according to data from S&P Global, extrapolated from second-quarter earnings reports. That is 45% higher than the average in the five years preceding the pandemic and a 2.6% increase from the previous quarter." The piece says, "Cruise-line operator Carnival Corp. has been gradually bringing some of its ships back into service after the pandemic effectively shut down its operations. But it currently has around $9 billion of cash, compared with its usual balance of around $2 billion to $2.5 billion before the pandemic. It has 23 of its ships in operation out of 91. 'My thought on liquidity was to plan for the worst and hope for the best,' said Carnival Chief Financial Officer David Bernstein in an interview.... Airlines also are continuing to increase their cash positions. United Airlines Holdings had $23 billion of liquidity at the end of the second quarter, more than quadruple the same period of 2019 and up $3.3 billion over the six months through June. Delta Air Lines added $1.6 billion to its cash pile in the most recent quarter for a total of $17.8 billion of liquidity. It had $3 billion of cash at the same point of 2019." They quote Marc Baigneres of JPMorgan Chase, "Major corporates have been sitting on a large liquidity position for a while now," ... noting that they also have limited their spending even as many have "generated cash flows that are higher than expected." The Journal adds, "Investors say they are generally averse to companies keeping large cash balances and would prefer them to put the capital to work or return it through dividends or share buybacks. But in a time of lingering uncertainty, it is more acceptable, according to Ken Taubes, chief investment officer of Amundi SA's U.S. branch."

A news brief entitled, "ABA Tells Financial Stability Board to Take a Balanced Approach to Money Market Fund Reforms," comments, "ABA today told the Financial Stability Board that additional regulation for the banking sector to address concerns regarding money market funds would be inappropriate and unnecessary, as banks have been a source of financial strength throughout the COVID-19 pandemic. ABA added that it appreciates that the FSB is focused on the feasible reforms to money market funds -- which experienced market disruption during the early days of the pandemic -- but that reforms 'should balance the need for stability with preservation of prime and tax-exempt municipal MMFs.'" The post continues, "ABA also urged FSB to remove the tie between the weekly liquid asset threshold and the imposition of fees and gates, while also potentially increasing the weekly liquid asset threshold during normal times and lowering it during times of stress. Doing so would 'balance the need for increased stability as well as the viability of these funds for the investing public,' ABA said." See the full "Letter to FSB on the Policy Proposals to Enhance Money Market Fund Resilience" here," see the FSB's "Policy proposals to enhance money market fund resilience: Consultation Report" here, and see the FSB's "Virtual workshop on policy proposals to enhance money market fund resilience" here. Responses to the FSB were due August 16, so watch for more excerpts from postings in coming days.

With just over a month to go, we continue to make preparations for our Money Fund Symposium conference, which will still take place live, Sept. 21-23, 2021, at The Loews Philadelphia. While we're watching latest on "delta" variant coronavirus cases closely, we still expect our live show to go on. We expect virtually all of our attendees to be vaccinated, and we believe cases will be falling sharply as we get into September (given what's happened in the U.K.). We'll of course adhere to whatever health policies the hotel and city have in place at the time and will adjust our plans if necessary. (The hotel and city are currently requiring masks, but we're checking to see if this applies if everyone is vaccinated. There are no restrictions on size or events in Pennsylvania currently.) We'll offer recorded or virtual sessions for those that can't make it, and will switch to virtual if travel or municipal restrictions force us to. We'll also offer refunds, or credits for next year's show, (and will include access to this year's recordings) for any reason at any time. Crane's Money Fund Symposium, the largest gathering of money market fund managers and cash investors in the world, is still scheduled to take place September 21-23, 2021 at The Loews Hotel, in Philadelphia, Pa. The latest agenda is available and registrations are still being taken. (We'll be tweaking the agenda in coming days as some speakers may not be able to make it due to travel restrictions, so ask Pete for the latest update or if you might be interested in subbing in as a speaker.) Money Fund Symposium attracts money fund managers, marketers and servicers, cash investors, money market securities dealers, issuers, and regulators. Visit the MF Symposium website at www.moneyfundsymposium.com) for more details. Registration is $750, and discounted hotel reservations are available. Full refunds will be given for any cancels for any reason, and thanks to our sponsors for their support ... and patience! We hope you'll still join us in Philadelphia next month! (Again, the show will be recorded for those that can't make it.) We'd like to encourage attendees, speakers and sponsors not to wait for the last minute to register and make hotel reservations, but we of course understand if you want to wait to monitor conditions. Note that the agenda is still being finalized, so watch for tweaks in coming weeks. E-mail us at info@cranedata.com to request the full brochure. Also, register for our virtual (and free) "European Money Fund Symposium, which is scheduled for Oct. 21, 2021, from `9:30am-12:00pm Eastern. (We cancelled our live European MFS in Paris, and have rescheduled this live event to Sept. 27-28, 2022.) Our virtual EMFS session will include a "Welcome to European MF Symposium" from Peter Crane; a "European MMF Update: Ireland, France, UK" with Vanessa Robert of Moody's, Alastair Sewell of Fitch Ratings and Andrew Paranthoiene of S&P Global Ratings; "Regulatory ESG & Ultra-Short Issues" with Patrick Rooney of Irish Funds, James Vincent of Goldman Sachs Asset Mgmt. and Rob Sabatino of UBS Asset Management; and "Senior Portfolio Manager Perspectives," with Deborah Cunningham of Federated Hermes, Joe McConnell of J.P. Morgan Asset Mgmt and Paul Mueller of Invesco. Finally, mark your calendars for our next Money Fund University which is scheduled for Jan. 20-21, 2022, in Boston, Mass and our next Bond Fund Symposium, which is scheduled for Mar. 28-29, 2022 in Newport Beach, California. Let us know if you'd like more details on any of our events, and we hope to see you in Philadelphia in September or in Boston or Newport Beach in 2022!

