News Archives: January, 2019

A press release entitled, "BlackRock Intends to Launch Environmentally-Aware Money Market Fund" tells us, "BlackRock Cash Management has filed an initial registration statement for the BlackRock Liquid Environmentally Aware Fund ('LEAF'), a series of the BlackRock Funds, with the U.S. Securities and Exchange Commission. LEAF is a prime money market fund that will seek to provide clients with as high a level of current income as is consistent with liquidity and preservation of capital, while giving consideration to select environmental criteria." We quote from the release, and also review recent briefs from Wells Fargo Funds and S&P Global Ratings, below. (See the new fund filing here and see also Reuters' "BlackRock Plans Environmentally Conscious Money Market Fund".)

The release explains, "LEAF will seek to invest in a broad range of money market instruments whose issuer or guarantor, in the opinion of BlackRock, at the time of investment has better than average performance in environmental practices. BlackRock will use data from independent ESG ratings vendors and may employ the use of its own models. The Fund will also prohibit any investments in companies that earn significant revenue from the mining, exploration or refinement of fossil fuels or from thermal coal or nuclear energy-based power generation."

It adds, "In addition to LEAF's environmentally-focused investment strategy, 5% of the net revenue from BlackRock's management fee from the Fund will be used to purchase and retire carbon offsets either directly or through a third-party organization. BlackRock has also entered into an agreement with World Wildlife Fund (WWF), a leading environmental non-profit with recognized expertise and experience in environmental protection. As part of this agreement, BlackRock will make an annual payment to help further the global conservation efforts of WWF."

For more on ESG Money Market Funds, see our Sept. 7, 2018 News, "DWS ESG Liquidity Goes Live; Federated Explains Prime Private Fund," and our Aug. 13 News, "DWS Converts Variable NAV to DWS ESG Money Fund, First ESG Offering."

In other news, Wells Fargo Asset Management poses the question: "What's Attracting Investors to Prime MMFs?" They tell us, "Prime MMF yields have become attractive compared with other asset classes. As the Federal Open Market Committee (FOMC) continues to remove its monetary policy accommodating, yields on prime MMFs have outpaced government MMF yields, thereby having created a wider yield differential. At the same time, prime MMFs have experienced minimal NAV movement, consistently high liquidity, and greater diversity of holdings within the funds. As a result, investors have become more comfortable with the operational aspects of prime MMFs."

Wells continues, "The stringent liquidity, maturity, and diversification requirements mandated by the most recent SEC rules have led to a more stable product, especially in terms of liquidity and minimal NAV fluctuations. At Wells Fargo, these rules are consistent with the conservative manner in which the Heritage Money Market Fund has always been managed, emphasizing preservation of capital and high levels of liquidity. The yield advantage presented by prime MMFs has given investors an economic incentive to invest in these funds."

They point out, "Investors appear to have become more comfortable with the idea of fees and gates now that they have had an extended period to observe weekly liquidity levels in prime MMFs. Fund managers have typically maintained weekly liquid asset levels well above the 30% threshold. The industry has done this, in part, to avoid triggering this event."

The piece explains, "At Wells Fargo Asset Management, we've consistently maintained substantial liquidity well in excess of the 30% threshold in our flagship prime MMF, the Wells Fargo Heritage Money Market Fund. We believe the most important aspect of liquidity management is understanding the liquidity needs of the different investors in the fund. We have established know-your-customer procedures that allow for ongoing and regular communication between the sales and investment teams. As a result, the portfolio management team is better able to understand the nature and timing of the fund's cash flows and manage the fund's liquidity accordingly."

Wells Fargo expects trends favoring Prime MMFs to persist, writing, "Because preservation of principal and daily liquidity have remained the most important aspects of prime MMFs, we believe investors will continue to reposition into them. Cash investors may be aided in their decisions about where to invest their short-term cash by considering three factors related to prime MMFs: the volatility of a fund's NAV, its liquidity level, and the size of the fund."

They conclude, "Investors reexamining prime MMFs now have two years of empirical data to review since the 2016 SEC rules were implemented. To recap, these rules included additional liquidity and diversification requirements as well as maturity restrictions. Investors may now see that the rules have made a difference in the construction of portfolios and, in response, liquidity levels have been consistently high and NAV volatility has been low even as the FOMC has continued to raise rates. In addition, prime MMFs still offer same-day liquidity and may be reported as cash."

Finally, S&P Global Ratings welcomed the implementation of the EU's money market regulation as "an important milestone" on Jan. 21 (the original compliance target deadline), but was quick to note that the finalization of the transition has been pushed back to March 21. The agency released the brief, "EU-Domiciled Money Market Funds Still Scrambling For Regulatory Approval Following Reforms," which reviews the regulatory delay granted to euro-denominated funds plagued by negative yields. (See yesterday's Crane Data News, "European MMF Reforms Going Live, or Not? Economist Swipes at RDM Kill.")

S&P writes, "Many euro-denominated funds had used share-cancellation mechanisms (also known as reverse-distribution mechanisms) to maintain their net asset value (NAV) per share when the value of their assets were affected by negative interest rates. The mechanism was favored by stable NAV MMF investors. It was recently announced, however, that such mechanisms are not allowed under the EUMMFR."

They explain, "Given the short notice, a number of money market fund sponsors have delayed the conversion of their MMFs by using Article 44 of the regulation. This will see them finalize their transition by March 21, 2019 instead. Numerous Ireland- and Luxembourg-domiciled money market funds that have had share-cancellation mechanism language in their prospectus since 2012 have used Article 44 as a backstop."

S&P comments that some of the largest European money market fund providers still await regulatory approval in Ireland and Luxembourg for revised prospectuses in time to meet the revised deadline. The update says, "The 91 Europe-domiciled funds recognized as MMFs under the EUMMFR and rated by S&P Global Ratings had approximately €711 billion in assets under management as of Dec. 31, 2018.... S&P Global Ratings ... supports a regulatory environment that promotes increased transparency, enhanced liquidity, safer investment products, and investor protection as well as a level playing field for the European money market fund industry. Our ratings on the money market funds domiciled in Europe have not been affected by the implementation of EU MMFR."

There seems to be some confusion about whether indeed European Money Market Fund Reforms will go live on Monday, January 21. Following a letter from the Irish Central Bank (and comments from fund managers), we wrote on Jan. 14 that "European Money Market Funds [Were] Granted [an] Extension for Reforms, March 21." But after hearing (and participating in) the session on "European MMF Reforms & Offshore Funds" at our Money Fund University in Stamford on Friday, we learned that Irish and Luxembourg regulators meant to only allow the extension until March 21 for Euro funds and funds using the RDM, or reverse distribution mechanism. We review the latest on European reforms below, and also quote from a new Economist article on the subject. (Note: Thanks to those who attended and supported our Money Fund University last week! Attendees and Crane Data subscribers may access the Powerpoints and recordings via our "Money Fund University 2019 Download Center.")

In our Jan. 7 News, we published, "BNY Mellon Converts for European MF Reforms; USD Assets Rise in 2018," which explained, "BNY Mellon's Liquidity Funds are the latest to formalize plans to operate under the EU Money Fund Reforms that take effect Jan. 21. The fund group revealed changes to its BNY Mellon U.S. Dollar Liquidity Fund and BNY Mellon U.S. Treasury Fund, which will actually occur seven days before the final deadline -- on Jan. 14. A number of firms have already converted their money funds to be compliant with the pending reforms, including Aviva (9/1/18), BNP Paribas (11/11/18), and JP Morgan (11/30/18). Several firms -- BlackRock, Federated, and SSGA -- will convert late this week, on Jan. 11, and Morgan Stanley and UBS will also convert on Jan. 14."

Our Jan. 14 News explained, "Money market funds in Europe, which had been scheduled to submit to new regulations starting January 21, have been given a 2-month extension by Irish and Luxembourg fund regulators. A press release entitled, "Statement on the treatment of share cancellation under EU Regulation" explains, "The Central Bank of Ireland ('Central Bank') and the Commission de Surveillance du Secteur Financier ('CSSF') are issuing this joint statement in the interests of supporting the orderly implementation of the Money Market Funds Regulation (MMF Regulation) by converging their respective supervisory approaches to share cancellation and advising the market accordingly." (See also, the Financial Times article, "Fund groups gain reprieve from EU money market rules.")"

The Economist writes in "Europe's safest funds lose a tool to cope with negative interest rates" that, "January 21st should have been a momentous day for the European Union's money markets. A package of reforms five years in the making, designed to make the bloc's safest funds even safer, was due to kick in. Blue-chip firms like BlackRock and Morgan Stanley, anxious to meet the deadline, planned to switch their funds to compliant structures a week early. Yet on January 11th regulators announced a surprise delay. Money-market managers, which together oversee €1.3trn ($1trn), now have until March to put their houses in order. The delay stems from a row between national regulators over whether managers should ditch the 'share-cancellation mechanism' (SCM), a tool that helps them deal with negative interest rates."

The article explains, "Money-market funds invest in very short-term safe assets, like government bonds and top-notch corporate debt, to provide clients with a liquid alternative to cash. They play a key role for pension funds and large companies, which need to park their cash somewhere safe before paying pensions or wages at the end of the month. The aim is to maintain their capital at a stable value, often €1 per share. Any interest on portfolio assets is distributed to investors on the day via dividend payments, leaving the share price unchanged."

It continues, "But the system does not work when interest rates are below zero, as they have been in the euro zone since 2014. Negative yields cannot be distributed. So in Ireland and Luxembourg, home to most European money-market funds, regulators allow funds to cancel shares to get around the problem. The assets of the cancelled shares are split among the remaining ones, ensuring that their value per share remains at par. The share price does not budge."

The Economist article explains, "The European Commission dislikes SCMs. Although most experts disagree, it reckons 'share destruction' can be used to mask a capital loss in the fund. After a long silence the European Securities and Markets Authority (ESMA), which co-ordinates regulation across the EU, eventually sided with the commission, confirming that SCMs would be stopped. It had initially hinted that national authorities could decide how to phase out SCMs, which led managers to expect a long transition period. But on Christmas Eve managers were told that no grace period would be allowed."

It adds, "When managers fumed at the lack of notice, regulators delayed the reform. But the two-month reprieve does not help much. Managers are scrambling to restructure funds -- without an obvious solution to the negative-yield headache. Most are likely to move to accumulative structures, where share prices fluctuate along with the yield. Some worry investors could move their money to bank deposits, depleting funds. That may lower demand for the safe short-term debt issued by banks and states."

For more on European Reforms, see the following Crane Data News stories: "Schwab USD LA Goes Govt Ahead of European Reforms; Weekly Holdings" (1/3/19); "Money Fund Average Breaks 2.0%, Yields Rise; BNP Splits European MMFs" (12/27/18); "Money Fund Assets Skyrocket, Break $3 Trillion; UBS on European MMFR" (12/14/18); "JPMorgan Now Live With European Money Fund Reforms; VNAVs SnP AAA" (12/4/18); and "Cash Will Be King in '19 Says GS; BlackRock Update; Europe Rejects RDM" (11/26/18).

Mutual fund news source ignites is the latest media source to signal that a "very good" 2018 for money funds is likely to foreshadow an "even better" year for them in 2019, based on conversations with market participants. Thursday's article, "You Ain't Seen Nothing Yet': Money Fund Flows Expected to Surge in 2019," cites "investors' growing awareness of the products' yields," as the principal reason behind fund leaders' optimism. Ignites writes, "Money market fund assets grew by 7% last year, adding $209 billion -- more than the previous five years of inflows combined." We quote from the piece, and also cover the ICI's latest money fund asset totals below.

