News Archives: April, 2019

With just over 2 months to go before our big show, Crane's Money Fund Symposium, which will be held in Boston, June 24-26, we are also preparing for our 7th Annual European Money Fund Symposium, the largest money market event in Europe. The preliminary agenda is now ready and registrations are being taken for this year's European MFS, which will take place Sept. 23-24 at The Hilton Dublin in Dublin, Ireland. We provide more details below, but feel free to contact us for more information. (Note: If you haven't registered yet for the U.S. Money Fund Symposium, you can still do so via www.moneyfundsymposium.com.) We look forward to seeing many of you in Boston this summer, or in Dublin this fall!

Last year's European Crane Symposium event in London attracted 140 attendees, sponsors and speakers -- our largest European event ever. Given the recent implementation of new money fund regulations and structures in Europe and continued "repatriation" of assets back to the U.S., we expect our show in Dublin to attract a similar level of interest this year.

"European Money Fund Symposium offers European, global and "offshore" money market portfolio managers, investors, issuers, dealers and service providers a concentrated and affordable educational experience, and an excellent and informal networking venue," says Crane Data President, Peter Crane. "Our mission is to deliver the best possible conference content at an affordable price to money market fund professionals," he adds.

EMFS will be held at the The Hilton Dublin. Hotel rooms must be booked before Monday, August 21 to receive the discounted rate of E295. Registration for our 2019 Crane's European Money Fund Symposium is $1,000 USD. Visit www.euromfs.com to register, or contact us to request the PDF brochure or for Sponsorship pricing and info.

The EMFS agenda features sessions conducted by many of the leading authorities on money funds in Europe and worldwide. The Day One Agenda for Crane's European Money Fund Symposium includes: "Welcome to European Money Fund Symposium" with Peter Crane of Crane Data; followed by "Money Market Funds in Ireland" with Pat Lardner and Patrick Rooney of Irish Funds; "Euro Money Funds & Continental Issues," with David Callahan of Lombard Odier, Nathalie Dogniez of PwC Luxembourg, and Joe McConnell, from J.P. Morgan Asset Management.

The afternoon will consist of: "Senior Portfolio Manager Perspectives," featuring Neil Hutchison of J.P. Morgan A.M., Dan Farrell of Northern Trust AM, and Jim O’Connor of Dreyfus/BNY Mellon CIS; "IMMFA Update: The State of MMFs in Europe" with Kim Hochfeld of Morgan Stanley I.M. and Jane Lowe of IMMFA; "ESG, Ultra‐Short & Technology Issues" with Andrew Paranthoiene of S&P Global Ratings, Abis Soetan of Fitch Ratings and James Vincent of Goldman Sachs A.M.; "U.K. & Sterling MMF Issues with Paul Mueller of Invesco; and lastly, "Dealer Update & Issuance Outlook" with Marianne Medora of Groupe BPCE/Natixis and Dan Singer of J.P. Morgan Securities.

The Day Two Agenda includes: "European MM Reforms: Finishing Touches" with John Aherne of William Fry and John Hunt of Sullivan & Worcester LLP; a "French & Continental Money Fund Update" with Vanessa Robert of Moody's Investors Service and Alastair Sewell of Fitch Ratings; and, "Strategists Speak: Negative Rates, Markets" with Ruairi Hourihane of Bank of America Merrill Lynch and Giuseppe Maraffino of Barclays.

The second day's afternoon will include: "U.S. Money Fund & European USD Update" with Peter Crane, Deborah Cunningham of Federated Investors and Rob Sabatino of UBS Asset Management; "Chinese Money Funds & Asian Markets" with Andrew Paranthoiene of S&P Global and Alastair Sewell of Fitch Ratings; and, last on the day 2 agenda, "Offshore Money Fund Information" with Peter Crane.

In other news, the Investment Company Institute released its latest weekly "Money Market Fund Assets" report late Thursday. It shows that assets fell sharply in the latest week, which included the April 15 tax due date, after rising for two weeks. They write, "Total money market fund assets decreased by $55.32 billion to $3.04 trillion for the week ended Wednesday, April 17, the Investment Company Institute reported today. Among taxable money market funds, government funds decreased by $48.66 billion and prime funds decreased by $2.42 billion. Tax-exempt money market funds decreased by $4.24 billion."

ICI's weekly series shows Institutional MMFs falling $42.2 billion and Retail MMFs falling $13.1 billion. Total Government MMF assets, including Treasury funds, stood at $2.265 trillion (74.4% of all money funds), while Total Prime MMFs declined to $644.7 billion (21.2%). Tax Exempt MMFs totaled $133.2 billion, or 4.4%.

ICI states, "Assets of retail money market funds decreased by $13.14 billion to $1.20 trillion. Among retail funds, government money market fund assets decreased by $6.06 billion to $694.59 billion, prime money market fund assets decreased by $3.25 billion to $384.30 billion, and tax-exempt fund assets decreased by $3.83 billion to $123.76 billion." Retail assets account for 39.5% of all assets, and Government Retail assets make up 57.8% of all Retail MMFs.

The release adds, "Assets of institutional money market funds decreased by $42.18 billion to $1.84 trillion. Among institutional funds, government money market fund assets decreased by $42.60 billion to $1.57 trillion, prime money market fund assets increased by $829 million to $260.40 billion, and tax-exempt fund assets decreased by $413 million to $9.47 billion." Institutional assets accounted for 60.5% of all MMF assets, with Government Institutional assets making up 85.3% of all Institutional MMF totals.

This month, BFI interviews Eddy Vataru, Portfolio Manager of the Osterweis Total Return Fund. We talk with the San Francisco based bond fund manager about his fund, which focuses on "picking securities, rotating sectors and hedging duration." We also discuss a number of other issues in the fixed-income market. Our Q&A follows. Note: This profile is reprinted from the April issue of our Bond Fund Intelligence publication. Contact us if you'd like to see the full issue, or if you'd like to see our BFI XLS performance spreadsheet, our BFI Indexes and averages, or our most recent Bond Fund Portfolio Holdings data set, which will be published Monday.