ICI's latest "Money Market Fund Assets" report shows assets higher in the latest week, their third (modest) increase in the past 4 weeks. Their release says, "Total money market fund assets increased by $9.24 billion to $4.51 trillion for the week ended Wednesday, August 11, the Investment Company Institute reported today. Among taxable money market funds, government funds increased by $18.74 billion and prime funds decreased by $8.47 billion. Tax-exempt money market funds decreased by $1.03 billion." Money fund assets are up by $213 billion, or 5.0%, year-to-date in 2021. Inst MMFs are up $312 billion (11.3%), while Retail MMFs are down $99 billion (-6.5%). ICI's stats show Institutional MMFs increasing $7.9 billion and Retail MMFs increasing $1.4 billion in the latest week. Total Government MMF assets, including Treasury funds, were $3.944 trillion (87.4% of all money funds), while Total Prime MMFs were $475.0 billion (10.5%). Tax Exempt MMFs totaled $91.3 billion (2.0%). Over the past 52 weeks, money fund assets have decreased by $45 billion, or -1.0%, with Retail MMFs falling by $109 billion (-7.1%) and Inst MMFs rising by $64 billion (2.1%). (Note that ICI's asset totals don't include a number of funds tracked by the SEC and Crane Data, so they're almost $400 billion lower than our asset series.) ICI explains, "Assets of retail money market funds increased by $1.36 billion to $1.43 trillion. Among retail funds, government money market fund assets increased by $3.49 billion to $1.13 trillion, prime money market fund assets decreased by $1.84 billion to $221.36 billion, and tax-exempt fund assets decreased by $283 million to $79.81 billion." Retail assets account for just under a third of total assets, or 31.6%, and Government Retail assets make up 78.9% of all Retail MMFs. ICI adds, "Assets of institutional money market funds increased by $7.88 billion to $3.08 trillion. Among institutional funds, government money market fund assets increased by $15.26 billion to $2.82 trillion, prime money market fund assets decreased by $6.63 billion to $253.63 billion, and tax-exempt fund assets decreased by $745 million to $11.43 billion." Institutional assets accounted for 68.4% of all MMF assets, with Government Institutional assets making up 91.4% of all Institutional MMF totals.

Investment News claims, "Schwab's $200 million charge points toward conflicts with cash spreads." The article speculates, "They say there's no such thing as a free lunch, but Charles Schwab & Co. could have customers believing otherwise. The discount brokerage's Intelligent Portfolios platform has long advertised itself as having no advisory fees or commissions, but a $200 million charge announced this month relating to an investigation by the Securities and Exchange Commission highlights the subtle ways free investment platforms charge for services. While the robo-adviser doesn't technically have an advisory fee, it does earn revenue through charging for its underlying exchange-traded funds and on interest collected on holding clients' assets in cash. The cash spread, as it's called, is the difference between what Schwab earns in interest and what it actually pays clients. The practice is explained here under its potential conflict-of-interest disclosures." The piece comments, "Currently, the company pays 0.01% on cash -- meaning almost any other online savings account will offer a higher yield -- and allocates between 6% and 22.5% of cash assets in Schwab managed cash accounts. When interest rates were higher in 2016, cash in client accounts earned 0.08% at a time when some savings accounts were offering 1% or more, according to an analysis by Bloomberg.... It's unclear for now why Schwab is under investigation by the SEC, but industry observers have pointed to cash spreads as a likely culprit. '[Is the SEC charge] a comeuppance for Schwab, after years of marketing its 'free' no-advisory fee robo, where clients were then placed into Schwab ETFs and Schwab cash?' asked Michael Kitces, in a tweet this month. 'Ironically, it's hard to imagine what else it could be that adds up to a $200 million adjustment for Schwab. That's a huge write down.'"

