Daily Links Archives: August, 2022

J.P. Morgan Securities writes that "MMFs pass on over 70% of rate increases to shareholders," in a recent US Short Duration Update. They explain, "In one of the most aggressive tightening cycles in decades, the Fed has raised the fed funds target range by 225bp this year. As expected, MMFs have been quick to pass on the rate increases to end shareholders <b:>`_. As of July month-end, 7-day net yields of prime, government, and Treasury MMFs registered 1.86%, 1.56%, and 1.55%, respectively, an increase of 180bp, 154bp, and 154bp YTD." The piece tells us, "In other words, MMFs have passed on about 70-80% of the rate increases to shareholders, depending on the type of fund. Of course, this was not the case initially. The relationship between market rates and MMF net yields is much weaker when rates are near the zero lower bound due to MMF fee waivers. During the 2015-2018 tightening cycle, the first 25bp rate hike almost entirely went to expanding the expense ratios of government and prime funds as MMFs sought to recapture fee waivers. It was not until the fourth rate hike when expense ratios began to stabilize, implying a resumption of the relationship between market rates and MMF net yields." JPM comments, "Against this backdrop, the current tightening cycle has shown similarities to the last tightening cycle with respect to recouping fee waivers. Treasury and government MMFs have recouped a majority of their fee waivers imposed since the pandemic following the initial two rate hikes in March (+25bp) and May (+50bp). We estimate 82% and 96% of Treasury and government MMF fee waivers, respectively, were recouped by the time the fed funds target range was 0.75%-1.00%, while prime MMFs lagged and only recouped 46% during the same period." The update adds, "Furthermore, with expense ratios for government and Treasury MMFs now matching pre-pandemic levels, MMFs could pass along a majority of any further rate increases to shareholders, especially as we continue down this aggressive tightening path. Notably, there is a growing gap between where institutional and retail money funds are yielding. Based on 7-day yields, the spread between institutional and retail is currently around 10-20bp, versus 0-5bp at the start of this year.... This makes sense, as institutional MMFs make up over 70% of the taxable MMF universe, and MMFs are eager to attract institutional money less-loved by leverage-constrained banks.... Meanwhile, retail MMF AUMs tend to be sticky. And while online deposit rates have exhibited a much higher beta to the fed funds rate than those paid on institutional deposits and traditional retail deposits, they are still below the rates paid on retail MMFs, particularly in prime.... All told, for anyone looking to hold cash, MMFs remain an economically attractive vehicle, reform or not."

The Investment Company Institute's latest weekly "Money Market Fund Assets" report shows assets falling in the past week after 4 straight weeks of gains in July. Year-to-date, MMFs are down by $129 billion, or -2.7%, with Institutional MMFs down $135 billion, or -4.2% and Retail MMFs up $6 billion, or 0.4%. Over the past 52 weeks, money fund assets are up by $75 billion, or 1.7%, with Retail MMFs rising by $50 billion (3.5%) and Inst MMFs rising by $26 billion (0.8%). (For the month of July, MMF assets increased by $25.3 billion to $5.013 trillion according to Crane's MFI XLS, which tracks a broader universe of funds than ICI.) ICI's weekly release says, "Total money market fund assets decreased by $14.20 billion to $4.58 trillion for the week ended Wednesday, August 3, the Investment Company Institute reported.... Among taxable money market funds, government funds decreased by $17.69 billion and prime funds increased by $4.28 billion. Tax-exempt money market funds decreased by $788 million." ICI's stats show Institutional MMFs decreasing $12.0 billion and Retail MMFs decreasing $2.2 billion in the latest week. Total Government MMF assets, including Treasury funds, were $4.008 trillion (87.6% of all money funds), while Total Prime MMFs were $471.0 billion (10.3%). Tax Exempt MMFs totaled $96.7 billion (2.1%). ICI explains, "Assets of retail money market funds decreased by $2.21 billion to $1.47 trillion. Among retail funds, government money market fund assets decreased by $5.92 billion to $1.14 trillion, prime money market fund assets increased by $4.60 billion to $247.35 billion, and tax-exempt fund assets decreased by $891 million to $87.09 billion." Retail assets account for just under a third of total assets, or 32.2%, and Government Retail assets make up 77.3% of all Retail MMFs. They add, "Assets of institutional money market funds decreased by $11.98 billion to $3.10 trillion. Among institutional funds, government money market fund assets decreased by $11.77 billion to $2.87 trillion, prime money market fund assets decreased by $323 million to $223.60 billion, and tax-exempt fund assets increased by $103 million to $9.62 billion." Institutional assets accounted for 67.8% of all MMF assets, with Government Institutional assets making up 92.5% of all Institutional MMF totals. (Note that ICI's asset totals don't include a number of funds tracked by the SEC and Crane Data, so they're over $400 billion lower than Crane's asset series.)