They explain, "Industrywide, money fund assets reached $3 trillion in mid-December for the first time since early 2010, according to Investment Company Institute data. That comes after hovering around $2.7 trillion for several years. And thanks to four Federal Reserve rate hikes during the year -- on top of five previous increases since late 2015 -- money fund yields cracked 2% mid-year and have continued rising."

The ignites news continues, "Money funds' higher yields have snuck up on many investors, says Peter Crane, president and CEO of Crane Data. The Federal Reserve's single rate hikes in 2015 and 2016 didn't have a big impact on the product's yields. But seven subsequent increases have pushed the target federal funds rate to between 2.25% and 2.50% -- returns that are now getting investors' attention." "It's like boiling the frog slowly," says Crane, referring to yields continuing to rise above 2% for the first time in years.

"In fact," the article noted, "significant 2018 increases in money fund assets at Vanguard and Fidelity show that more retail investors are moving out of lower-yielding bank deposit products and into money funds, says Crane, who adds that he thinks this shift will increase in 2019." The piece quotes Crane, "You ain't seen nothing yet.... I'll eat my hat if money fund assets don't grow more in 2019 than they did in 2018."

Finally, the piece adds, "The extreme market volatility of December and January could impact investors' 2019 asset allocation decisions, says Michael Morin, head of liquidity management solutions for Fidelity Investments. 'That's another possible tailwind [for money funds],' he says, noting that the yield the products offered is attractive when compared to losses by most equity and bond indexes. 'Perhaps they feel like their allocation to cash should continue to increase.'"

In other news, the ICI released its latest "Money Market Fund Assets <i:https://www.ici.org/research/stats/mmf/mm_01_17_19>_" report, which shows that `only Prime MMFs showed asset gains in the latest week. MMFs have now posted 11 weeks of gains out of the past 13 weeks <b:>`_, during which time they've risen by $177.1 billion. ICI's weekly series showed Retail MMFs decreasing $3.6 billion, or -3.0%, while Institutional MMFs declined $13.8 billion, or -7.4%, since the previous week.

They write, "Total money market fund assets decreased by $17.36 billion to $3.05 trillion for the week ended Wednesday, January 16, the Investment Company Institute reported <b:>_. Among taxable money market funds, `government funds decreased by $20.44 billion and prime funds increased by $4.55 billion. Tax-exempt money market funds decreased by $1.47 billion." Total Government MMF assets, including Treasury funds, stood at $2.313 trillion (75.9% of all money funds), while Total Prime MMFs reached $590.5 billion (19.4%). Tax Exempt MMFs totaled $145.5 billion, or 4.8%.

ICI explains, "Assets of retail money market funds decreased by $3.56 billion to $1.19 trillion. Among retail funds, government money market fund assets decreased by $3.73 billion to $703.43 billion, prime money market fund assets increased by $1.29 billion to $353.12 billion, and tax-exempt fund assets decreased by $1.11 billion to $136.28 billion." Retail assets account for over a third of total assets, or 39.1%, and Government Retail assets make up 58.9% of all Retail MMFs.

The release adds, "Assets of institutional money market funds decreased by $13.80 billion to $1.86 trillion. Among institutional funds, government money market fund assets decreased by $16.71 billion to $1.61 trillion, prime money market fund assets increased by $3.26 billion to $237.33 billion, and tax-exempt fund assets decreased by $354 million to $9.18 billion." Institutional assets accounted for 60.9% of all MMF assets, with Government Institutional assets making up 86.7% of all Institutional MMF totals.

Crane's Money Fund Symposium, the largest gathering of money market fund managers and cash investors in the world, will take place June 24-26, 2019 at The Renaissance Boston Waterfront Hotel, in Boston, Mass. The preliminary agenda is now available and registrations are now being taken. Our previous MFS in Pittsburgh attracted 575 attendees, and we expect another record turnout for our 11th annual event in Boston this summer. Money Fund Symposium attracts money fund managers, marketers and servicers, cash investors, money market securities dealers, issuers, and regulators. We review the agenda, as well as Crane Data's 2019 conference calendar, below. (Welcome to those of you attending Crane's Money Fund University, which starts today in Stamford, Conn., and runs through Friday. Attendees and Crane Data subscribers may access our conference materials at the bottom of our "Content" page or our via our Money Fund University 2019 Download Center. Feel free to drop by!)

Our June 24 Symposium Opening (afternoon) Agenda kicks off with a "Welcome to Money Fund Symposium 2019" and keynote on "Money Funds, Cash Comeback" from Peter Crane, President of Crane Data. The rest of the Day 1 agenda includes: "The State of the Money Fund Industry & MMFs," with Crane, Yeng Butler of SSgA, and Alex Roever of J.P. Morgan Securities; "Risks & Ratings: Credit Liquidity, & NAV Moves," with Robert Callagy from Moody's Investors Service, Greg Fayvilevich from Fitch Ratings, and Guyna Johnson from S&P Global Ratings; and, a "Major Money Fund Issues 2019" panel with Tracy Hopkins of Dreyfus/BNY Mellon Cash Investment Strategies, Jeff Weaver of Wells Fargo Asset Management, and Peter Yi of Northern Trust Asset Management. (The evening's reception is sponsored by Bank of America Merrill Lynch.)

Day 2 of Money Fund Symposium 2019 begins with "Strategists Speak '18: Fed & Rates, Repo & SOFR," which features Mark Cabana of Bank of America, Joseph Abate of Barclays, and Chris Chadie of Credit Suisse, followed by a "Senior Portfolio Manager Perspectives" panel, including Laurie Brignac of Invesco, Deborah Cunningham of Federated Investors, and Nafis Smith of Vanguard Group. Next up is "Government & Treasury Money Fund Issues," with moderator Priya Misra of TD Securities, Adam Ackerman of J.P. Morgan Asset Management, and Ed Dombrowski of AB Funds. The morning concludes with "Muni & Tax Exempt Money Fund Update," featuring Colleen Meehan of Dreyfus, Sean Saroya of J.P. Morgan Securities, and John Vetter of Fidelity.

The Afternoon of Day 2 (after a Dreyfus-sponsored lunch) features the segments: "Dealer's Choice: Supply, New Securities & CP" with Stewart Cutler of Barclays, John Kodweis of J.P. Morgan Securities, and Nick Ro of Toyota Financial Services; "Analysts Roundtable: Concerns in Credit" with Jimmie Irby of J.P. Morgan AM, Keith Lawler of Bank of America Merrill Lynch, and Matthew Plomin of DWS; "SMA & Ultra-Short Update; Bond Fund Regs," with Dave Martucci of JPMAM, Kerry Pope of Fidelity, and Steve Cohen of Dechert. The day’s wrap-up presentation is "Corporate Liquidity & Investor Issues" involving Lance Pan of Capital Advisors and Tom Hunt from AFP. (The Day 2 reception is sponsored by Barclays.)

The third day of the Symposium features the sessions: "Treasury & NY Fed Update; Agency Issuance" with Tom Katzenbach from the U.S. Dept. of Treasury, Dave Messerly of the FHLBanks - Office of Finance, and Josh Frost of the Federal Reserve Bank of NY; "European Money Funds After Reforms," with Kim Hochfield of Morgan Stanley Investment Management and Dan Morrissey of William Fry; and concludes with "Brokerage Sweep: Deposits vs. Money Funds" with Rick Holland of Charles Schwab Investment Management, Joe Hooker of Promontory Interfinancial Network and Tuyen Tu of Raymond James; then "Technology, Software & Data in Money Funds" ends the program with Peter Crane and Greg Fortuna of State Street Fund Connect.

Visit the MF Symposium website at www.moneyfundsymposium.com) for more details. Registration is $750, and discounted hotel reservations are available. We hope you'll join us in Boston this June! We'd like to encourage attendees, speakers and sponsors to register and make hotel reservations early. Note that a couple of our speakers have yet to confirm their participation, and the agenda is still in the process of being finalized. E-mail us at info@cranedata.com to request the full brochure, or click here to see the latest.

In other conference news, preparations are being made for the third annual Crane's Bond Fund Symposium, which will be held at the Loews Philadelphia Hotel March 25-26. (Click here to see the PDF agenda.) Bond Fund Symposium is the first 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. (As a reminder, please register for BFS and make hotel reservations for BFS soon if you plan on attending!)

Crane Data, which recently celebrated the fourth anniversary of its Bond Fund Intelligence publication and BFI XLS bond fund information service and benchmarks, continues to expand its fixed income fund offerings with the recent launch of Bond Fund Wisdom product and Bond Fund Portfolio Holdings dataset. Bond Fund Symposium offers attendees a concentrated and affordable educational experience, as well as an excellent networking venue. Registration for Bond Fund Symposium is $750; exhibit space is $2,000 (includes 2 tickets); and sponsorship opportunities are $3K, $4K, $5K and $6K. Our mission is to deliver the best possible conference content at an affordable price to bond fund professionals and investors.

Finally, mark your calendars for Crane's 7th annual "offshore" money fund event, European Money Fund Symposium, which will be held in Dublin, Ireland, September 23-24, 2019. This website (www.euromfs.com) will be updated with the 2019 information soon. (Contact us to inquire about sponsoring or speaking.)

Crane Data's latest MFI International shows total assets in "offshore" money market mutual funds, U.S.-style funds domiciled in Ireland or Luxemburg and denominated in USD, Euro and GBP (sterling), up overall year-to-date in the early days of 2019 after rising in 2018. Through 1/14/19, MFII assets are up $5.4 billion to $851 billion. (They rose $15 billion in 2018 after rising $100 billion in 2017.) Offshore USD money funds are up $4.1 billion YTD, continuing to defy predictions of repatriation-related outflows (they rose $29B last year). Euro funds are still feeling the pain of negative rates and pending European MMF reforms; they're down E5.4 billion YTD (following 2 flat years). GBP funds are up L5.7B. U.S. Dollar (USD) money funds (174) account for over half ($458 billion, or 53.8%) of this "European" money fund total, while Euro (EUR) money funds (100) total E93.6 billion (11.0%) and Pound Sterling (GBP) funds (104) total L215 billion (25.3%). We summarize our "offshore" money fund statistics and Money Fund Intelligence International Portfolio Holdings below.

USD MMFs yield 2.31% (7-Day) on average (as of 1/14/19), up from 2.29 % on 12/31/18, 1.19% at the end of 2017 and 0.56% at the end of 2016. EUR MMFs yield -0.48 on average, up from -0.49% at year-end 2018, -0.55% on 12/29/17 and -0.49% on 12/30/16, while GBP MMFs yielded 0.65%, up from 0.64% on 12/31/18, from 0.24% at the end of 2017 and 0.19% at the end of 2016. (See our `latest MFI International for more on the "offshore" money fund marketplace.)

Crane's MFII Portfolio Holdings, with data (as of 12/31/18), show that European-domiciled US Dollar MMFs, on average, consist of 27% in Commercial Paper (CP), 20% in Certificates of Deposit (CDs), 15% in Treasury securities, 22% in Repurchase Agreements (Repo), 14% in Other securities (primarily Time Deposits), and 2% in Government Agency securities <b:>`_. USD funds have on average 37.5% of their portfolios maturing Overnight, 12.0% maturing in 2-7 Days, 18.0% maturing in 8-30 Days, 12.4% maturing in 31-60 Days, 7.5% maturing in 61-90 Days, 8.8% maturing in 91-180 Days, and 3.7% maturing beyond 181 Days. USD holdings are affiliated with the following countries: US (28.4%), France (13.8%), Japan (11.4%), Canada (13.1%), United Kingdom (5.6%), Germany (4.5%), Sweden (3.8%), Australia (3.9%), The Netherlands (3.2%), Switzerland (3.5%), Singapore (2.2%), and China (1.8%).