BFI: Give us a little background. Vataru: Osterweis was founded in 1983. We launched our first fixed income fund in 2002, the Osterweis Strategic Income Fund, which was among the earliest unconstrained funds.... Carl Kaufman started the fund and still manages it today. The firm decided to launch the Total Return fund because it really needed an investment grade analog to the Strategic Income Fund -- something with same kind of DNA but focused only on the investment grade market. It uses a different toolkit, but the aim is the same: to have a benchmark agnostic, absolute return strategy with lower volatility.

I joined Osterweis 2 1/2 years ago.... Here I'm not required to run money using a specific style. I wanted a little more freedom to run money the way I think it should be run, and Osterweis has always been skeptical of the style matrix, so it's been a great fit. We call it the common-sense approach to managing money. Our fund is a combination of disciplines -- both quantitative and fundamental.... In many ways there are similarities to what Carl and his team are doing, as their fund is unconstrained and also does not fit neatly into a particular style box. So, it was a good match from a philosophical standpoint. We launched at the end of '16, and we’re coming up on three years at the end of this year.

BFI: Talk about your allocations. Vataru: Actually, it changes quite a bit depending on market conditions. The allocation a year ago was probably closer to 75-80% mortgage and 20% corporate. We increased our corporate holdings throughout 2018 as spreads widened over two different periods, and our current corporate allocation is about 40%. At the same time, our mortgage allocation has decreased from 80% to about 50%. We've generally kept a relatively low allocation to Treasuries, although we did increase it in the fourth quarter to about 12%, predominantly in TIPS. We've since reduced that position.... We also have about 2-4% in ABS, which was a late-year addition to the fund.

The fund relies on three primary levers to deliver our returns. Number one is sector allocation, number two is security selection, and number three is duration management/interest rate hedging. The third lever can be both a risk reducer and an alpha producer, depending on market conditions.

Sector allocation is an area that through time has been really a compelling way to outperform the index. In fact, with the recent era of central bank easing mostly behind us, I believe sector allocation will be a primary driver of returns moving forward. The three largest components of the investment grade bond universe -- treasuries, agency mortgages, and corporates -- have very different risk profiles. For example, agency MBS carry none of the default or liquidity risk that corporates have but are exposed to callability.... Treasuries carry the least risk and, over the long term, the lowest return. The interplay between volatility, level of rates, liquidity, and macroeconomic-driven default risk [is] fertile ground for generating strong returns.

Obviously, security selection is also very important. There are plenty of investment grade names that we've seen over the last few months that we've deliberately avoided. Recent examples would include General Electric or PG&E, both investment grade names that obviously hit some headwinds in recent months. So there is certainly some opportunity within investment grade not just from a sector basis, but from a security selection standpoint.... On the mortgage side there are also some very compelling opportunities, especially if you dig beyond vanilla passthrough securities into structure.

We also use interest rate futures in an effort to boost returns, particularly when attractive securities carry durations that are longer than we are comfortable with. But our hedging strategy is mostly to limit the portfolio's exposure to rising rates -- especially now because our index, the Bloomberg Barclays Aggregate, has a duration just under 6 and a yield below 3%. That's a lot of duration to take for not a lot of yield, especially when yields at the very short end of the curve are around 2.5%. We are very focused on being smart about our interest rate risk, and right now we feel taking duration risk is ill-advised. Short rates have increased but the middle of the curve has inverted, and we think the rally in that part of the curve is overdone.

BFI: What can't you buy? Vataru: Our prospectus doesn't place too many restrictions on us, but we maintain a credit profile in the fund that is very distinctly investment grade. We think there's enough opportunity in the space to deliver a good return without having to go down the credit spectrum. We rarely hold high yield or emerging market bonds, and you won't find munis and CLOs in our portfolio. We don't use leverage, which is another key attribute that some total return funds use. We've added some asset-backed positions recently, but they have all been AAA-rated.

BFI: Is volatility a big challenge? Vataru: I actually like volatility. I've always done well in volatile markets, so I like 'vol' because I think it creates opportunities. Like I said, the trinity of ways in which we can generate returns are sector allocation, security selection, and then hedging. When rates move, our hedging program is going to capitalize on movements in markets that are idiosyncratic and mostly mean-reverting. The drivers of sector performance are different. Corporates are driven largely by pricing based on liquidity risk and default risk. With mortgages, you're looking at call risk of the underlying pools or the borrowers in those pools, and volatility risk because there's a call option that those borrowers can exercise. These are very different and fairly uncorrelated drivers of returns.

So when you have moves like we've had over the last 12 months in particular, sector allocation has been an area where you really have a lot of opportunity to deliver of performance. I would say that's really the number one area where we've had success over the last year. Looking at our one-year returns, we've had pretty substantial outperformance against our peers and against the 'Agg.' A lot of that has really come from well-timed sector allocation decisions that we've made.

BFI: What about your investor base? Vataru: At this point it's primarily the intermediary market -- financial advisors and RIAs. They have responded well to how we have performed and our approach risk. But, my entire experience pre-Osterweis was with an institutional client base, and I think this strategy should appeal to them. We have not yet had much direct exposure to retail investors, so that's an open question, but I think over time we could be a very attractive option for them, too.

BFI: Talk about your outlook. Vataru: My view on inflation is a little bit of an outlier. In the last 3-4 months the market has really priced in not only a pause in hikes, but a cut.... I don't agree with that. I actually don't even see a cut in 2020, and I think that the next rate move will be a hike. [That] makes me very defensive against short and intermediate yields. So while I'll take floating-rate risk all day long, I'm not as constructive on 2-5 year interest rates.

BFI: What about the future of funds? Vataru: Bond funds are something you're always going to need, whether as a ballast against an equity holding or as a dividend stream for investors.... In particular, I do think that active bond funds should see some growth in the next few years. We've been kind of in a secular decline over the last 10 years versus passive and ETFs.... I think all that's going to change.... What we've seen over the last year and half really tells me that there is a lot of value to the tools and strategies that active managers use -- including security selection, sector rotation, and duration hedging. I think all of those approaches have a home in this new landscape and I expect that to continue for years to come.