The Association for Financial Professionals will host a webinar next Thursday, August 11 (2-3pm EDT) entitled, "2022 AFP Liquidity Survey: Short-Term Investing in Turbulent Times," which will review AFP's 2022 Liquidity Survey and recent trends in cash investing. (The webinar is free for AFP members or $100 for non-members.) AFP's introduction explains, "Join this companion webinar to the 2022 AFP Liquidity Survey underwritten by Invesco, as we highlight key survey results and discuss the current investment climate. Panelists share their insights on possible money fund reform, rising interest rates, the war in Ukraine, low unemployment, and high inflation rates -- issues we haven't had to deal with in years. Due to prevailing economic uncertainty, investing operating cash in the near term has its challenges. We highlight what corporate practitioners are doing as well as provide market insight into where there is value and opportunity out on the yield curve." The webinar's objectives include: "Learn about investing short term cash in in this unique and unprecedented economic environment, and, Benchmark and determine best practices towards investing based on survey results and from the panelists." Speakers include: AFP's Tom Hunt, Invesco's Laurie Brignac, Gilbane Building Company's John Paris, Crane Data's Pete Crane and Workiva's Hui Chen. Also, please join us for our 8th Annual Crane's European Money Fund Symposium. The latest agenda is available and registrations are still being taken for this year's European event, which will take place Sept. 27-28 at the Renaissance Paris La Defense in Paris, France. Registration for our 2022 Crane's European Money Fund Symposium is $1,000 USD. Please make your hotel reservations soon! Rooms must be booked before August 5 to receive the discounted rate of E259. Visit www.euromfs.com to register, and contact us to request the PDF brochure. (Let us know too if you'd like information on speaking or sponsorship pricing.)

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 July 29) includes Holdings information from 55 money funds (down 30 from a week ago), which represent $2.260 trillion (down from $2.833 trillion) of the $4.997 trillion (45.2%) in total money fund assets tracked by Crane Data. (Our Weekly MFPH are e-mail only and aren't available on the website. See our July 13 News, "July Portfolio Holdings: Fed Repo in MMFs Breaks $2.0 Tril; T-Bills Down," for more.) Our latest Weekly MFPH Composition summary again shows Government assets dominating the holdings list with Repurchase Agreements (Repo) totaling $1.168 trillion (down from 1.470 trillion a week ago), or 51.7%; Treasuries totaling $834.7 billion (down from $996.3 billion a week ago), or 36.9%, and Government Agency securities totaling $109.0 billion (down from $151.9 billion), or 4.8%. Commercial Paper (CP) totaled $48.2 billion (down from a week ago at $66.8 billion), or 2.1%. Certificates of Deposit (CDs) totaled $37.3 billion (down from $47.1 billion a week ago), or 1.6%. The Other category accounted for $38.4 billion or 1.7%, while VRDNs accounted for $24.4 billion, or 1.1%. The Ten Largest Issuers in our Weekly Holdings product include: the Federal Reserve Bank of New York with $915.2 billion (40.5%), the US Treasury with $834.7 billion (36.9% of total holdings), Federal Home Loan Bank with $64.2B (2.8%), Federal Farm Credit Bank with $40.0B (1.8%), BNP Paribas with $38.4B (1.7%), Fixed Income Clearing Corp with $31.4B (1.4%), RBC with $27.1B (1.2%), Barclays PLC with $17.1B (0.8%), Credit Agricole with $13.5B (0.6%) and Citi with $13.5B (0.6%). The Ten Largest Funds tracked in our latest Weekly include: JPMorgan US Govt MM ($237.0B), Goldman Sachs FS Govt ($228.7B), Morgan Stanley Inst Liq Govt ($158.0B), BlackRock Lq FedFund ($157.3B), BlackRock Lq Treas Tr ($120.2B), Fidelity Inv MM: Govt Port ($116.5B), BlackRock Lq T-Fund ($108.1B), Allspring Govt MM ($106.7B), Goldman Sachs FS Treas Instruments ($105.7B) and State Street Inst US Govt ($98.9B). (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.)