The 10 Largest Issuers to "offshore" USD money funds include: the US Treasury with $76.5 billion (15.1% of total assets), BNP Paribas with $22.0B (4.4%), Wells Fargo with $16.6B (3.3%), Mitsubishi UFJ Financial Group Inc with $15.3B (3.0%), Bank of Nova Scotia with $15.1B (3.0%), RBC with $14.0B (2.8%), Mizuho Corporate Bank Ltd with $13.3B (2.6%), Toronto-Dominion Bank with $13.2B (2.6%), Societe Generale with $11.9B (2.4%), and Barclays PLC with $11.6B (2.3%).

Euro MMFs tracked by Crane Data contain, on average 45% in CP, 27% in CDs, 20% in Other (primarily Time Deposits), 6% in Repo, 1% in Agency securities, and 1% in Treasuries. EUR funds have on average 20.7% of their portfolios maturing Overnight, 12.5% maturing in 2-7 Days, 22.3% maturing in 8-30 Days, 17.0% maturing in 31-60 Days, 12.5% maturing in 61-90 Days, 12.3% maturing in 91-180 Days and 2.5% maturing beyond 181 Days. EUR MMF holdings are affiliated with the following countries: France (29.7%), Japan (15.0%), the US (9.2%), Sweden (7.3%), Netherlands (5.1%), Germany (6.6%), U.K. (4.4%), China (3.1%), Switzerland (2.6%) and Belgium (2.9%).

The 10 Largest Issuers to "offshore" EUR money funds include: Credit Agricole with E6.1B (6.3%), BNP Paribas with E4.4B (4.5%), BPCE SA with E3.5B (3.7%), Mizuho Corporate Bank Ltd with E3.5B (3.6%), Sumitomo Mitsui Banking Co with E3.3B (3.5%), Svenska Handelsbanken with E3.2B (3.3%), Credit Mutuel with E3.0B (3.1%), Nordea Bank with E2.9B (3.0%), Procter & Gamble Co with E2.5B (2.6%), and Societe Generale with E2.5B (2.6%).

The GBP funds tracked by MFI International contain, on average (as of 12/31/18): 34% in CDs, 27% in Other (Time Deposits), 23% in CP, 10% in Repo, 6% in Treasury, and 0% in Agency. Sterling funds have on average 22.7% of their portfolios maturing Overnight, 9.7% maturing in 2-7 Days, 20.4% maturing in 8-30 Days, 20.4% maturing in 31-60 Days, 13.2% maturing in 61-90 Days, 9.5% maturing in 91-180 Days, and 4.1% maturing beyond 181 Days. GBP MMF holdings are affiliated with the following countries: France (16.3%), Japan (17.3%), United Kingdom (16.7%), Canada (8.6%), Netherlands (6.8%), Australia (2.2%), Germany (5.3%), United States (4.0%), Sweden (4.7%), and Singapore (3.2%).

The 10 Largest Issuers to "offshore" GBP money funds include: UK Treasury with L15.6B (9.5%), Mizuho Corporate Bank Ltd with E7.7B (4.7%), Mitsubishi UFJ Financial Group with L6.4B (3.9%), Sumitomo Mitsui Trust Bank with L5.7B (3.5%), BNP Paribas with L5.5B (3.4%), Sumitomo Mitsui Banking Co with L5.4B (3.3%), BPCE SA with L5.4B (3.3%), Nordea Bank with L4.9B (3.0%), Toronto-Dominion Bank with L4.8B (2.9%), and Rabobank with L4.4B (2.7%).

In other news, the Investment Company Institute released its latest "Money Market Fund Holdings" summary on Tuesday (with data as of Dec. 28, 2018). This monthly update reviews the aggregate daily and weekly liquid assets, regional exposure, and maturities (WAM and WAL) for Prime and Government money market funds. (See also Crane Data's Jan. 11 News, "Jan. MF Portfolio Holdings: Treasuries, Repo Jump; FICC Biggest Repo Zero.")

The MMF Holdings release says, "The Investment Company Institute (ICI) reports that, as of the final Friday in December, prime money market funds held 29.1 percent of their portfolios in daily liquid assets and 43.1 percent in weekly liquid assets, while government money market funds held 62.6 percent of their portfolios in daily liquid assets and 77.9 percent in weekly liquid assets." Prime DLA increased from 28.5% in November, and Prime WLA grew from 41.6% the previous month. Govt MMFs' DLA increased from 61.0% in Nov. but Govt WLA decreased from 78.9% that month.

ICI explains, "At the end of December, prime funds had a weighted average maturity (WAM) of 30 days and a weighted average life (WAL) of 64 days. Average WAMs and WALs are asset-weighted. Government money market funds had a WAM of 31 days and a WAL of 89 days." Prime WAMs were down two days from last month, and WALs shortened by seven days. Govt WAMs were unchanged from Nov. levels and Govt WALs added two days in December.

Regarding Holdings By Region of Issuer, ICI's release tells us, "Prime money market funds' holdings attributable to the Americas rose from $226.86 billion in November to $275.16 billion in December. Government money market funds' holdings attributable to the Americas rose from $1,779.61 billion in November to $1,977.67 billion in December."

The Prime Money Market Funds by Region of Issuer table shows Americas-related holdings at $275.2 billion, or 48.5%; Asia and Pacific at $118.0 billion, or 20.8%; Europe at $168.2 billion, or 29.7%; and, Other (including Supranational) at $5.5 billion, or 1.1%. The Government Money Market Funds by Region of Issuer table shows Americas at $1.978 trillion, or 83.4%; Asia and Pacific at $122.5 billion, or 5.2%; and Europe at $264.9 billion, or 11.2%.

The January issue of our Bond Fund Intelligence, which was sent out to subscribers Tuesday, features the lead story, "Top Stories & Funds in '18; Outlook for '19; BFI Turns 4," which looks at the biggest stories and top-performing funds of 2018, and the profile, "FPA New Income's Atteberry: Staying Short But Flexible," our latest Portfolio Manager interview. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that bond fund yields and returns rose again in December. We excerpt from the new issue below. (Contact us if you'd like to see our Bond Fund Intelligence and BFI XLS spreadsheet, or our Bond Fund Portfolio Holdings dataset, and mark your calendars our 3rd annual Bond Fund Symposium, which will take place March 25-26, 2019 in Philadelphia.)

The lead BFI story says, "A strong year for bond funds was interrupted by a period of outflows in the late stages of 2018 as bond investors sought the safety of lower-risk vehicles, including money-market funds. Bond fund assets and returns ended the year almost flat, with the former up slightly and the latter down slightly. We briefly review last year, including top stories from BFI, which celebrates its 4th birthday this month, and we list the top-performing funds in 2018."

It continues, "Bond fund assets remained above $4 trillion and bond ETFs broke above $600 billion in late 2018. According to ICI, bond fund assets stood at $4.087 trillion as of Nov. 30, 2018, up $51.0 billion, or 12.6%, from a year earlier. Bond ETFs totaled $614.1 billion on 11/30/18, up $66.4 billion, or 12.1%, over the past year."

Our "Fund Profile" says, "This month, BFI interviews Thomas Atteberry, co-manager of the $5.6 billion FPA New Income Fund and partner at the Los Angeles-based First Pacific Advisors. He discusses the fund's strategy, investor base and focus on preservation of capital. He also tells us why ultra-short may be too short in the coming year and why short-term is likely the 'sweet spot.'"

BFI asks Atteberry to, "Give us some background on the fund." He answers, "The FPA New Income Fund was originally run by Bob Rodriguez. FPA purchased the fund from Transamerica in 1984, so that's how we acquired a bond fund. Bob hired me in '97 to come to work for him as the first analyst on the fund.... I was made co-manager of the fund in 2004 and was put in charge in 2010."

We also ask him to, "Tell us about the fund. He responds, "We have two objectives we try to reach. One is a positive return in a 12-month period; and then we're trying to get CPI plus 100 basis points over a rolling five-year period. So, because of that, we're indifferent to a benchmark of any kind. We're merely looking for securities that help us accomplish those two objectives. So it's a very bottom-up, security specific, one idea at a time sort of approach. It has a fairly broad set of parameters to it. It's not very restrictive. In order to qualify, it just needs to be a bond. So we can look at any bond we want. It's a very broad mandate." (Watch for more excerpts from this article later this month, or see the latest issue of BFI.)

Our Bond Fund News includes the brief, "Yields Rise Again, Returns Jump in Dec. Bond fund yields and returns rose last month for almost all categories. The BFI Total Index returned 0.46% for 1-month and -0.08% over 12 months. The BFI 100 returned 0.65% in December and 0.03% over 1 year. The BFI Conservative Ultra-Short Index returned 0.19% over 1 month and 1.75% over 1-year; the BFI Ultra-Short Index averaged 0.12% in Dec. and 1.35% over 12 mos. BFI Short-Term returned 0.31% and 0.82%, and BFI Intm-Term Index returned 1.15% and –0.34% for 1-mo and 1-year. BFI's Long-Term Index returned 1.51% in Dec. and –1.37% for 1-year; BFI's High Yield Index returned -2.01% in Dec. and –2.00% over 1-year."

Another brief, entitled, "ICI Publishes Papers on Bond Fund Flows." It tells us, "Last month, ICI published, 'Debunking Assumptions About Bond Mutual Funds' Flows and Bond Sales,' which says, 'Recent outflows from bond mutual funds have drawn press attention and revived concerns among regulators about the impact of bond fund investors' actions on the broader bond market. Unfortunately, this attention is rooted in misconceptions -- as we'll show using ICI's comprehensive data covering 98 percent of mutual fund industry assets."

A third News brief, "WSJ Says '`Individual Investors Try Not to Panic Over Big Market Gyrations,'" explains, "Noninstitutional net inflows into U.S. ultrashort-duration bond funds rose to over $65 billion in the first 11 months of 2018, a record high for that period since 2000, according to data estimates from Morningstar Inc. At the same time, retail net inflows into money-market funds for that period were the highest in a year since 2008."

Finally, a sidebar entitled, "World BF Assets Flat," comments, "Bond fund assets worldwide slipped slightly but remained above the $10 trillion level in the latest quarter. Two of the three largest bond fund markets -- the U.S. and Ireland -- showed gains in the latest quarter (Q3'18) according to the Investment Company Institute's 'Worldwide Open-End Fund Assets and Flows, Third Quarter 2018.'"

It adds, "ICI's report shows worldwide bond fund assets declined $908 million, or 0.0%, to $10.253 trillion in the third quarter. Bond funds represent 20.5% of the $50.09 trillion in worldwide mutual fund assets. Globally, bond funds posted outflows of $294 billion in Q2 of 2018, after an inflow of $174B in Q1."

Money market funds in Europe, which had been scheduled to submit to new regulations starting January 21, have been given a 2-month extension by Irish and Luxembourg fund regulators. A press release entitled, "Statement on the treatment of share cancellation under EU Regulation" explains, "The Central Bank of Ireland ('Central Bank') and the Commission de Surveillance du Secteur Financier ('CSSF') are issuing this joint statement in the interests of supporting the orderly implementation of the Money Market Funds Regulation (MMF Regulation) by converging their respective supervisory approaches to share cancellation and advising the market accordingly." (See also, the Financial Times article, "Fund groups gain reprieve from EU money market rules.")