Both BlackRock and Schwab, the 4th largest and 7th largest managers of money market mutual funds, released first quarter earnings earlier this week, and releases, conference calls and coverage shed some light on the major issue of the day for MMFs. Yesterday, BlackRock's Q1 Earnings Call contained a few quotes on cash. (See Seeking Alpha's earnings call transcript here.) CFO Gary Shedlin said, "BlackRock's cash management platform saw $6 billion of net inflows, as we continue to grow our cash business, leverage scale for clients and deliver innovative distribution and risk management solutions through a combination of Cachematrix and Aladdin."

CEO Larry Fink comments, "After more muted growth in 2018, we are seeing renewed demand for fixed income securities. BlackRock generated $80 billion of fixed income inflows across active and indexed products.... Performance in our active fixed income strategies remain strong with 83% and 85% of assets above benchmark or peer median for the three-year and five-year period. We are constantly innovating across our platform to meet client needs and delivering growth for shareholders."

He explained, "For example, in cash management where we generated $6 billion of inflows in the quarter, we are leveraging our Cachematrix technology to improve convenience and transparency for our clients. We are also innovating on the types of cash management strategy we offer to clients and last week we launched a Liquid Environmentally Aware Fund or LEAF as a prime money market fund with an environmentally focused strategy."

Fink added, "The fund will use 5% of its net revenues to purchase and retire carbon offsets and direct a portion of proceeds to our conservation efforts. Increasingly, clients want sustainable strategies that provide financial returns and target a measurable social or economic impact. BlackRock's goal is to make those strategies more accessible to more people." (See our April 10 Link of the Day, "`Moody'​s Rates BlackRock LEAF Aaa-​mf.")

Charles Schwab's Q1'19 earnings release quoted CFO Peter Crawford, who commented, "Our unwavering focus on championing our clients' goals translated into strong first quarter financial performance as well as business growth, indicating the Schwab financial formula continues to operate as intended. Overall, revenues rose by 14% year-over-year to a record $2.7 billion. Net interest revenue grew 33% to a record $1.7 billion largely due to higher interest-earning assets stemming from the transfer of sweep money market funds to bank and broker-dealer sweep as well as client cash allocations."

He added, "Additionally, our net interest margin expanded to 2.46%, up from 2.12% a year earlier, following the Fed's four rate hikes in 2018. Asset management and administration fees decreased 11% to $755 million, mainly as a result of lower money market fund revenue as we executed on sweep transfers. Trading revenue declined by 8% to $185 million largely due to client first quarter trading activity that was strong but below last year's then-record pace."

Crawford also said, "During the first quarter, we continued to emphasize effective balance sheet management. While clients sorted through their invested and transactional cash allocations, we transferred $11.6 billion from sweep money market funds to bank and broker-dealer sweep. This activity contributed to consolidated balance sheet assets of $283 billion at quarter end. A small amount of the $14.4 billion in sweep money market fund balances outstanding as of month-end March remains to be transferred; we expect to complete those transfers by the end of April."

Finally, in other news, Crane Data published its latest Weekly Money Fund Portfolio Holdings statistics and summary Tuesday, which tracks a shifting subset of our monthly Portfolio Holdings collection. The latest cut, with data as of Friday, April 12, includes Holdings information from 59 money funds (up from 78), representing $982.4 billion, compared to $1.239 trillion on March 29. That represents 30.5% of the $3.225 trillion in total money fund assets tracked by Crane Data. (For our latest monthly Money Fund Portfolio Holdings numbers, see our April 10 News, "April Money Fund Portfolio Holdings: Treasuries Jump, Repo Plunges.")

Our latest Weekly MFPH Composition summary shows Government assets again dominated the holdings list with Repurchase Agreements (Repo) totaling $359.1 billion (declining from $443.8 billion on March 29), or 36.6% of holdings, Treasury debt totaling $319.1 billion (down from $442.9 billion), or 32.5%, and Government Agency securities totaling $182.4 billion (down from $212.8 billion), or 18.6%. Commercial Paper (CP) totaled $50.0 billion (down from $56.5 billion), or 5.0%, and Certificates of Deposit (CDs) totaled $45.8 billion (down from $49.6 billion), or 4.7%. A total of $14.7 billion, or 1.5%, was listed in the Other category (primarily Time Deposits) and VRDNs accounted for $12.3 billion, or 1.3%.

The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $319.1 billion (32.5% of total holdings), Federal Home Loan Bank with $125.8B (12.8%), RBC with $51.7B (5.3%), Federal Farm Credit Bank with $41.5B (4.2%), BNP Paribas with $39.9B (4.1%), JP Morgan with $24.4B (2.5%), Fixed Income Clearing Co. with $20.8B (2.1%), Mitsubishi UFJ Financial Group Inc with $20.6B (2.1%), Credit Agricole with $16.1B (1.6%), and Natixis with $16.0B (1.6%).

The Ten Largest Funds tracked in our latest Weekly Holdings update include: Fidelity Inv MM: Govt Port ($107.1 billion), Goldman Sachs FS Govt ($95.7B), Wells Fargo Govt MMkt ($72.3B), Goldman Sachs FS Trs Instruments ($58.5B), Fidelity Inv MM: MMkt Port ($56.3B), Morgan Stanley Inst Liq Govt ($55.4B), Dreyfus Govt Cash Mgmt ($51.1B), State Street Inst US Govt ($44.2B), First American Govt Oblg ($41.8B), and Dreyfus Treas Sec Cash Mg ($29.5B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary.)

After a lengthy delay due to a revamp of the report, the Securities and Exchange Commission released its latest "Money Market Fund Statistics" summary, which shows that total money fund assets rose by $76.86 billion in February to $3.406 trillion. Prime MMFs increased $57.9 billion in February to close at $872.9 billion, Govt & Treasury funds rose by $21.1 billion to $2.390 trillion. Tax Exempt funds fell by $2.1 billion to $143.7 billion. Yields were flat for Prime and Govt, but jumped for Tax Exempt MMFs in February. The SEC's Division of Investment Management summarizes monthly Form N-MFP data and includes asset totals and averages for yields, liquidity levels, WAMs, WALs, holdings, and other money market fund trends. (The latest report includes more history on their charts and splits Prime into Prime Inst and Prime Retail and Muni into Muni Inst and Muni Retail.) We review the latest numbers below.