"Tether Says Massive Reserves Held in Investment-Grade Commercial Paper" writes The Wall Street Journal. The piece tells us, "Tether Holdings Ltd. released the most detailed version yet of the assets backing its widely used digital currency, seeking to address regulatory concerns that it hasn't previously disclosed enough about the currency's underpinnings. Tether is a stablecoin, a type of cryptocurrency designed to mimic the value of the U.S. dollar.... Traders use tether to get in and out of other cryptocurrencies because of its ease of use and quick transaction times. Trading directly between the dollar and digital currencies often involves high transaction costs and delays in processing. Using tether as a stand-in for the U.S. dollar allows cryptocurrency traders to buy and sell digital assets such as bitcoin quickly and with little fuss. The peg to the U.S. dollar is meant to give assurance that a tether is as safe as owning dollars." The Journal explains, "Tether is used across different cryptocurrency exchanges and trading platforms, making it a widely accepted way to fund trading positions or to post as collateral for risky, leveraged investments. Roughly half of Tether's $62.8 billion in assets were held in commercial paper and certificates of deposit, according to a report the company published Monday. It detailed for the first time the credit ratings of these notes, saying that about 93% of them were rated A-2 or higher, indicating an investment-grade, short-term rating. It said most of the assets were rated by Standard & Poor's where available. It also relied on ratings from Fitch Ratings and Moody's Corp. The report said that 24% of its assets were in Treasury bills -- considered among the safest to hold -- up from about 2.2% detailed in May. The other roughly quarter of the reserves are held in a mix of corporate bonds, cash and small deposits. Each tether coin is pegged at $1. In an appendix to the report, Tether's Cayman Islands-based auditor, Moore Cayman, said that Tether's reserves for its digital assets issued exceeded the amount required to redeem them. The composition of the reserves backing tether has long been a topic of debate. Earlier this year, Tether settled a nearly two-year investigation by the New York attorney general's office into it and the operator of the Bitfinex cryptocurrency exchange. Alongside the settlement, Tether agreed to publicly release quarterly statements detailing its reserves."

Fitch Ratings' "U.S. Money Market Funds: July 2021" tells us, "Total taxable money market fund (MMF) assets decreased by $76 billion from May 28, 2021 to June 30, 2021, according to iMoneyNet data. Government MMFs lost $67 billion in assets during this period, and prime MMF assets decreased by$9 billion.... MMFs have been reducing exposure to treasury while increasing exposure to repo. Treasury holdings decreased by $134 billion, while repo increased by $251 billion from May 31 to June 30, 2021, according to Crane Data. Of this amount, $839 billion, or 50% of all repo, has been invested in the reverse repo program (RRP) managed by the Federal Reserve Bank of New York (Fed), which has been growing over the past few months." It adds, "As of June 30, 2021, institutional government and prime MMFs net yields were 0.02% and 0.03% per iMoneyNet data, respectively, unchanged from end of May. MMF managers have been waiving fees to encourage investment in the funds during this low interest rate environment."

The Wall Street Journal writes that, "Cash Is Flooding Into Short-Term Markets Like Never Before. Is That a Bad Sign?." They comment, "An unusual surge of short-term lending by cash-rich companies is raising concerns on Wall Street that a period of unrest may lie ahead. Investors such as money-market funds and banks are parking over $1 trillion in spare cash overnight at the Federal Reserve. That is the most on record since the Fed opened its facility for these reverse repurchase agreements in 2013. The scale of the moves has some analysts warning that the markets for short-term funding are vulnerable to disruption. The cause for this summer's rush into the Fed's reverse repo facility appears to be the central bank's decision in June to nudge up the amount of interest it pays, from 0% to 0.05% -- though usage had already been rising in the spring." The piece explains, "Repurchase agreements, or repos, are the market's main mechanism for moving cash from those who have it to those who need it. The Fed also uses them to influence short-term interest rates; the flood into reverse repo means banks and investors have extra cash and the Fed is vacuuming it up. A higher interest rate should attract more money, but analysts said they were surprised by the speed with which firms moved into reverse repo from other short-term investments such as Treasury bills and commercial paper." The Journal adds, "Worries about short-term funding markets aren't new. The Fed said in its last meeting it would establish two new permanent repo facilities. The decision aims to brace markets against volatility that could hit when the central bank begins tightening financial conditions in coming years. Short-term debt sits at the intersection of markets and the economy, and as such the functioning of these markets is central to the health of the U.S. recovery and the broad advance in prices of stocks, bonds and other assets. While few investors believe repo and reverse repo markets are imminently vulnerable to the kind of breakdown that characterized the 2008 crisis, the sensitivity of these markets to policy changes and economic developments is leaving many portfolio managers on edge. That is doubly so at a time of record U.S. bond issuance, ultralow interest rates and a booming economic recovery that has sent inflation to its highest level in years.... Bill Nelson, chief economist at BPI and a former top Fed staffer, said heavy usage of the reverse repo facility increases the systemic importance of money-market mutual funds, a sector the Fed sees as a financial stability risk. It is a sign that financial markets continue to change and that investors and policy makers must redouble their efforts to keep up."