It continues, "Article 44 of the MMF Regulation provides that money market funds existing prior to 21 July 2018 shall submit an application for authorisation to its competent authority by 21 January 2019 together with all documents and evidence necessary to demonstrate compliance with the MMF Regulation. This application should include details of arrangements for the cessation of the use of the share cancellation mechanism in accordance with the MMF Regulation and the opinion of the European Commission expressed in its letters dated January 2018 and October 2018 that share cancellation is not compatible with the MMF Regulation."

The update adds, "Article 44 of the MMF Regulation also provides that no later than 21 March 2019 (being the date falling 2 months after 21 January 2019), the Central Bank or CSSF (as applicable) shall assess whether or not each fund is compliant with the MMF Regulation and shall issue a decision and notify it immediately to the fund."

It says, "With that in mind, and without prejudice to the functions and powers of the Central Bank and CSSF respectively, with effect from 21 January 2019, the Central Bank and the CSSF will as part of their supervisory strategy for the enforcement of the MMF Regulation, require relevant funds to: provide a copy of this notice to investors and notify such investors that they are invested in a fund which is the subject of this notice; ensure all necessary and appropriate facilities are available for investors or prospective investors to get such information as they may require from the fund with respect to the subject matter of this notice; take such steps which in the opinion of the fund are appropriate to avoid a disorderly sale of fund assets; and confirm to the Central Bank or CSSF (as applicable) in writing by no later than 21 March 2019 that all use of share cancellation mechanisms has ceased."

BlackRock released a letter to European fund investors which states, "We previously communicated our intention to migrate all our funds to the new post-reform structures on Monday 14 January 2019. At that time, we were awaiting final approval of the ICS Funds' prospectus by the Central Bank of Ireland (CBI), which was contingent upon their clarification of the use of the 'Reverse Distribution Mechanism' (RDM) for our Euro funds."

They write, "On 24 December 2018, the CBI provided clarity to the industry stating that they are not able to approve RDM in MMF prospectuses for post-reform use. Instead, they have granted a two-month period (to 21 March 2019) for resubmission of new documentation, including fund prospectuses, without the inclusion of RDM language."

BlackRock adds, "Accordingly, we have divided the sub-funds of the ICS fund range into two different implementation timelines: 1. Our existing US Dollar and Sterling ICS Funds, along with our Institutional Euro Assets Liquidity Fund and Institutional Euro Ultra Short Bond Fund will migrate as planned, effective 14 January 2019. 2. For our Institutional Euro Liquidity Fund and Institutional Euro Government Liquidity Fund we are now enacting our contingency plan to amend the dividend policy of the distributing T+0 share classes within these funds to act as accumulating T+0 share classes. We plan to utilise the two-month extension granted by the CBI to provide shareholders of the impacted funds as much time as possible to prepare for the change from stable to non-stable net asset value (NAV) shares."

They conclude, "Therefore, our new planned migration date for our Institutional Euro Government and Institutional Euro Liquidity Funds is March 2019 (we anticipate 18 March but will confirm this in due course). Until this March migration date, the Institutional Euro Liquidity Fund and the Institutional Euro Government Liquidity Fund will continue to operate as CNAV Funds (not yet authorised under the European Money Market Fund Reform), using RDM for those share classes that do so today."

HSBC Global Asset Management also commented on the "European Money Market Fund Reform changes earlier this week. They wrote, "New rules for Money Market Funds in Europe will apply from January 2019. HSBC has been actively keeping clients informed of the details of the new rules, and the changes they mean for our funds in Europe."

Their update says, "A key part of the new rules is the creation of a 'Low Volatility' Net Asset Value (LVNAV) fund, which we believe will be welcomed by most investors, in part due to the features which are similar to existing Constant Net Asset Value (CNAV) prime funds that many investors use today. By 21 March 2019, HSBC Global Liquidity Funds plc expects to transition its full spectrum of CNAV Prime Funds denominated in USD, EUR, GBP, CAD and AUD to the new LVNAV Prime Funds. The HSBC US Treasury Liquidity Fund will remain CNAV as a Public Debt Fund."

Finally, a footnote explains, "On 24 December 2018 the Central Bank of Ireland wrote to all fund providers requesting them to submit their plan outlining how they will be fully compliant with the new regulation by no later than 21 March 2019. We will provide investors with further updates as those plans are finalised with the Central Bank of Ireland, including the removal of the Reverse Distribution Mechanism for the Euro Liquidity Fund specifically. As a result the HSBC Global Liquidity Funds conversion will now take place by 21 March 2019 at the latest, in line with the new regulatory guidance."

For more on European Reforms, see the following Crane Data News stories: "BNY Mellon Converts for European MF Reforms; USD Assets Rise in 2018" (1/7/19); "Schwab USD LA Goes Govt Ahead of European Reforms; Weekly Holdings" (1/3/19); "Money Fund Average Breaks 2.0%, Yields Rise; BNP Splits European MMFs" (12/27/18); "Money Fund Assets Skyrocket, Break $3 Trillion; UBS on European MMFR" (12/14/18); "JPMorgan Now Live With European Money Fund Reforms; VNAVs SnP AAA" (12/4/18); and "Cash Will Be King in '19 Says GS; BlackRock Update; Europe Rejects RDM" (11/26/18).

Crane Data released its January Money Fund Portfolio Holdings Thursday, and our most recent collection of taxable money market securities, with data as of Dec. 31, 2018, shows big increases in Treasuries, Repo and Agencies. Money market securities held by Taxable U.S. money funds (tracked by Crane Data) increased by $98.0 billion to $3.124 trillion last month, after increasing $41.7 billion in Nov. and $61.0 billion in Oct. Repo continued to be the largest portfolio segment, after breaking over $1.0 trillion the previous month, followed by Treasury securities, then Agencies. CP remained fourth ahead of CDs, Other/Time Deposits and VRDNs. Below, we review our latest Money Fund Portfolio Holdings statistics. (Visit our Content center to download the latest files, or contact us to see our latest Portfolio Holdings reports.)

Among taxable money funds, Repurchase Agreements (repo) rose $29.6 billion (3.0%) to $1.031 trillion, or 33.0% of holdings, after increasing $18.1 billion (1.8%) in Nov., $17.3 billion in Oct. and $16.0 billion in Sept. Treasury securities rose $70.2 billion (8.1%) to $933.3 billion, or 29.9% of holdings, after gaining $33.5 billion (4.0%) in Nov., rising $21.7 billion in Oct. and falling $29.6 billion in Sept. Government Agency Debt rose $25.9 billion (4.1%) to $660.8 billion, or 21.2% of holdings, after declining by $8.3 billion (-1.3%) in Nov., rising $4.4 billion in Oct. and falling $11.5 billion in Sept. Repo, Treasuries and Agencies totaled $2.625 trillion, representing a massive 84.0% of all taxable holdings.

Money funds' holdings of CDs, CP and Other (mainly Time Deposits) all declined in December. Commercial Paper (CP) was down $12.1 billion (-5.1%) to $226.2 billion, or 7.2% of holdings after dropping by $1.7 billion (-0.7%) in Nov., and adding $0.7 billion in Oct. and $6.1 billion in Sept., respectively. Certificates of Deposits (CDs) fell $5.1 billion (-2.6%) to $191.5 billion, or 6.1% of taxable assets, after rising by $4.1 billion (2.1%) in Nov., which followed increases of $15.1 billion in Oct. and $3.6 billion in Sept. Other holdings, primarily Time Deposits, fell by $10.5 billion (-12.5%) to $73.9 billion, or 2.4% of holdings. VRDNs were unchanged at $7.8 billion, or 0.3% of assets. (Note: This total is VRDNs for taxable funds only. We will publish Tax Exempt MMF holdings separately later today.)

Prime money fund assets tracked by Crane Data declined by $3 billion to $745 billion, or 23.8% of taxable money fund total taxable holdings of $3.124 trillion. Among Prime money funds, CDs represent over a quarter of holdings at 25.7% (down from 26.3% a month ago), while Commercial Paper accounted for 30.3% (down from 31.9%). The CP totals are comprised of: Financial Company CP, which makes up 19.2% of total holdings, Asset-Backed CP, which accounts for 7.3%, and Non-Financial Company CP, which makes up 3.8%. Prime funds also hold 4.2% in US Govt Agency Debt, 10.6% in US Treasury Debt, 6.4% in US Treasury Repo, 1.6% in Other Instruments, 8.3% in Non-Negotiable Time Deposits, 5.6% in Other Repo, 6.4% in US Government Agency Repo, and 0.8% in VRDNs.

Government money fund portfolios totaled $1.605 trillion (51.4% of all MMF assets), up from $1.559 trillion in Nov., while Treasury money fund assets totaled another $774 billion (24.8%), up from $719 billion the prior month. Government money fund portfolios were made up of 39.2% US Govt Agency Debt, 19.9% US Government Agency Repo, 20.0% US Treasury debt, and 20.7% in US Treasury Repo. Treasury money funds were comprised of 68.9% US Treasury debt, 30.5% in US Treasury Repo, and 0.5% in Government agency repo, Other Instrument, and Investment Company shares. Government and Treasury funds combined now total $2.379 trillion, or 76.2% of all taxable money fund assets.

European-affiliated holdings declined by $167.4 billion in Dec. to $480.9 billion among all taxable funds (and including repos); their share of holdings fell to 15.4% from 21.4% the previous month. Eurozone-affiliated holdings fell $131.9 billion to $277.7 billion in December; they account for 8.9% of overall taxable money fund holdings. Asia & Pacific related holdings increased by $9.1 billion to $278.0 billion (8.9% of the total). Americas related holdings rose $256.0 billion to $2.364 trillion and now represent 75.7% of holdings.

The overall taxable fund Repo totals were made up of: US Treasury Repurchase Agreements (up $6.0 billion, or 1.0%, to $616.8 billion, or 19.7% of assets); US Government Agency Repurchase Agreements (up $23.4 billion, or 6.7%, to $372.1 billion, or 11.9% of total holdings), and Other Repurchase Agreements (up $0.3 billion from last month to $41.7 billion, or 1.3% of holdings). The Commercial Paper totals were comprised of Financial Company Commercial Paper (down $9.0 billion to $143.2 billion, or 4.6% of assets), Asset Backed Commercial Paper (up $3.6 billion to $54.5 billion, or 1.7%), and Non-Financial Company Commercial Paper (down $6.7 billion to $28.5 billion, or 0.9%).

The 20 largest Issuers to taxable money market funds as of Dec. 31, 2018, include: the US Treasury ($933.3 billion, or 29.9%), Federal Home Loan Bank ($526.3B, 16.8%), Fixed Income Clearing Co ($138.3B, 4.4%), RBC ($127.0B, 4.1%), Federal Farm Credit Bank ($82.1B, 2.6%), BNP Paribas ($76.9B, 2.5%), JP Morgan ($68.3B, 2.2%), Wells Fargo ($61.2B, 2.0%), Mitsubishi UFJ Financial Group Inc ($59.1B, 1.9%), Barclays ($52.2B, 1.7%), HSBC ($48.1B, 1.5%), Sumitomo Mitsui Banking Co ($45.8B, 1.5%), Bank of Montreal ($43.9B, 1.4%), Bank of America ($41.3B, 1.3%), Nomura ($41.1B, 1.3%), Federal Reserve Bank of New York ($39.6B, 1.3%), Societe Generale ($38.1B, 1.2%), Toronto-Dominion Bank ($38.0B, 1.2%), Citi ($37.5B, 1.2%), and Bank of Nova Scotia ($37.3B, 1.2%).