Overall assets gained $76.9 billion, following an increase of $31.4 billion in January, $44.7 billion in December, and $89.3 billion in November. Over the 12 months through 2/28/19, total MMF assets increased $284.2 billion, or 9.1%. (Note that the SEC's series includes a number of private and internal money funds not reported to ICI or others, though Crane Data tracks most of these.)

Of the $3.406 trillion in assets, $872.9 billion was in Prime funds, up $57.9 billion in February, after increasing $50.7 billion in January. Prime funds represented 25.6% of total assets at the end of February. They've increased by $206.3 billion, or 30.9%, over the past 12 months. Government & Treasury funds totaled $2.390 trillion, or 70.2% of assets. They rose $21.1 billion in February after falling $15.5 billion in January. Govt & Treas MMFs are up $74.5 billion over 12 months, or 3.2%. Tax Exempt Funds decreased $2.1B to $143.7 billion, or 4.2% of all assets. The number of money funds was 370 in February, up by one fund in the month but unchanged since year-end 2018.

Yields for Taxable MMFs were mixed in February following 16 months in a row of increases. The Weighted Average Gross 7-Day Yield for Prime Institutional Funds on Feb. 28 was 2.62%, unchanged from the previous month. The Weighted Average Gross 7-Day Yield for Prime Retail MMFs was `2.66%, down 1 basis point from the previous month. Gross yields moved to 2.47% for Government Funds, up 2 basis points from last month. Gross yields for Treasury Funds increased 1 basis point to 2.45%. Gross Yields for Muni Institutional MMFs increased from 1.42% in January to 1.76% in February, while Gross Yields for Muni Retail increased from 1.45% in January to 1.78% in February.

The Weighted Average 7-Day Net Yield for Prime Institutional MMFs was 2.52%, unchanged from the previous month and up 1.00% since 02/28/18. The Average Net Yield for Prime Retail Funds was 2.39%, down 0.01% from the previous month and up 1.05% since 02/28/18. (Note: These averages are asset-weighted.)

WALs and WAMs were higher in February. The average Weighted Average Life, or WAL, was 59.0 days (up 0.6 days from last month) for Prime Institutional funds, and 64.0 days for Prime Retail funds (up 2 days). Government fund WALs averaged 88.3 days (up 2.5 days) while Treasury fund WALs averaged 92.3 days (down 0.8 days). Muni Institutional fund WALs were 14 days (up 1.1 days), and Muni Retail MMF WALs averaged 27.9 days (down 1.6 days).

The Weighted Average Maturity, or WAM, was 29.0 days (up 1.4 days from the previous month) for Prime Institutional funds, 34.8 days (up 0.7 days from the previous month) for Prime Retail funds, 26.9 days (down 0.1 days) for Government funds, and 31.5 days (down 0.5 days) for Treasury funds. Muni Inst WAMs were up 1 day to 13.5 days, while Muni Retail WAMs decreased by 2.1 days to 25.4 days.

Total Daily Liquid Assets for Prime Institutional funds was 40.0% in February (down 0.2% from the previous month), and DLA for Prime Retail funds was 27.5% (up 0.5% from previous month) as a percent of total assets. The average DLA was 47.1% for Govt MMFs and 91.9% for Treasury MMFs. Total Weekly Liquid Assets was 54.3% (down 0.3% from the previous month) for Prime Institutional MMFs, and 42.4% (up 0.8% from the previous month) for Prime Retail funds. Average WLA was 70.8% for Govt MMFs and 98.0% for Treasury MMFs.

In the SEC's "Prime MMF Holdings of Bank-Related Securities by Country table for February 2019," the largest entries included: Canada with $112.4 billion, the U.S. with $94.4 billion, Japan with $89.0 billion, France with $79.8B, the U.K. with $44.5B, Australia/New Zealand with $36.0B, Germany with $31.4B, Switzerland with $29.5B and the Netherlands with $25.0B. The biggest gainers among the "Prime MMF Holdings by Country" include: Canada (up $6.7B), France (up $4.2B), the UK (up $2.3B), and the U.S. (up $516 million). The biggest drops came from Japan (down $14.9B), the Netherlands (down $7.8B), and Switzerland (down $5.4B).

The SEC's "Trend in Prime MMF Holdings of Bank-Related Securities by Major Region" table shows Europe had $290.1B (up $14.5B from last month), while the Eurozone subset had $151.1B (down $4.7B). The Americas had $207.3 billion (up $6.1B), while Asia Pacific had $139.5 billion (down $14.1B).

The "Prime MMF Portfolio Composition" chart shows that of the $872.9 billion in Prime MMF Portfolios as of Feb. 28, $298.0B (34.1%) was in CDs (up from $289.4B), $244.6B (28.0%) was in Government securities (including direct and repo) (up from $216.1B), $109.3B (12.5%) was held in Non-Financial CP and Other Short Term Securities (up from $99.4B), $167.8B (19.2%) was in Financial Company CP (up from $160.7B), and $59.1B (6.8%) was in ABCP (up from $58.3B). All MMF Repo with the Federal Reserve increased by $2.4 billion in February to $3.4 billion.

Finally, a "Percent of Securities with Greater than 179 Days to Maturity" shows Prime Inst MMFs with 8.1%, Prime Retail MMFs with 7.7%, Muni Inst MMFs with 1.9%, Muni Retail MMFs with 4.8%, Govt MMFs with $15.3% and Treasury MMFs with 14.4%.

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 and Euro down sharply year-to-date, though Sterling MMFs have seen increases. Through 4/11/19, overall MFII assets are down $21.4 billion to $824.5 billion. (They rose $15.2 billion in 2018.) Offshore USD money funds are down $15.2 billion YTD (they rose $28.8B last year). Euro funds are still feeling the pain of negative rates and recent European MMF reforms; they're down E10.1 billion YTD (following 2 flat years). GBP funds are up, however, by L8.8billion. U.S. Dollar (USD) money funds (174) account for over half ($438.8 billion, or 53.2%) of this "European" money fund total, while Euro (EUR) money funds (79) total E88.9 billion (10.8%) and Pound Sterling (GBP) funds (102) total L218.3 billion (26.5%). We summarize our latest "offshore" money fund statistics and our Money Fund Intelligence International Portfolio Holdings (which went out to subscribers Friday), below.