J.P. Morgan Asset Management published a press release entitled, "J.P. Morgan Asset Management Commits $1 Million to Support Economic Opportunity for Underserved Youth and Single Mothers as Part of Empowering Change Program." It explains, "J.P. Morgan Asset Management today announced a $1 million dollar commitment to support underserved students through commitments made by the Empower and Community Development Fund, a Donor-Advised Fund established by J.P. Morgan Investment Management Inc. (and administered by the Chicago Community Trust), to the United Negro College Fund (UNCF) and Youth Guidance, as well as to support single mothers through Kingsborough Community College in Brooklyn, New York and Lee College in Houston, Texas. This announcement, part of J.P. Morgan Asset Management's February 2021 commitment to make a donation of 12.5% of its annual gross revenue received from the management fees on the Empower money market share class assets to the Empower Community Development Fund, a Donor-Advised Fund that is committed to supporting community development, aligns with the firm's broader commitment to preparing people for the future of work and closing the racial wealth gap." The piece quotes Paula Stibbe, "We launched Empowering Change in 2021 to connect institutional investors and diverse financial institutions to drive systemic change within underserved communities, and we're incredibly proud to be committing $1 million as the program's first annual donation to further this mission in collaboration with these long-standing partner organizations.... In a little over twelve months our Empower share class has not only surpassed $6 billion in assets under management but has attracted investments from some of America's most highly regarded companies, which is testament to the appeal of pioneering initiatives like Empowering Change to help advance racial equity. By expanding the number of MDI partners we're working with, we've also ensured that the program is reaching more underserved communities across the country, and we look forward to continuing to build the program in the years to come." JPMAM's release adds, "The Empower share class, offered across the firm's money market funds, was established as part of the Empowering Change program for exclusive distribution by MDIs and diverse-led CDFIs, allowing institutional clients to support MDIs and diverse-led CDFIs and further their ESG commitments. The Empowering Change program has achieved a number of significant milestones since launching in February 2021: Empower share class surpassed $6 billion in assets under management (as of 7/20/22).... Significant blue-chip institutional investment in Empower share class across a diverse range of industries, including an investment from the National Football League."

While Crane Data is gearing up for its next live event, European Money Fund Symposium, which will take place Sept. 27-28 in Paris, France, we're also starting to make plans for our next Money Fund University educational conference. Our 12th annual MFU will change slightly from its previous "basic training" format to a more advanced "Master's in Money Markets" program this year. It will take place at the Hyatt Regency in Boston, Mass., December 15-16, 2022. (We cancelled MFU last January and hosted a virtual event, but this year we'll be back live and in person.) Crane's Money Fund University is designed for those relatively new to the money market fund industry or those in need of a concentrated refresher on a broad core curriculum. The event also focuses on hot topics like money market fund regulations, money fund alternatives, offshore markets, and other recent industry trends. Our educational conference features a faculty of the money fund industry's top lawyers, strategists, and portfolio managers, and the Boston show will include an extended free training session (and lunch) for Crane Data clients, as well as a Holiday party where all are welcome. Money Fund University offers a 2-day crash course on money market mutual funds, educating attendees on the history of money funds, the Fed, interest rates, ratings, rankings, and money market instruments such as commercial paper, Treasury bills, CDs and repo. We also cover portfolio construction and credit analysis. Registrations ($750) are now being taken, and the latest agenda is available here. (E-mail us to request the latest brochure.) New portfolio managers, analysts, investors, issuers, service providers, and anyone interested in expanding their knowledge of "cash" investing should benefit from our comprehensive program. Even experienced professionals may enjoy a refresher course and the opportunity to interact with peers in an informal setting. Also, please join us for the 8th Annual Crane's European Money Fund Symposium. The latest agenda is available and registrations are still being taken for this year's European event, which will take place Sept. 27-28 at the Renaissance Paris La Defense in Paris, France. Registration for our 2022 Crane's European Money Fund Symposium is $1,000 USD. Please make your hotel reservations soon! Rooms must be booked before August 5 to receive the discounted rate of E259. Visit www.euromfs.com to register, and contact us to request the PDF brochure. (Let us know too if you'd like information on speaking or sponsorship pricing.) Mark your calendars for our next Bond Fund Symposium, which be held in Boston, Mass., on March 23-24, 2023. (Click here to see last year's agenda.) Bond Fund Symposium is the only conference devoted entirely to bond mutual funds, bringing together bond fund managers, marketers, and professionals with fixed-income issuers, investors and service providers. The majority of the content is aimed at the growing ultra-short and conservative ultra-short bond fund marketplace. Finally, mark your calendars too for our next big show, Crane's Money Fund Symposium, which will be held in Atlanta, Ga., June 21-23, 2023. Money Fund Symposium attracts money fund managers, marketers and servicers, cash investors, money market securities dealers, issuers, and regulators for 2 1/2 days of sessions, socializing and networking. Let us know if you'd like more details on any of our events, and we hope to see you in Paris in September, Boston in December or in March 2023, and Atlanta in June 2023. Thanks to all of our speakers, sponsors and supporters for your patience and support over the past 2+ rough years!

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