In the repo space, the 10 largest Repo counterparties (dealers) with the amount of repo outstanding and market share (among the money funds we track) include: Fixed Income Clearing Co ($138.3B, 13.4%), RBC ($100.6B, 9.8%), BNP Paribas ($69.3B, 6.7%), JP Morgan ($57.0B, 5.5%), Wells Fargo ($51.1B, 5.0%), Barclays PLC ($47.3B, 4.6%), Mitsubishi UFJ Financial Group Inc ($42.1B, 4.1%), Nomura ($41.1B, 4.0%), HSBC ($40.4B, 3.9%), and Federal Reserve Bank of New York ($39.6B, 3.8%). Fed Repo positions among MMFs on 12/31/18 include: Fidelity Inv MM: Treasury Port ($9.5B), Schwab Value Adv MF ($9.4B), Schwab Govt MMkt ($5.0B), Fidelity Govt Cash Reserves ($3.7B), Fidelity Govt Money Market ($2.4B), Schwab Cash Reserves ($1.4B), Fidelity Treasury Fund ($6.0B), Morgan Stanley Inst Liq Govt Sec ($0.7B), Franklin IFT US Govt MM ($0.6B), and Columbia Short-Term Cash Fund ($0.5B).

The 10 largest issuers of "credit" -- CDs, CP and Other securities (including Time Deposits and Notes) combined -- include: RBC ($26.4B, 6.1%), Toronto-Dominion Bank ($26.2B, 6.1%), Mizuho Corporate Bank Ltd ($18.3B, 4.2%), Bank of Nova Scotia ($17.6B, 4.1%), Mitsubishi UFJ Financial Group Inc. ($17.0B, 3.9%), Credit Suisse ($15.9B, 3.7%), Bank of Montreal ($15.7B, 3.7%), Sumitomo Mitsui Banking Co ($15.7B, 3.6%), Australia & New Zealand Banking Group Ltd ($14.4B, 3.3%), and Canadian Imperial Bank of Commerce ($13.9B, 3.2%).

The 10 largest CD issuers include: Bank of Montreal ($15.4B, 8.0%), Mitsubishi UFJ Financial Group Inc ($11.7B, 6.1%), Sumitomo Mitsui Banking Co ($11.4B, 5.9%), Svenska Handelsbanken ($10.7B, 5.6%), RBC ($10.6B, 5.6%), Mizuho Corporate Bank Ltd ($10.3B, 5.4%), Wells Fargo ($9.9B, 5.2%), Sumitomo Mitsui Trust Bank ($9.1B, 4.7%), Toronto-Dominion Bank ($8.7B, 4.5%), and Nordea Bank ($8.5B, 4.5%).

The 10 largest CP issuers (we include affiliated ABCP programs) include: Toronto-Dominion Bank ($16.2B, 8.1%), RBC ($11.4B, 5.7%), JPMorgan ($11.2B, 5.6%), Bank of Nova Scotia ($8.8B, 4.4%), Credit Suisse ($8.5B, 4.3%), UBS AG ($7.6B, 3.8%), Societe Generale ($6.7B, 3.4%), Canadian Imperial Bank of Commerce ($6.7B, 3.4%), Westpac Banking Co ($6.5B, 3.2%), and National Australia Bank Ltd ($6.3B, 3.2%).

The largest increases among Issuers include: US Treasury (up $70.2B to $933.3B), Fixed Income Clearing Co (up $54.3B to $138.3B), Federal Home Loan Bank (up $23.6B to $526.3B), JP Morgan (up $14.1B to $68.3B), RBC (up $13.7B to $127.0B), Nomura (up $8.2B to $41.1B), Sumitomo Mitsui Banking Co (up $7.9B to $45.8B), Citi (up $7.2B to $37.5B), Goldman Sachs (up $6.7B to $19.4B), and Bank of Nova Scotia (up $5.4B to $37.3B).

The largest decreases among Issuers of money market securities (including Repo) in Dec. were shown by: BNP Paribas (down $34.1B to $76.9B), Credit Agricole (down $31.9B to $31.6B), Natixis (down $16.2B to $29.6B), Mizuho Corporate Bank Ltd (down $14.1B to $27.0B), Barclays PLC (down $12.2B to $52.2B), Societe Generale (down $7.2B to $38.1B), Deutsche Bank AG (down $6.2B to $16.4B), Lloyds Banking Group (down $6.2B to $6.3B), Skandinaviska Enskilda Banken AB (down $5.0B to $6.4B), and Wells Fargo (down $4.5B to $61.2B).

The United States remained the largest segment of country-affiliations; it represents 66.4% of holdings, or $2.074 trillion. Canada (9.2%, $288.6B) moved into second place and Japan (7.1%, $220.2B) moved up to third. France (6.0%, $186.4B) dropped down to the No. 4 spot. The United Kingdom (4.0%, $125.3B) remained in fifth place. Australia (1.4%, $44.2B) moved ahead of the Netherlands (1.3%, $41.6B). Germany (1.2%, $38.8B) fell to 8th place, and Switzerland (1.2%, $37.1B) and Sweden (1.1%, $33.4B) ranked 9th and 10th, respectively. (Note: Crane Data attributes Treasury and Government repo to the dealer's parent country of origin, though money funds themselves "look-through" and consider these U.S. government securities. All money market securities must be U.S. dollar-denominated.)

As of Dec. 31, 2018, Taxable money funds held 37.0% (up from 33.4%) of their assets in securities maturing Overnight, and another 11.6% maturing in 2-7 days (down from 15.6% last month). Thus, 48.6% in total matures in 1-7 days. Another 20.4% matures in 8-30 days, while 14.1% matures in 31-60 days. Note that over three-quarters, or 83.1% of securities, mature in 60 days or less (up slightly from last month), the dividing line for use of amortized cost accounting under SEC regulations. The next bucket, 61-90 days, holds 8.7% of taxable securities, while 6.9% matures in 91-180 days, and just 1.4% matures beyond 181 days.

Wells Fargo Asset Management says money market funds ended 2018 in a celebratory mood, as four Fed rate hikes and a "miserable fourth quarter for risk assets" cleared the way for "cash" to seize "the crown (as) king of returns." Their latest "Portfolio Manager Commentary" comments, "The upshot is that after eight years of near-zero yields (and a few hikes in 2017), Prime money market funds garnered attention as a real asset class again in 2018, with the path of money market rates generally following the pace of the four Fed rate hikes. In addition, the bear flattening of the U.S. Treasury curve, the underperformance of credit products, and U.S. equities approaching bear market territory have brought favorable attention back to money markets."

The Wells Overview observes, "The rise in short rates has brought not only attention but perhaps also nontraditional money market investors (those that typically invest in longer-term debt or equities) into the short end of the market. The Crane Prime Institutional Money Market Index was up over $71 billion this year, with all prime assets up over $139 billion."

Though the money fund industry fought hard against certain aspects of the latest rounds of re-regulation, sunbeams are now apparently piercing the doom and gloom once presented. They write, for example, "Investors reexamining prime money market funds are realizing the changes implemented from the 2010 money market reform have made a material difference in the construction of prime money market fund portfolios. The added liquidity requirements and maturity restrictions have had a beneficial impact on dampening net asset value (NAV) volatility even as the FOMC continues to raise rates, as well as in the face of widening credit spreads."

Wells notes, "Going forward, money market rates should continue to look toward the FOMC and other market indicators for future rate guidance. As we get closer to the end of the tightening cycle, money market participants may look to extend weighted average maturities to capture higher yields. Our strategy of emphasizing highly liquid portfolios, relatively short WAMs, and a position in securities that reset frequently allows us to capture future FOMC rate moves with minimal NAV pricing pressures and affords us the flexibility to add longer-dated securities as opportunities arise."

The piece concludes, "[M]oney market funds were the place to be, with higher returns than other segments of the market, in the final quarter of the year. The positive returns on money market funds was not just the story of the quarter -- we feel it was the story of the year. On average, yields are up 97 to 100 bps, in line with the Fed moves. Did investors vote with their dollars? Yes, they did. Money market funds ended the year with net inflows of more than $219 billion, topping out at $3.15 trillion."

Finally, the Wells piece adds, "With increasing volatility in risk assets, we would anticipate money market funds may continue to offer investors a port in the vortex. But, as we have seen in the past, increases in demand, plus an approaching end to the tightening cycle, usually temper further rises in yields, which may have an offsetting effect on funds' assets. Our best expectations at this point is that the money market fund assets will remain relatively stable for the very near term before typical tax-related cyclical events take their toll."

In other news, Crane Data's latest monthly Money Fund Portfolio Holdings statistics will be published today (Thursday), and we'll be writing our normal monthly update on the Dec. 31 data tonight for Friday's News. But we've also been generating a separate and broader Portfolio Holdings data set based on the SEC's Form N-MFP filings. (We continue to merge the two series, and the N-MFP version is now available via Holdings file listings to Money Fund Wisdom subscribers.) Our summary, with data as of Dec. 31, includes holdings information from 1,179 money funds (down from 1,193 on Nov. 30), representing assets of $3.344 trillion (up from $3.242 trillion). We review the latest data below.

Our latest Form N-MFP Summary for All Funds (taxable and tax-exempt) shows Repurchase Agreement (Repo) holdings in money market funds totaling $1,057.8 billion (up from $1,019.3 billion on Nov. 30), or 31.6% of all assets. Treasury holdings total $945.1 billion (up from $880.6 billion) or 28.3%, and Government Agency securities total $680.1 billion (up from $656.2 billion), or 20.3%. Commercial Paper (CP) totals $237.6 billion (down from $250.2 billion), or 7.1%, and Certificates of Deposit (CDs) total $194.7 billion (down from $200.2 billion), or 5.8%. The Other category (primarily Time Deposits) totals $115.7 billion or 3.5%, and VRDNs account for $112.6 billion, or 3.4%.

Broken out into the SEC's more detailed categories, the CP totals were comprised of: $149.1 billion, or 4.5%, in Financial Company Commercial Paper; $54.7 billion or 1.6%, in Asset Backed Commercial Paper; and, $33.8 billion, or 1.0%, in Non-Financial Company Commercial Paper. The Repo totals were made up of: U.S. Treasury Repo ($638.5B, or 19.1%), U.S. Govt Agency Repo ($376.9B, or 11.3%), and Other Repo ($42.4B, or 1.3%).

The N-MFP Holdings summary for the 215 Prime Money Market Funds shows: CP holdings of $232.8 billion (down from $245.5 billion Nov. 30), or 30.5%; CD holdings of $194.7B (down from $200.2B), or 25.5%; Repo holdings of $140.3B (up from $124.4B), or 18.4%; Other (primarily Time Deposits) holdings of $73.6B (down from $84.8B), or 9.6%; Treasury holdings of $82.4B (up from $77.1B) , or 10.8%; Government Agency holdings of $32.5B (up from $29.6B), or 4.3%; and VRDN holdings of $6.6B (down from $6.7B), or 0.9%.

The SEC's more detailed categories show CP in Prime MMFs made up of: $149.1 billion, or 19.5%, in Financial Company Commercial Paper; $54.7 billion, or 7.2%, in Asset Backed Commercial Paper; and, $29.0 billion, or 3.8%, in Non-Financial Company Commercial Paper. The Repo totals include: U.S. Treasury Repo ($50.0B, or 6.6%), U.S. Govt Agency Repo ($47.9B, or 6.3%), and Other Repo ($42.3B, or 5.5%).