Offshore USD MMFs yield 2.34% (7-Day) on average (as of 4/11/19), 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 -0.50 on average, compared to -0.49% at year-end 2018, -0.55% on 12/29/17 and -0.49% on 12/30/16. Meanwhile, GBP MMFs yielded 0.68%, 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. Note that these funds are only available to qualified, non-U.S. investors.)

Crane's MFII Portfolio Holdings, with data (as of 3/31/19), show that European-domiciled US Dollar MMFs, on average, consist of 28% in Commercial Paper (CP), 18% in Repurchase Agreements (Repo), 23% in Certificates of Deposit (CDs), 11% in Other securities (primarily Time Deposits), 18% in Treasury securities and 2% in Government Agency securities. USD funds have on average 33.9% of their portfolios maturing Overnight, 10.0% maturing in 2-7 Days, 22.9% maturing in 8-30 Days, 11.2% maturing in 31-60 Days, 9.5% maturing in 61-90 Days, 10.3% maturing in 91-180 Days and 2.3% maturing beyond 181 Days. USD holdings are affiliated with the following countries: the US (29.2%), France (12.7%), Japan (11.6%), Canada (10.9%), Germany (6.2%), the United Kingdom (6.2%), the Netherlands (5.0%), Sweden (3.6%), Australia (2.9%), Switzerland (2.9%), Singapore (2.9%), China (1.9%), Belgium (1.8%), and Norway (1.4%).

The 10 Largest Issuers to "offshore" USD money funds include: the US Treasury with $83.2 billion (17.5% of total assets), BNP Paribas with $18.5B (3.9%), Wells Fargo with $17.2B (3.6%), Mitsubishi UFJ Financial Group Inc with $17.2B (3.6%), Barclays PLC with $13.8B (2.9%), Mizuho Corporate Bank Ltd with $13.0B (2.7%), Bank of Nova Scotia with $12.8B (2.7%), Toronto-Dominion Bank with $10.8B (2.3%), RBC with $10.4B (2.2%) and Sumitomo Mitsui Banking Co with $9.0B (1.9%).

Euro MMFs tracked by Crane Data contain, on average 47% in CP, 24% in CDs, 18% in Other (primarily Time Deposits), 10% in Repo, 1% in Agency securities and 0% in Treasuries. EUR funds have on average 27.8% of their portfolios maturing Overnight, 9.8% maturing in 2-7 Days, 16.0% maturing in 8-30 Days, 13.6% maturing in 31-60 Days, 13.0% maturing in 61-90 Days, 18.0% maturing in 91-180 Days and 1.8% maturing beyond 181 Days. EUR MMF holdings are affiliated with the following countries: France (29.0%), Japan (13.1%), the US (10.5%), Germany (10.2%), Sweden (6.9%), the Netherlands (4.8%), Canada (4.2%), the U.K. (3.9%), Supranational (3.0%), China (2.3%), Finland (2.2%), Belgium (2.2%) and Switzerland (2.1%).

The 10 Largest Issuers to "offshore" EUR money funds include: Credit Agricole with E4.5B (5.4%), BNP Paribas with E4.3B (5.1%), Mitsubishi UFJ Financial Group with E3.1B (3.7%), BPCE SA with E3.1B (3.7%), Mizuho Corporate Bank Ltd with E3.1B (3.6%), Svenska Handelsbanken with E2.6B (3.1%), European Investment Bank with E2.5B (2.9%), Citi with E2.4B (2.9%), Procter & Gamble Co. with E2.4B (2.9%) and Credit Mutuel with E2.4B (2.8%).

The GBP funds tracked by MFI International contain, on average (as of 3/31/19): 25% in CDs, 36% in Other (Time Deposits), 23% in CP, 11% in Repo, 4% in Treasury and 1% in Agency. Sterling funds have on average 26.2% of their portfolios maturing Overnight, 9.2% maturing in 2-7 Days, 19.4% maturing in 8-30 Days, 12.1% maturing in 31-60 Days, 12.8% maturing in 61-90 Days, 15.3% maturing in 91-180 Days and 5.0% maturing beyond 181 Days. GBP MMF holdings are affiliated with the following countries: the United Kingdom (19.1%), France (15.4%), Japan (14.9%), Canada (9.4%), Germany (7.7%), the Netherlands (5.9%), Australia (5.4%), the United States (4.6%), Sweden (3.6%), Singapore (3.1%), China (2.5%) and Abu Dhabi (1.9%).

The 10 Largest Issuers to "offshore" GBP money funds include: UK Treasury with L15.0B (9.2%), Mizuho Corporate Bank Ltd with L7.1B (4.3%), Standard Chartered Bank with L5.9B (3.6%), Mitsubishi UFJ Financial Group with L5.7B (3.5%), BNP Paribas with L5.5B (3.3%), Credit Agricole with L5.1B (3.1%), Sumitomo Mitsui Banking Co with L5.0B (3.1%), BPCE SA with L4.7B (2.9%), Toronto-Dominion Bank with L4.6B (2.8%) and Sumitomo Mitsui Trust Bank with L4.4B (2.7%).

In related news, Crane Data continues to make plans for our 7th annual European Money Fund Symposium, which will be held Sept. 23-24, 2019, in Dublin, Ireland. (See the latest agenda here.) Our last "offshore" money fund event in London attracted a record 140 attendees, sponsors and speakers, and we expect our next Dublin show to once again be the largest money fund event in Europe. Let us know if you're interested in any sponsorship or speaking opportunities, or if you have any feedback or questions.

European Money Fund Symposium offers "offshore" money fund portfolio managers, and money market investors, issuers, dealers and service providers a concentrated and affordable educational experience, as well as an excellent and informal networking venue. Our mission is to deliver the best possible conference content at an affordable price to money market fund professionals. Attendee registration for our 2019 Crane's European Money Fund Symposium is $1,000 (USD).

Finally, there's just over 2 months to go until our big show, Crane's Money Fund Symposium, which is June 24-26, 2019, at the Renaissance Boston. If you plan on attending, register soon and make your hotel reservations asap, and let us know if you'd like to learn more about any of our other events.