ICI's latest "Money Market Fund Assets" report shows assets flat in the latest week after two weeks of increases and six weeks of declines. Their release says, "Total money market fund assets decreased by $1.14 billion to $4.50 trillion for the week ended Wednesday, August 4, the Investment Company Institute reported today. Among taxable money market funds, government funds decreased by $934 million and prime funds decreased by $867 million. Tax-exempt money market funds increased by $660 million." Money fund assets are up by $204 billion, or 4.7%, year-to-date in 2021. Inst MMFs are up $304 billion (11.0%), while Retail MMFs are down $101 billion (-6.6%). ICI's stats show Institutional MMFs decreasing $3.1 billion and Retail MMFs increasing $2.0 billion in the latest week. Total Government MMF assets, including Treasury funds, were $3.925 trillion (87.2% of all money funds), while Total Prime MMFs were $483.5 billion (10.7%). Tax Exempt MMFs totaled $92.3 billion (2.1%). Over the past 52 weeks, money fund assets have decreased by $75 billion, or -1.6%, with Retail MMFs falling by $114 billion (-7.4%) and Inst MMFs rising by $39 billion (1.3%). (Note that ICI's asset totals don't include a number of funds tracked by the SEC and Crane Data, so they're almost $400 billion lower than our asset series.) ICI explains, "Assets of retail money market funds increased by $1.99 billion to $1.43 trillion. Among retail funds, government money market fund assets increased by $2.77 billion to $1.12 trillion, prime money market fund assets decreased by $859 million to $223.20 billion, and tax-exempt fund assets increased by $86 million to $80.10 billion." Retail assets account for just under a third of total assets, or 31.7%, and Government Retail assets make up 78.7% of all Retail MMFs. ICI adds, "Assets of institutional money market funds decreased by $3.13 billion to $3.08 trillion. Among institutional funds, government money market fund assets decreased by $3.70 billion to $2.80 trillion, prime money market fund assets decreased by $7 million to $260.27 billion, and tax-exempt fund assets increased by $574 million to $12.18 billion." Institutional assets accounted for 68.3% of all MMF assets, with Government Institutional assets making up 91.1% of all Institutional MMF totals.

The Independent Adviser for Vanguard Investors, a newsletter which tracks Vanguard funds, published the brief, "Chasing Pennies," which says, "A decade ago, the yields on Vanguard's money funds all fell to 0.01% or 0.02% for the first time. Savers got a brief reprieve (and a modicum of income) for a few years. But, today, we're back at 0.01% yields again. Vanguard has liquidated two state-tax-free funds and begun, as before, to waive expenses to keep yields above zero. What, if anything, can a saver do? What are the risks of trying to outmaneuver what Jeff and I have taken to calling the 'near-zero bound' of cash yields?" They explain, "As the chart makes clear, the fed funds rate is the primary driver of money market yields. The Federal Reserve cutting the fed funds rate from 5.25% down to 0.25% during the Global Financial Crisis acted as a gravitational pull on money market yields. It took a little time, well, several years, but eventually, all of Vanguard's money market funds were at the near-zero bound." The article tells us, "While history may not repeat, it certainly rhymes. With the fed funds rate having again been cut to 0.25% in March 2020 as the COVID-19 pandemic took hold, we remain in another near-zero- bound period for money market yields.... The question is, when can we expect to see yields rise again? Today's consensus view is that the Fed might contemplate hiking the fed funds rate sometime in late 2022. If that's the case, and if history indeed rhymes, then we might see money market yields start to rise in mid-2022 -- which is a year off. So, there might be light at the end of the near-zero-bound tunnel, but, in the meantime, is there some way to increase the yield on your cash, and should you try? In a wonderful essay in The New York Times this past month, contributor `Paul Brown detailed how he set out on a personal journey to raise his cash yields.... What he discovered is pretty much what I've said for quite some time -- you can spend an awful lot of time monkeying around to earn an extra few basis points but when you come right down to it, unless you're hoarding millions, the payout is probably not going to be worth your time and effort."