Crane Data's latest Money Fund Market Share rankings show assets were higher again for most U.S. money fund complexes in December. Money fund assets rose by $69.7 billion, or 2.2%, last month to $3.243 trillion, and assets have climbed by $161.7 billion, or 5.2%, over the past 3 months. They have increased by $215.5 billion, or 7.1%, over the past 12 months through Dec. 31, 2018. The biggest increases among the 25 largest managers last month were seen by Fidelity, Federated, Vanguard, and Schwab, which increased assets by $25.8 billion, $14.5B, $13.8B, and $13.6B, respectively. We review the latest market share totals below, and we also look at money fund yields in December.

The most noticeable declines in assets among the largest complexes in December were seen by SSGA, whose MMF assets dropped by $5.8 billion, or -6.9%, JP Morgan, down $5.7 billion, or -1.9%, Dreyfus with a decline of $3.8 billion, or -2.3%, and Invesco, off $2.5 billion, or -4.2%. BlackRock, whose MMFs fell by $5.1 billion in November moved down another $1.2 billion, or -0.4% in December, having liquidated its BIF money funds. Our domestic U.S. "Family" rankings are available in our MFI XLS product, our global rankings are available in our MFI International product. The combined "Family & Global Rankings" are available to Money Fund Wisdom subscribers.

Over the past year through Dec. 31, 2018, Fidelity (up $94.7B, or 16.5%), Vanguard (up $66.5B, or 23.5%), JP Morgan (up $37.9B, or 15.0%), Federated (up $33.8B, or 16.8%), Goldman Sachs (up $27.1B, or 15.1%), and UBS (up $14.2B, or 33.2%) were the largest gainers. These complexes were followed by Northern (up $9.1B, or 8.6%), First American (up $8.2B, or 16.3%), Wells Fargo (up $4.3B, or 4.0%), and Franklin (up $3.9B, or 20.7%).

Fidelity, Federated, Schwab, Vanguard, JPMorgan, Morgan Stanley and Goldman Sachs had the largest money fund asset increases over the past 3 months, rising by $61.9B, $30.7B, $24.9B, $21.8B, $11.6B, $8.8B and $7.6B, respectively. The biggest decliners over 3 months include: BlackRock (down $9.3B, or -3.2%), SSGA (down $4.1B, or -5.0%), T Rowe Price (down $3.3B, or -9.4%), DWS (down $2.9B, or-11.8%, and DFA (down $2.3B, or -9.7%).

Our latest domestic U.S. Money Fund Family Rankings show that Fidelity Investments remains the largest money fund manager with $670.6 billion, or 20.7% of all assets. That was up $25.8 billion in December, up $61.9 billion over 3 mos., and up $94.7B over 12 months. Vanguard ranked second with $349.1 billion, or 10.8% market share (up $13.8B, up $21.8B, and up $66.5B for the past 1-month, 3-mos. and 12-mos., respectively). JPMorgan was third with $291.3 billion, or 9.0% market share (down $5.7B, up $11.6B, and up $37.9B). BlackRock ranked fourth with $278.8 billion, or 8.6% of assets (down $1.2B, down $9.3B, and down $18.2B for the past 1-month, 3-mos. and 12-mos.), while Federated remained in fifth with $234.9 billion, or 7.2% of assets (up $14.5B, up $30.7B, and up $33.8B).

Goldman Sachs remained in sixth place with $206.6 billion, or 6.4% of assets (up $5.1B, up $7.6B, and up $27.1B), while Dreyfus held seventh place with $164.4 billion, or 5.1% (down $3.8B, down $1.6B, and down $18.1B). Schwab ($151.5B, or 4.7%) was in eighth place (up $13.6B, up $24.9B and down $9.9B), followed by Northern, which occupied ninth place ($114.8B, or 3.5%, up $5.9B, up $5.3B, and up $9.1B). Wells Fargo was in 10th place ($111.7B, or 3.4%, up $3.3B, up $5.2B, and up $4.3B).

The 11th through 20th-largest U.S. money fund managers (in order) include: Morgan Stanley ($111.2B, or 3.4%), SSgA ($78.2B, or 2.4%), Invesco ($58.4B, or 1.8%), First American ($58.2B, or 1.8%), UBS ($57.2B, or 1.8%), T Rowe Price ($31.4B, or 1.0%), Franklin ($23.2B, or 0.7%), Western ($22.0B, or 0.7%), DWS ($21.7B, or 0.7%), and DFA ($20.9, or 0.6%). Crane Data currently tracks 70 U.S. MMF managers.

When European and "offshore" money fund assets -- those domiciled in places like Ireland, Luxembourg, and the Cayman Islands -- are included, the top 10 managers match the U.S. list, except JPMorgan and BlackRock move ahead of Vanguard, Goldman moves ahead of Federated, and Morgan Stanley moves ahead of Wells and Northern.. Our Global Money Fund Manager Rankings include the combined market share assets of our MFI XLS (domestic U.S.) and our MFI International ("offshore") products.

The largest Global money market fund families include: Fidelity ($680.8 billion), J.P. Morgan ($450.2B), BlackRock ($423.4B), Vanguard ($349.1B), and Goldman Sachs ($315.2B). Federated ($243.3B) was sixth and Dreyfus/BNY Mellon ($181.3B) was in seventh, followed by Schwab ($151.5B), Morgan Stanley ($150.5B), and Northern ($139.2B), which rounded out the top 10. These totals include "offshore" U.S. Dollar money funds, as well as Euro and Pound Sterling (GBP) funds converted into U.S. dollar totals.

The January issue of our Money Fund Intelligence and MFI XLS, with data as of 12/31/18, shows that yields were up again in December across all of our taxable Crane Money Fund Indexes. The Crane Money Fund Average, which includes all taxable funds covered by Crane Data (currently 753), was up 15 bps to 2.04% for the 7-Day Yield (annualized, net) Average, and the 30-Day Yield was up 9 bps to 1.95%. The MFA's Gross 7-Day Yield increased 15 bps to 2.47%, while the Gross 30-Day Yield rose 9 bps to 2.39%.

Our Crane 100 Money Fund Index shows an average 7-Day (Net) Yield of 2.23% (up 17 bps) and an average 30-Day Yield of 2.14% (up 10 bps). The Crane 100 shows a Gross 7-Day Yield of 2.50% (up 17 bps), and a Gross 30-Day Yield of 2.41% (up 10 bps). For the 12 month return through 12/31/18, our Crane MF Average returned 1.48% and our Crane 100 returned 1.68%. The total number of funds, including taxable and tax-exempt, remained at 944. There are currently 753 taxable and 191 tax-exempt money funds.

Our Prime Institutional MF Index (7-day) yielded 2.23% (up 16 bps) as of Dec. 31, while the Crane Govt Inst Index was 2.11% (also up 16 bps) and the Treasury Inst Index was also 2.11% (up 16 bps). Thus, the spread between Prime funds and Treasury funds is 12 basis points, while the spread between Prime funds and Govt funds is 12 basis points, the same as last month. The Crane Prime Retail Index yielded 2.09% (up 16 bps), while the Govt Retail Index yielded 1.78% (up 13 bps) and the Treasury Retail Index was 1.87% (up 16 bps). The Crane Tax Exempt MF Index yield rose in December to 1.25% (up 2 bps).

Gross 7-Day Yields for these indexes in December were: Prime Inst 2.62% (up 16 bps), Govt Inst 2.41% (up 16 bps), Treasury Inst 2.43% (up 16 bps), Prime Retail 2.61% (up 16 bps), Govt Retail 2.38% (up 13 bps), and Treasury Retail 2.45% (up 17 bps). The Crane Tax Exempt Index increased 2 basis points to 1.75%. The Crane 100 MF Index returned on average 0.18% over 1-month, 0.51% over 3-months, 1.68% YTD, 1.68% over the past 1-year, 0.88% over 3-years (annualized), 0.54% over 5-years, and 0.31% over 10-years. (Contact us if you'd like to see our latest MFI XLS, Crane Indexes or Market Share report.)

The January issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Tuesday morning, features the articles: "Highlights of '18; Rising Yields, Retail Drive Assets Higher," which looks at rising money fund yields and asset growth in 2018; "U.S. Bancorp's Jim Palmer: Staying Focused on Cash," a Q&A featuring Jim Palmer, CIO of U.S. Bancorp Asset Management; and, "Top Money Funds of 2018; 10th Annual MFI Awards," which salutes the top-performing money funds for 2018, ranked by total returns. We've also updated our Money Fund Wisdom database with Dec. 31 statistics, and sent out our MFI XLS spreadsheet Tuesday a.m. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our January Money Fund Portfolio Holdings are scheduled to ship on Thursday, January 10, and our January Bond Fund Intelligence is scheduled to go out Tuesday, January 15.

MFI's "Highlights of '18," article says, "Rising yields pushed money fund assets over $3 trillion to their highest level in nearly a decade in 2018. Prime funds continued their gradual recovery, and returns more than doubled for the third straight year. Below, we take a backwards look at 2018 highlights and also provide a brief outlook for what may happen in 2019."

It continues, "Crane Data's numbers showed assets rose by $203.2 billion, or 6.7%, to $3.244 trillion in 2018. The Investment Company Institute's narrower asset collection settled at $3.047 trillion, up by $209.0 billion, or 7.4%. In 2017, assets rose slightly following five years of flat assets."

Our U.S. Bancorp "Profile", reads, "MFI interviews Jim Palmer, CIO of Minneapolis-based U.S. Bancorp Asset Management (USBAM), which manages the First American Funds, Inc. First American, the 14th largest money fund manager, is one of the few investment advisers focusing solely on cash and investment-grade fixed income. USBAM manages 34 funds with $58.3 billion (as of 11/30/18), according to Crane Data. We discuss the fund manager's outlook for 2019, the Fed, SMAs and a number of other topics below."

MFI says, "Tell us about your team." Palmer tells us, "I am the Chief Investment Officer of U.S. Bancorp Asset Management, which is a dedicated investment-grade, fixed-income manager. We have over $83 billion in assets under management as of the end of November 2018. We focus on three primary business lines. We are the investment adviser to the First American family of money market funds. We have a book of investment-grade, fixed-income SMA portfolios. Typically, these portfolios have maturity limits of five years and under, but we do have strategies going out to 15 years. We also manage the collateral reinvestment for the securities lending program. We run both taxable and tax efficient strategies."

We also ask, "What are your big issues for 2019? Palmer comments, "From an investment standpoint, I think [the biggest is] accurately predicting Fed rate changes for 2019, which we believe will be far less telegraphed than in the recent past. Obviously, making accurate predictions around what the Fed will do is crucial for money market fund and SMA absolute performance as well as for relative performance versus peers. We believe predicting the Fed will be more challenging this year for a couple of reasons. One, the Fed will be holding live press conferences at each meeting going forward, implying each meeting is live for a policy rate adjustment. Whereas [in] 2018, it was well signaled and accepted that at every other meeting we would be getting a rate hike."

MFI includes a sidebar, "Robinhood & Fintech." It notes that "Last week, Barron's took another shot at Robinhood and financial technology startups that have drawn the ire of regulators and consumers in their entry in to the savings and money market space. Their article, 'Fintech Takes the High Road, Only to Trip Up,' tells us, 'Robinhood, a start-up that offers no-fee stock and options trading, came out with a product on Dec. 13 that took direct aim at penny-pinching banks -- 'checking and savings' accounts that yield 3%.... But these were not checking and savings accounts."