The April issue of our Bond Fund Intelligence, which was sent out to subscribers Friday morning, features the lead story, "Bond Fund Symposium Focus on Ultra-Shorts, Flows, ESG," which recaps our recent ultra-short bond fund conference, and the profile, "Osterweis Total Return's Vataru Stays Flexible," our latest portfolio manager interview. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show lower bond fund yields and higher returns again in March. 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 data.)

Our lead story says, "Crane's Bond Fund Symposium, our event focusing on the 'enhanced cash' and ultra-short bond fund space, took place last month in Philadelphia, and the buzz told us that the party is still going strong in this sector of the marketplace. We quote from several of the BFS sessions below. (Next year's show is scheduled for March 23-24, 2020, in Boston, Mass.) See our latest Money Fund Intelligence newsletter and recent Crane Data News for more too."

It continues, "Our 'State of the Bond Fund Marketplace' introduction featured ICI's Shelly Antoniewicz. She commented on the massive inflows bond funds have seen, 'No matter what was going on with bond returns, we feel that there is a very large demographic reason for why we have seen these sustained inflows to bond funds. We expect that continue and boost bond fund flows.'

She added, "We have this very large baby boom generation; they hold half of mutual fund assets. That's a lot of money, long term mutual fund assets right now, around $17 trillion. [T]hey're ... going to be moving from equity to fixed income because they're looking for an asset class that historically has lower volatility and is going to throw off an income stream in retirement."

Our "Fund Profile" says, "This month, BFI interviews Eddy Vataru, Portfolio Manager of the Osterweis Total Return Fund. We talk with the San Francisco based bond fund manager about his fund, which focuses on 'picking securities, rotating sectors and hedging duration.' We also discuss a number of other issues in the fixed-income market. Our Q&A follows."

BFI asks Vataru to "Give us a little bit of background." He responds, "Osterweis was founded in 1983. We launched our first fixed income fund in 2002, the Osterweis Strategic Income Fund, which was among the earliest unconstrained funds.... Carl Kaufman started the fund and still manages it today. The firm decided to launch the Total Return fund because it really needed an investment grade analog to the Strategic Income Fund -- something with same kind of DNA but focused only on the investment grade market. It uses a different toolkit, but the aim is the same: to have a benchmark agnostic, absolute return strategy with lower volatility."

Vataru continues, "I joined Osterweis 2 1/2 years ago.... Here I'm not required to run money using a specific style. I wanted a little more freedom to run money the way I think it should be run, and Osterweis has always been skeptical of the style matrix, so it's been a great fit. We call it the common-sense approach to managing money."

Our Bond Fund News includes the brief "Yields Lower, Returns Jump in March." It explains, "Bond fund yields were lower for most categories except Ultra-Shorts and Intm. The BFI Total Index returned 1.16% for 1-month and 3.48% over 12 months. The BFI 100 returned 1.32% in March and 3.99% over 1 year. Our BFI Conservative Ultra-Short Index returned 0.35% over 1 month and 2.35% over 1-year; the BFI Ultra-Short Index averaged 0.40% in March and 2.19% over 12 mos. BFI Short-Term returned 0.72% and 2.90%, and BFI Intm-Term Index returned 1.57% and 3.85% for 1-mo and 1-year. BFI's Long-Term Index returned 2.30% in March and 4.36% for 1-yr; our High Yield Index returned 0.66% in March, 4.18% over 1-yr."

Another News brief, "ICI Says Bond Fund Expense Ratios Flat," says, "A press release explains, 'In 2018, the average expense ratio of actively managed ... bond mutual funds fell to 0.55 percent in 2018, from 0.56 percent in 2017. Over the same period, the average expense ratios for index ... bond mutual funds remained unchanged at ... 0.07 percent.' ICI's 'Trends in the Expenses and Fees of Funds, 2018,' adds, 'After falling for four consecutive years, the asset-weighted average expense ratio for bond mutual funds remained unchanged in 2018, at 0.48 percent.'"

A third News update, "InvestmentNews Says '`Morningstar Improving Bond Fund Data Reporting,' says, 'Morningstar Inc. is changing up the way it reports fixed-income data for investors and financial advisers. The switch relates to how Morningstar ... reports important fixed-income metrics such as duration and credit quality. Morningstar currently relies on the data that are self-reported by asset managers, but it will start calculating the data internally as of July 31 for all fixed-income funds.'"

A fourth News brief, "Investments in bond-based ETFs head for $1tn landmark,'" says, "Exchange traded funds linked to bond markets are marching inexorably towards the $1tn mark. A key milestone in the development of fixed income ETFs. Despite this growth, fixed income ETFs currently account for a tiny share -- less than 1 per cent -- of the value of outstanding bonds globally. Adoption rates, however, are rising rapidly. Greenwich Associates ... surveyed a sample of US institutional investors in late 2018 and found that 60% used bond ETFs, up from 20% as recently in 2017."

Finally, a sidebar entitled, "World BF Assets Flat," explains, "Bond fund assets worldwide fell sharply in the latest quarter but remained above the $10 trillion level. U.S. and European bond funds fell sharply in Q4'18, but Asian BFs rose, according to the Investment Company Institute's 'Worldwide Open-End Fund Assets and Flows, Fourth Quarter 2018.' ICI's report shows assets plunged $117.2 billion, or -1.1%, to $10.136 trillion in the 4th quarter. Bond funds represent 21.7% of the $46.70 trillion in worldwide mutual fund assets. Global bond fund assets have declined by $237.6 billion, or -2.3%, over 12 months."

The Wall Street Journal again covers money market funds in China in the piece, "China's Giant Money-Market Fund Scraps Investment Caps." They tell us, "China's biggest money-market mutual fund is lifting restrictions on how much individuals can invest in it, after suffering through months of outflows to rivals. Tianhong Asset Management Co., a unit of Jack Ma's Ant Financial Services Group, said individuals in its flagship Tianhong Yu'e Bao money-market fund would no longer be subject to an investment cap of 100,000 yuan ($14,900). It first imposed a ceiling on account sizes in May 2017, following a surge in the funds' assets."

The Journal article continues, "The fund said it would also eliminate a 20,000 yuan cap on daily inflows from individuals. Tianhong Yu'e Bao became the world's largest money-market mutual fund by 2017 after hundreds of millions of people in China stashed money into the online fund. At the end of last year, it had 588 million investors, representing more than a third of China's population. The fund's assets under management topped 1.69 trillion yuan ($251.6 billion) in March 2018, but have fallen steadily since, ending the year at 1.13 trillion yuan."