A news brief from the Nigerian website Vanguard Media Limited, entitled, "Norrenberger launches Money Market Fund, harps on wealth creation," tells us, "A leading financial services group, Norrenberger has launched a new product, the Money Market Fund as part of its commitment to deepen financial inclusion in the country. The Money Market Fund is a collective investment scheme, registered with the Securities and Exchange Commission, SEC, which invests in short-term money market instrument such as treasury bills, bankers' acceptance, commercial papers and other instruments introduced and approved by the Central Bank of Nigeria, CBN." Norrenberger's Tony Edeh comments, "The Fund provides significant value to investors as they enjoy competitive returns on their investment, professional expertise from our fund managers, and an online access to monitor and manage their investment which puts them in total control of their portfolio. These benefits have been designed for clients looking to grow their money with a low-risk investment option. Our team of highly qualified and experienced portfolio managers supported with in depth investment research continue to design investment opportunities through the development of strategic products to hedge against inflation and provide better returns despite the tough economic situation in the country. `We are extremely excited to present our Money Market Fund to the public as I strongly believe the launch of the fund comes at the right time following the excellent performance of our Islamic Fund." Abigail Utomi, Norrenberger's Head of Asset Management, adds, "The Norrenberger Money Market Fund will give investors the exposure to a diversified portfolio of money market instruments, while also providing capital preservation, competitive returns, liquidity, safety of funds and quarterly dividend payments."

A Prospectus Supplement filing for AIG Government Money Market Fund explains that, "SunAmerica Asset Management, LLC, the Fund's investment adviser, and Touchstone Advisors, Inc. announced that they have entered into a definitive agreement for Touchstone to acquire certain assets related to SunAmerica's retail mutual fund management business. Under the terms of the agreement, twelve AIG Funds are expected to be reorganized into existing or newly created series of trusts in the Touchstone fund complex. Certain AIG Funds not covered by the agreement, including the Fund, will be liquidated. On February 8, 2021, the Board of Directors of SunAmerica Money Market Funds, Inc., on behalf of the Fund, approved a proposal to close the Fund to new and subsequent investments and thereafter to liquidate and dissolve the Fund pursuant to a Plan of Liquidation. Under the Plan of Liquidation, the Fund is expected to be liquidated on or about July 16, 2021." Another filing for BlackRock Liquidity Funds MuniFund states, "On May 11, 2021, the Board of Trustees of BlackRock Liquidity Funds on behalf of its series MuniFund, approved a proposal to close MuniFund to new investors and thereafter to liquidate MuniFund. Accordingly, effective at 4:00 P.M. (Eastern time) on May 17, 2021, MuniFund will no longer accept purchase orders from new investors. On or about July 19, 2021, all of the assets of MuniFund will be liquidated completely, the shares of any shareholders holding shares on the Liquidation Date will be redeemed at the net asset value per share and MuniFund will then be terminated as a series of the Trust. Shareholders may continue to redeem their MuniFund shares at any time prior to the Liquidation Date. MuniFund may not achieve its investment objective as the Liquidation Date approaches."

Last week, the Federal Reserve Board of Governors released a "Statement Regarding Repurchase Agreement Arrangements," which explains, "The Federal Open Market Committee on Wednesday announced the establishment of two standing repurchase agreement (repo) facilities—a domestic standing repo facility (SRF) and a repo facility for foreign and international monetary authorities (FIMA repo facility). These facilities will serve as backstops in money markets to support the effective implementation of monetary policy and smooth market functioning. Under the SRF, the Federal Reserve will conduct daily overnight repo operations against Treasury securities, agency debt securities, and agency mortgage-backed securities, with a maximum operation size of $500 billion. The minimum bid rate for repos under the facility will be set initially at 25 basis points, somewhat above the general level of overnight interest rates. Counterparties for this facility will include primary dealers and will be expanded over time to include additional depository institutions." The release continues, "Under the FIMA repo facility, the Federal Reserve will enter into overnight repurchase agreements as needed with foreign official institutions against their holdings of Treasury securities maintained in custody at the Federal Reserve Bank of New York. The rate for this facility will be set initially at 25 basis points with a per counterparty limit of $60 billion. By creating a temporary source of dollar liquidity for FIMA account holders, the facility can help address pressures in global dollar funding markets that could otherwise affect financial market conditions in the United States." See also the Fed's "Statement Regarding Repurchase Agreements."