Another sidebar, "European Reforms Go Live," explains, "BNY Mellon's Liquidity Funds are the latest to formalize plans to operate under the EU Money Fund Reforms that take effect Jan. 21. The fund group revealed changes to its BNY Mellon U.S. Dollar Liquidity Fund and BNY Mellon U.S. Treasury Fund, which will take place Jan. 14. A number of firms have already converted their money funds to be compliant with the pending reforms, including Aviva (9/1/18), BNP Paribas (11/11/18), and JP Morgan (11/30/18). Several firms -- BlackRock, Federated, and SSGA -- will convert late this week, on Jan. 11, and Morgan Stanley and UBS will also convert on Jan. 14."

Our January MFI XLS, with Dec. 31, 2018, data, shows total assets rising $72.6 billion in December to $3.244 trillion, after increasing $64.3 billion in November, $34.5 billion in October, $1.6 billion in Sept., and $29.2 billion in August. Our broad Crane Money Fund Average 7-Day Yield rose 15 bps to 2.04% during the month, while our Crane 100 Money Fund Index (the 100 largest taxable funds) was up 17 bps to 2.23% (its highest level since Oct. 2008).

On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA rose 15 bps to 2.47% and the Crane 100 rose to 2.50%. Charged Expenses averaged 0.43% (unchanged) and 0.27% (unchanged), respectively for the Crane MFA and Crane 100. The average WAM (weighted average maturity) for the Crane MFA and Crane 100 was 28 and 29 days, respectively (up 1 day). (See our Crane Index or craneindexes.xlsx history file for more on our averages.)

BNY Mellon's Liquidity Funds are the latest to formalize plans to operate under the EU Money Fund Reforms that take effect Jan. 21. The fund group revealed changes to its BNY Mellon U.S. Dollar Liquidity Fund and BNY Mellon U.S. Treasury Fund, which will actually occur seven days before the final deadline -- on Jan. 14. A number of firms have already converted their money funds to be compliant with the pending reforms, including Aviva (9/1/18), BNP Paribas (11/11/18), and JP Morgan (11/30/18). Several firms -- BlackRock, Federated, and SSGA -- will convert late this week, on Jan. 11, and Morgan Stanley and UBS will also convert on Jan. 14. We review BNY Mellon's move below, and we also look at "offshore" money fund assets, which have surged in recent weeks, contrary to expectations related to "repatriation."

Dreyfus/BNY Mellon writes, "The EU's new regulations are aimed at making money market funds (MMFs) more robust, ensuring the smooth operation of the short-term funding market. Regulators set out to maintain the essential role that MMFs play in financing the European economy and recognize the importance of providing short-term options for investors. The rules have received final sign-off by the European Parliament and were published in the Official Journal on June 30, 2017. They came into force on July 20, 2017 with the effective date for compliance January 21, 2019."

Their USD Liquidity Fund will operate as a "Short-Term Low-Volatility Net Asset Value" (LVNAV) product, allowing investors to purchase and redeem shares at a stable NAV to two decimal places, "provided the fund is managed to certain restrictions," involving use of amortized-cost valuation with limits based on its mark-to-market valuation. A deviation greater than 20 basis points would necessitate a switch to a market-to-market value to four decimal places as required by the new rules.

BNY's U.S. Treasury Fund, which will be classified as a Short-Term Public Debt (Government) fund, will feature a constant net asset value per share, based on amortized cost, and will be required to "invest at least 99.5% of the fund's assets in cash, government securities, or repurchase agreements that are fully collateralized," according to the company's announcement.

Each fund will continue to offer the same share classes as before, namely Participant Shares, Investor Shares, Institutional Shares, Service Shares, Administrative Shares and Advantage Shares. The Treasury Fund additionally offers Agency Shares. Such funds, of course, are not available for investment by "U.S. persons".

Crane Data's Money Fund Intelligence International statistics show that U.S. Dollar money funds jumped $29 billion in 2018 to $454 billion, with most of the gain coming in the last week of the year. Outflows had been expected from these funds as U.S.-based corporations began to repatriate cash following the U.S. tax-reform package approved in 2017.

Garret Sloan of Wells Fargo Securities sized up the approaching finalization of fund reform in Europe in his Jan. 3 "Daily Short Stuff," and provided his insights about asset flows impacting prime funds operating there versus those in the States. Sloan wrote, "The 'go-live' date for existing European money market funds to convert to the new fund categories: CNAV, LVNAV, and Short-Term VNAV, is Jan. 21. The question is how much have assets flowed, and how much do we expect to see going forward?"

We explained, "Thus far, the universe of assets in offshore USD denominated money market funds has actually been quite stable, showing a net increase since the time that European money fund reform was first implemented for 'new' funds in July 2018. Since July 31, offshore prime money market funds have risen from $318.4 billion to $335.9 billion in AUM, Treasury funds have increased from $100.4 billion to $111.2 billion, and government funds have increased from $5.2 billion to $6.8 billion."

Sloan continued, "In total, the IMMFA US Dollar Index of money fund assets has risen from $418 billion to $451.4 billion, an increase of $33.4 billion, or 7.9 percent. The rise has been concentrated in a few fund families, however. HSBC has added $5.4 billion, an increase of 20 percent. JPMorgan added just over $3 billion, an increase of 2.6 percent, and Morgan Stanley added $2.5 billion, an increase of 9.2 percent. But by far the largest increase in holdings has been by Western Asset Management's USD Liquid Reserves Fund, which has grown by $18.9 billion, a 181.4 percent increase."

Note that the WAMCO fund is domiciled in the Cayman Islands, so Sloan observed that "the growth of the fund is almost certainly disconnected from anything to do with European money fund reform, despite it being an offshore fund." He added, "Still, even after adjusting for Cayman-domiciled funds, the trend in European domiciled funds shows that they have added almost $15 billion in assets, or approximately 3.8 percent."

"This trend has run completely counter to the trend we saw in U.S. institutional money market funds, which lost more than 80 percent or just over $622 billion in assets under management in the 5 months leading up to U.S. money market fund reform implementation," said Sloan.

He concluded, "The takeaway, at least from this data point, is that European money market fund investors are just not that concerned with the changes that are coming to their funds, and that they will be able to live within the new framework just fine. Absent some dramatic last-second tsunami of fund flows, we anticipate that the overall impact of European money market fund reform will come with much less bluster than U.S. reform. Issuers and repo counterparties are likely relieved."

For more on European Reforms and fund transitions, see these recent Crane Data News stories: "Schwab USD LA Goes Govt Ahead of European Reforms; Weekly Holdings" (1/3/19); "Money Fund Average Breaks 2.0%, Yields Rise; BNP Splits European MMFs" (12/27/18); "Money Fund Assets Skyrocket, Break $3 Trillion; UBS on European MMFR" (12/14/18); "JPMorgan Now Live With European Money Fund Reforms; VNAVs SnP AAA" (12/4/18); and "Cash Will Be King in '19 Says GS; BlackRock Update; Europe Rejects RDM" (11/26/18).

The Investment Company Institute released its latest weekly tally of "Money Market Fund Assets," reporting that MMF assets rose again during the period ended Jan. 2. The latest asset totals show MMFs posting their 10th week of gains out of the past 11 weeks, during which time they've risen by $175.4 billion, or 6.1%. Retail assets jumped in the past week and have led the surge since mid-October, but Inst assets declined. Government, Prime and Tax Exempt MMFs all increased. We review the latest asset totals below, as well as the most recent yield statistics. (See also the FT's "Investors pile into money market funds amid market turmoil".)

Overall fund assets reached $3.05 trillion, after climbing $209 billion, or 7.4% overall in 2018, according to ICI, their strongest showing in 10 years. Retail MMFs pushed up by $179 billion, or 17.6%, while Institutional MMFs were up just $31 billion or 1.7%. We review the latest asset figures below. In 2017, money fund assets increased by $113 billion, or 4.1%, following 4 years of flat assets. Assets fell slightly in 2011 after falling sharply in 2010 and 2009. Assets haven't grown this fast since 2008, when they rose by $685 billion, or 21.8%.

ICI writes, "Total money market fund assets increased by $8.51 billion to $3.05 trillion for the week ended Wednesday, Jan. 2, the Investment Company Institute reported today. Among taxable money market funds, government funds increased by $2.14 billion and prime funds increased by $4.28 billion. Tax-exempt money market funds increased by $2.09 billion." Total Government MMF assets, including Treasury funds, stood at $2.331 trillion (76.5% of all money funds), while Total Prime MMFs reached $569.54 billion (18.7%). Tax Exempt MMFs totaled $146.76 billion, or 4.8%.

ICI further explained that "Assets of retail money market funds increased by $20.01 billion to $1.19 trillion. Among retail funds, government money market fund assets increased by $11.92 billion to $706.34 billion, prime money market fund assets increased by $6.53 billion to $347.96 billion, and tax-exempt fund assets increased by $1.56 billion to $137.97 billion." Retail assets account for over a third of total assets, or 39.1%, and Government Retail assets make up 59.2% of all Retail MMFs.

The ICI release added, "Assets of institutional money market funds decreased by $11.50 billion to $1.86 trillion. Among institutional funds, government money market fund assets decreased by $9.78 billion to $1.62 trillion, prime money market fund assets decreased by $2.25 billion to $221.58 billion, and tax-exempt fund assets increased by $529 million to $8.79 billion." Institutional assets accounted for 60.9% of all MMF assets, with Government Institutional assets making up 87.6% of all Institutional MMF totals.

According to Crane Data's separate MFI Daily series, assets increased by $69.4 billion to $3.154 trillion in the month of December through 12/31, the largest monthly asset increase since December 2014 (and Dec. 2012 before that). MFI Daily shows $19.3 billion of the increase was from from Prime MMFs and $35.2 billion came from Govt MMFs. Retail MMFs jumped $52.5 billion while just $2.0 billion was from Inst MMFs.

Money fund yields moved higher for the second week in a row following the Fed's 9th quarter-point rate hike on Dec. 19, pushing our Crane 100 Money Fund Index above the 2.25% level for the first time in 8 years. The Crane 100, which tracks the 100 largest taxable MMFs, broke over 2.0% in late October (w/the Fed's last hike); it rose 8 basis points over the past week (after rising 8 bps the prior week too) to 2.27%, its highest level since June 2008. Yields for the Crane 100 have increased from 1.12% on Dec. 31, 2017, from 0.43% on Dec. 31, 2016, and from 0.13% on Dec. 31, 2015.

The Crane Money Fund Average, a simple average of all taxable money market funds (655) tracked by Crane Data, rose 8 basis points over the past week (after rising 7 bps the prior week) to 2.11% as of Wednesday, Jan. 2. Yields for the Crane Money Fund Average have increased from 1.80% on 10/31/18, from 0.92% on Dec. 31, 2017 and from 0.26% on Dec. 31, 2016.

Prime Institutional MFs now (as of 1/2/19) yield 2.23% on average, while Government Inst MFs yield 2.15%, a spread of a mere 8 basis points. (Treasury Inst MFs yield 2.11%.) Prime Retail MFs yield 2.13% vs. 1.82% for Govt Retail MFs (a much more generous spread of 31 bps). Tax Exempt MFs average a 7-day yield of 1.26% currently. (See our Money Fund Intelligence Daily for the latest yields and averages.)

The top-yielding money funds are currently paying annualized rates of well over 2.50% with some poised to hit 2.75%. Internal (not available to outside investors) fund Fidelity Money Market Central Fund (FID03) is yielding 2.68%, while DWS ESG Liquidity Cap (ESIXX) yields 2.67%. Morgan Stanley Inst Liq MMP Inst (MPUXX) is yielding 2.62% as of Wednesday (1/2/19), while Goldman Sachs FS MM Inst (FSMXX) is yielding 2.61%. Federated Inst Prime Obligs IS (POIXX) yields 2.58%, while Wells Fargo Heritage Sel (WFJXX) yields 2.57%. Among Retail funds, the highest-yielding offerings include: Fidelity Inv MM: MM Port Inst (FNSXX), which yields 2.56%, JPMorgan Liquid Assets Capit (CJLXX), which yields 2.55%, and UBS Prime Preferred Fund (UPPXX), which yields 2.54%.