They tell us, "Though the fund hasn't disclosed its latest size, it continued to shrink during the first quarter of 2019, according to a person familiar with the matter." Note that a chart accompanying the article shows the Yu'e Bao money fund with approximately $149 billion early this year, so we'd estimate that the fund is now below $140 billion. This would bring its asset total below those of Fidelity Cash Reserves, which is currently $143 billion. Thus, Fidelity is likely now the world's largest money market fund once again, though this remains to be confirmed (and could change with this latest news).

The WSJ adds, "The decision to remove investment limits was approved by Chinese regulators after Tianhong Asset Management and its parent Ant Financial pointed to the fund’s continuing outflows, the person added. In a statement, Beijing-based Tianhong Asset Management said removing the caps -- originally implemented to stabilize the fund -- would help the fund better serve investors."

Finally, they write, "The fund has had to contend with increasing competition in the past year. Last May, Ant began offering other money-market mutual funds to users of its popular Alipay mobile-payments network. Tencent Holdings Ltd., whose WeChat Pay network competes with Alipay, started a similar program that lets customers stash their spare cash in high-yielding online funds."

For more on money funds in China and Yu'e Bao, see these Crane Data News pieces and Links of the Day: "Worldwide MMF Assets Reclaim $​6T Mark in Q4: US Jumps, China Drops" (3/28/19), "WSJ Also Writes on China's Yu'e Bao" (3/28/19), "SCMP on Yu'e Bao MMF Platform" (3/27/19), "WSJ Says China's Yu'e Bao Shrinks" (2/1/19) and "FT Says China's Ant Shrinks; More on BlackRock LEAF; Weekly Holdings" (1/30/19).

In other news Bloomberg writes, "Money Markets Brace to See If Fed Will Play Repo Whack-a-Mole," which discusses a potential cap on repo rates. Author Alex Harris explains, "The Federal Reserve could be preparing to explain within days how -- or even if -- it will add a new mechanism to help keep a closer rein on how the central bank actually implements monetary policy."

She explains, "Rates for repurchase agreements -- a central component of short-term funding markets -- have recently shown a tendency to spike, especially at month-end. The move was especially eye-catching at the end of 2018, but it's also happened in subsequent months as financial institutions scrambled to secure enough financing to meet their needs, prompting those with capacity to lend to jack up rates."

The piece tells us, "There's evidence the Fed is genuinely considering doing something, even if what that looks like isn't clear. A standing repo facility is one of the tools that many think the Fed should look at. Such a mechanism would allow banks to convert Treasuries into reserves on demand, making it easier for them to get cash at crucial moments and potentially relieving upward pressure across money markets."

Finally, the Federal Reserve released its "Minutes of the Federal Open Market Committee, March 19-20, 2019" yesterday, which say, "Conditions in short-term funding markets generally remained stable over the intermeeting period. The EFFR was consistently equal to the rate of interest on excess reserves, while take-up in the overnight reverse repurchase agreement facility remained low. Yield spreads on commercial paper and negotiable certificates of deposit generally narrowed further from their elevated year-end levels, likely reflecting an increase in investor demand for short-term financial assets. Meanwhile, the statutory federal government debt ceiling was reestablished at $22 trillion on March 1."

They also comment, "The deputy manager provided an overview of money market developments and policy implementation over the intermeeting period. The effective federal funds rate (EFFR) continued to be very stable at a level equal to the interest rate on excess reserves. Rates in overnight secured markets continued to exhibit some volatility, particularly on month-end dates. Market participants attributed some of the volatility in overnight secured rates to persistently high net dealer inventories of Treasury securities and to Treasury issuance coinciding with the month-end statement dates."

Crane Data released its April Money Fund Portfolio Holdings Tuesday, and our most recent collection of taxable money market securities, with data as of March 31, 2019, shows another big increase in Treasury holdings and drop in Repo. Money market securities held by Taxable U.S. money funds (tracked by Crane Data) decreased by $8.2 billion to $3.217 trillion last month, after increasing by $89.8 billion in February, $4.2 billion in January, and $98.0 billion in December. Repo continued to be the largest portfolio segment -- it was down sharply but remained above the $1.0 trillion mark -- 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) fell by $61.6 billion (-5.7%) to $1.018 trillion, or 31.7% of holdings, after increasing $0.9 billion in February, $41.4 billion in January and $29.6 billion in December. Treasury securities jumped by $54.4 billion (6.0%) to $958.3 billion, or 29.8% of holdings, after increasing by $69.6 billion in February, decreasing $99.0 billion in January and rising $70.2 billion in December. Government Agency Debt inched higher by $5.6 billion (0.8%), to $666.9 billion, or 20.7% of holdings, after decreasing $0.1 billion in February, increasing $0.7 billion in January and rising $25.9 billion in Dec. Repo, Treasuries and Agencies totaled $2.644 trillion, representing a massive 82.2% of all taxable holdings.

Money funds' holdings of CP rose in March, but CDs and Other (mainly Time Deposits) assets fell. Commercial Paper (CP) increased $5.2 billion (2.0%) to $262.4 billion, or 8.2% of holdings, after rising $13.2 billion in February and $17.7 billion in January. Certificates of Deposit (CDs) fell by $5.9 billion (-2.6%) to $222.6 billion, or 6.9% of taxable assets, after jumping $6.7 billion in February and $30.4 billion in January. Other holdings, primarily Time Deposits, decreased $5.8 billion (-6.7%) to $80.3 billion, or 2.5% of holdings, after falling $0.5 billion in February but rising $13.1 billion in January. VRDNs moved down to $7.8 billion, or 0.2% of assets. (Note: This total is VRDNs for taxable funds only. We will publish Tax Exempt MMF holdings separately late today.)