Unlike when Money Fund Reforms were implemented in the U.S. in October 2016, the vast majority of European money market funds have opted to remain "Prime" and convert into the new LVNAV, or Limited Volatility NAV, structure. But we learned yesterday that one has chosen to "go Government," changing into the Public Debt CNAV option ahead of the European reform implementation date of January 21, 2019. Charles Schwab Investment Management tells us, "Effective today, January 2, 2019, the Schwab U.S. Dollar Liquid Assets Fund is lowering its Expense ratio from 1.00% to 0.65% and will be classified as a Government Fund as described in Section 6 - Investment objectives & policies section." According to our Money Fund Intelligence International, which tracks money funds domiciled outside the U.S., Schwab US Dollar Liquid Assets is $1.94 billion as of Dec. 31.

Schwab's updated offering document says, "This Prospectus describes Charles Schwab Worldwide Funds plc, an investment company with variable capital incorporated in Ireland as a public limited company. The Company is constituted as an umbrella fund insofar as the share capital of the Company will be divided into different series of Shares with each series of Shares representing a separate investment portfolio of assets. Shares of any Fund may be divided into different classes to accommodate different subscription and/or redemption provisions and/or dividend and/or charges and/or fee arrangements, including different total expense ratios."

It explains, "The Company has currently established one Fund, the Schwab U.S. Dollar Liquid Assets Fund. The Fund is authorised pursuant to the MMF Regulations by the Central Bank as a Public Debt constant NAV (CNAV) money market fund and a short-term money market fund. The Fund seeks to maintain a stable Net Asset Value per Share of U.S. $1.00. There is no assurance that the Fund will be able to maintain a stable Net Asset Value per Share of U.S. $1.00 or otherwise meet its investment objectives."

Schwab adds, "The Fund may, but is not obliged to, seek to maintain a credit rating. Such ratings, if obtained, will be solicited by the Manager and financed by the Manager or the Fund. Details of the current rating for the Fund, if any, can be obtained from the Manager. There is currently one class of Shares available for subscription in the Fund, the Class A Shares. The base currency of the Fund is U.S. dollars."

We continue to watch the announcements and change our MFII product to reflect the new fund types, names and metrics, and we expect more news in the coming weeks. On Dec. 27, we announced that "BNP Splits European MMFs," on Dec. 14, we quoted, "UBS on European MMFR," and on Dec. 4, we published, "JPMorgan Now Live With European Money Fund Reforms." Other recent Crane Data News updates include: "SF Chronicle on Brokerage Sweeps; Bloomberg on Europe Rejecting RDM (11/28/18), "Cash Will Be King in '19 Says GS, JPM; BlackRock on European Reforms (11/26/18), and "JPMorgan on European MMF Reforms; Aviva First to Convert to LVNAV" (9/5/18).

For more on European Money Market Fund Reforms, see these additional Crane Data News stories: SSGA Podcast on European Money Fund Reforms Discusses PM Strategies (8/29/18), Goldman on Repatriation, European Reforms; Federated Plans; Assets (8/24/18), BlackRock Details European Money Fund Reform Plans; Love the LVNAV (8/17/18), SEC Shows Private Liquidity Funds Up in Q4; HSBC's European MF Plans (8/14/18), Morgan Stanley European MMF Reform Plans; Offshore Port Composition (7/17/18), JPMAM European MMFs Plan for Nov 2018 Conversion; MF Assets Plunge (3/16/18), and JP Morgan To Offer All European Fund Options; ICI MMF Holdings Update (11/16/17).

In other news, Crane Data published its latest Weekly Money Fund Portfolio Holdings statistics and summary Wednesday, which tracks a shifting subset of our monthly Portfolio Holdings collection. The latest cut, with data as of Dec. 28, includes Holdings information from 43 money funds (down from 82 on Dec. 21), representing $718.4 billion (down from $1.423 trillion) of the $3.026T (23.7%) in total money fund assets tracked by Crane Data. (For our latest monthly Money Fund Portfolio Holdings numbers, see our Dec. 13 News, "Dec. MF Portfolio Holdings Break 3.0 Tril; T-Bills Up, Repo Breaks 1.0T.")

Our latest Weekly MFPH Composition summary shows Government assets dominating the holdings list with Repurchase Agreements (Repo) totaling $271.0 billion (down from $527.1 billion on Dec. 21), or 37.7% of holdings, Treasury debt totaling $195.4 billion (down from $460.1 billion) or 27.2%, and Government Agency securities totaling $162.0 billion (up from $269.7 billion), or 22.6%. Commercial Paper (CP) totaled $37.3 billion (up from $67.1 billion), or 5.2%, and Certificates of Deposit (CDs) totaled $28.6 billion (up from $44.3 billion), or 4.0%. A total of $13.4 billion or 1.9% was listed in the Other category (primarily Time Deposits), and VRDNs accounted for $10.8 billion, or 1.5%.

The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $195.4 billion (27.2% of total holdings), Federal Home Loan Bank with $114.2B (15.9%), RBC with $41.7 billion (5.8%), Federal Farm Credit Bank with $35.2B (4.9%), Fixed Income Clearing Co with $31.2B (4.3%), BNP Paribas with $16.9B (2.4%), Fidelity $16.7B (2.3%), Mitsubishi UFJ Financial Group Inc with $13.7B (1.9%), Nomura with $11.6B (1.6%) and Credit Agricole with $11.6B (1.6%).

The Ten Largest Funds tracked in our latest Weekly Holdings update include: Fidelity Inv MM: Govt Port ($113.7B), Wells Fargo Govt MMkt ($73.7B), Dreyfus Govt Cash Mgmt ($57.0B), Morgan Stanley Inst Liq Govt ($48.8B) Fidelity Inv MM: MMkt Port ($45.1B), State Street Inst US Govt ($44.0B), First American Govt Oblig ($40.1B), Dreyfus Treas Sec Cash Mg ($31.1B), Fidelity Inv MM: Treasury Port ($25.7B), and Morgan Stanley Inst Liq Trs Sec ($23.0B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary.)

This past weekend, Barron's took another shot at Robinhood and a handful of financial technology startups that have drawn the ire of regulators and consumers in their entry in to the savings and money market space. Their article, "Fintech Takes the High Road, Only to Trip Up," tells us, "From hawking shoddy mortgage securities to nickel-and-diming retail customers, banks have squandered the public's trust over the past decade. Financial-technology start-ups have seized on those failures, making it cheaper and easier to transfer money or invest in stocks even if you don't have much money. These young companies not only have better technology than the entrenched giants, but they pitch themselves to customers as being more ethical, as well. Now, some of that good will has been erased because of missteps by promising fintech companies. Will the new guard be any different than the old guard?" (See Crane Data's Dec. 23 News, "Robinhood Withdraws 3 Percent Offer; MF Assets Stay Over $​3 Trillion.")

It explains, "Robinhood, a start-up that offers no-fee stock and options trading, came out with a product on Dec. 13 that took direct aim at penny-pinching banks -- 'checking and savings' accounts that yield 3%. It promised free ATM withdrawals at 75,000 locations, and no minimum balances or other gotchas. But these were not checking and savings accounts as commonly understood."

Barron's continues, "Robinhood is a broker, not a bank, so they were what is known as cash management accounts, a common product offered by traditional firms like Fidelity. Such accounts tend to be protected by the Securities Investor Protection Corporation, or SIPC, a nonprofit member organization funded by brokers, not the Federal Deposit Insurance Corporation, or FDIC. Robinhood said the products would be insured by SIPC."

They state, "In this case, however, the SIPC was unwilling to insure the assets. Stephen Harbeck, the head of the SIPC, told Barron's that it would only protect money held for 'purchasing securities' and said he had never been contacted by Robinhood before the product's launch. By the end of that week, Robinhood changed the branding to make it clearer that they were cash management accounts, posting a letter from its founders acknowledging that the 'announcement may have caused some confusion.'"

Barron's adds, "Seven U.S. senators wrote to the Securities and Exchange Commission, saying they were concerned that the Robinhood rebranding 'may simply be a way to circumvent regulatory scrutiny without offering full transparency to its customers.' ... Dan Egan, the director of behavioral finance at robo-advisory firm Betterment, says that the Robinhood episode hurts the industry."

Betterment also may be headed for scrutiny, as it too seems to substitute a higher-risk bond fund option for "cash" or "cash management." It's Smart Saver product appears to be a portfolio of ultra-short bond fund ETFs masquerading as a money market account. Their site says, "Betterment's Smart Saver account offers income through a managed portfolio of ultra-low-risk bonds. As of Dec. 3, 2018, the expected yield for Smart Saver is 2.09%. Other options, discussed below, typically have lower yields." (Note: The average money market fund currently yields 2.20%, as measured by our Crane 100 Money Fund Index.)

Their offering appears to turn a higher-yielding and higher-risk bond fund yield into a money market yield, offering more risk and lower yield due to added fees. The disclosure tells us, "References to a 2.09% yield for a Smart Saver account correspond to the asset-weighted blend of the 30-Day SEC Yield as of Dec. 3, 2018 of the ETFs that comprise this portfolio net of Betterment's 0.25% management fee for its Digital Plan. Clients who are in Betterment's Premium Plan pay an advisory fee of 0.40%, reducing the net yield by an additional 0.15%."

In other news, MarketWatch writes, "This is how much money is sitting 'on the sidelines' waiting to come in to the market." They say, "It is as reliable as your alarm clock. Every time the stock market suffers a swoon, slump or downright rout, financial experts appear in the media to reassure investors that a charging knight is about to ride to their rescue. That knight? Billions or even trillions of dollars that are being held 'on the sidelines' in the form of cash, and are 'waiting to come into stocks.'"

The piece explains, "The basis of the argument: Investors -- including households, the rich, the nervous, and big institutions -- are holding big reserves in the form of cash, money market funds, short-term bonds and the like. When stock prices fall, they will be tempted to convert some of that money into stocks, 'putting it to work,' and that will start driving the market higher."

MarketWatch continues, "But is it correct? How much money are we really talking about? And how much effect will it have? The U.S. Federal Reserve reports that at the last count, everyone across the financial system, from grandmothers to hedge funds, was holding a total of $2.9 trillion in overnight money market funds (see Table L.206, line 1 on p. 115 of this report), $4.4 trillion in checking accounts and currency (Table L.204, line 1, p. 114), and another $12.1 trillion in savings account and Certificates of Deposit [Table L.205, line 1, p. 115)."

They tells us, "That comes to $19.4 trillion in gross 'cash' and equivalents that is 'on the sidelines' of the stock market. Meanwhile, says, the Fed, the total market value of all U.S. stocks at the same time came to $41.7 trillion (Table L.223, line 1. p. 130).... Alas not, say experts. For every stock that is bought, one is sold, financial analysts observe sadly. Every time someone invests, someone else cashes out, they lament."

Finally, the article adds, "Those pushing the argument about the money on the sidelines, say experts, are either being dishonest, or falling for one of the oldest tricks in the book -- the 'fallacy of composition.' It's comparable to the idea that everyone at the poker table can win. There may be trillions of dollars on the sidelines, but they cannot come into the market. The net figure for the amount of money that is going to come into the market is $0.00."