Prime money fund assets tracked by Crane Data decreased $5 billion to $839 billion, or 26.1% of taxable money funds' $3.217 trillion total. Among Prime money funds, CDs represent over a quarter of holdings at 26.5% (down from 27.1% a month ago), while Commercial Paper accounted for 31.3% (up from 30.5%). The CP totals are comprised of: Financial Company CP, which makes up 19.6% of total holdings, Asset-Backed CP, which accounts for 6.8%, and Non-Financial Company CP, which makes up 4.9%. Prime funds also hold 3.1% in US Govt Agency Debt, 13.0% in US Treasury Debt, 5.3% in US Treasury Repo, 1.2% in Other Instruments, 6.5% in Non-Negotiable Time Deposits, 4.3% in Other Repo, 6.3% in US Government Agency Repo, and 0.7% in VRDNs.

Government money fund portfolios totaled $1.620 trillion (50.4% of all MMF assets), down from $1.626 trillion in Feb., while Treasury money fund assets totaled another $759 billion (23.5%), up from $755 billion the prior month. Government money fund portfolios were made up of 39.6% US Govt Agency Debt, 20.6% US Government Agency Repo, 18.9% US Treasury debt, and 20.76% in US Treasury Repo. Treasury money funds were comprised of 71.6% US Treasury debt, 28.3% in US Treasury Repo, and 0.1% in Government agency repo, Other Instrument, and Investment Company shares. Government and Treasury funds combined now total $2.379 trillion, or 73.9% of all taxable money fund assets.

European-affiliated holdings (including repo) fell by $87.0 billion in March to $593.9 billion; their share of holdings fell to 18.5% from last month's 21.1%. Eurozone-affiliated holdings fell to $366.4 billion from last month's $426.5 billion; they account for 11.4% of overall taxable money fund holdings. Asia & Pacific related holdings decreased by $13.7 billion to $269.1 billion (8.4% of the total). Americas related holdings jumped $92 billion to $2.352 trillion and now represent 73.1% of holdings.

The overall taxable fund Repo totals were made up of: US Treasury Repurchase Agreements (down $63.6 billion, or -9.7%, to $595.2 billion, or 18.5% of assets); US Government Agency Repurchase Agreements (up $2.2 billion, or 0.6%, to $387.2 billion, or 12.0% of total holdings), and Other Repurchase Agreements (down $0.1 billion from last month to $36.2 billion, or 1.1% of holdings). The Commercial Paper totals were comprised of Financial Company Commercial Paper (up $3.4 billion to $164.5 billion, or 5.1% of assets), Asset Backed Commercial Paper (down $1.2 billion to $56.9 billion, or 1.8%), and Non-Financial Company Commercial Paper (up $3.1 billion to $41.1 billion, or 1.3%).

The 20 largest Issuers to taxable money market funds as of March 31, 2019, include: the US Treasury ($958.3 billion, or 29.8%), Federal Home Loan Bank ($516.7B, 16.1%), BNP Paribas ($133.2B, 4.1%), RBC ($125.5B, 3.9%), Fixed Income Clearing Co ($106.8B, 3.3%), JP Morgan ($93.6B, 2.9%), Federal Farm Credit Bank ($85.4B, 2.7%), Wells Fargo ($64.5B, 2.0%), Barclays ($59.8B, 1.9%), Mitsubishi UFJ Financial Group Inc ($58.1B, 1.8%), HSBC ($46.4B, 1.4%), Federal Home Loan Mortgage Co ($43.4B, 1.3%), Societe Generale ($41.1B, 1.3%), Bank of America ($39.5B, 1.2%), Bank of Montreal ($38.8B, 1.2%), Sumitomo Mitsui Banking Co ($38.6B, 1.2%), Bank of Nova Scotia ($38.2B, 1.2%), Toronto-Dominion Bank ($34.9B, 1.1%), Nomura ($34.3B, 1.1%) and Citi ($33.1B, 1.0%).

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: BNP Paribas ($123.3B, 12.1%), Fixed Income Clearing Co ($106.8B, 10.5%), RBC ($99.5B, 9.8%), JP Morgan ($79.0B, 7.8%), Wells Fargo ($52.6B, 5.2%), Barclays PLC ($50.5B, 5.0%), HSBC ($38.7B, 3.8%), Mitsubishi UFJ Financial Group Inc ($35.9B, 3.5%), Bank of America ($35.5B, 3.5%) and Nomura ($34.3B, 3.4%). Fed Repo positions among MMFs on 3/31/19 include: T Rowe Price Govt Reserve Fund ($0.5B), Northern Inst Govt Select ($0.1B), Northern Trust US Govt MMkt ($0.1B), Western Asset Inst Govt ($0.0B), Northern Inst Govt ($0.0B) and HSBC Inv US Govt MMkt ($0.0B).

The 10 largest issuers of "credit" -- CDs, CP and Other securities (including Time Deposits and Notes) combined -- include: RBC ($26.0B, 5.3%), Toronto-Dominion Bank ($22.8B, 4.7%), Mitsubishi UFJ Financial Group Inc. ($22.2B, 4.6%), Mizuho Corporate Bank Ltd ($19.4B, 4.0%), Credit Suisse ($18.0B, 3.7%), Bank of Nova Scotia ($16.8B, 3.5%), Svenska Handelsbanken ($16.3B, 3.3%), Sumitomo Mitsui Banking Co ($15.5B, 3.2%), Canadian Imperial Bank of Commerce ($14.7B, 3.0%) and JP Morgan ($14.6B, 3.0%).

The 10 largest CD issuers include: Mitsubishi UFJ Financial Group Inc ($16.5B, 7.4%), Mizuho Corporate Bank Ltd ($13.8B, 6.2%), Svenska Handelsbanken ($13.4B, 6.0%), Sumitomo Mitsui Banking Co ($13.0B, 5.9%), Wells Fargo ($11.6B, 5.2%), Sumitomo Mitsui Trust Bank ($11.0B, 5.0%), Bank of Nova Scotia ($10.9B, 4.9%), Bank of Montreal ($9.6B, 4.3%), Landesbank Baden-Wurttemberg ($8.5B, 3.8%) and Skandinaviska Enskilda Banken AB ($7.6B, 3.4%).

The 10 largest CP issuers (we include affiliated ABCP programs) include: Toronto-Dominion Bank ($14.8B, 6.5%), RBC ($14.5B, 6.4%), JPMorgan ($14.4B, 6.3%), Credit Suisse ($11.7B, 5.2%), Toyota ($7.1B, 3.1%), National Australia Bank Ltd ($7.1B, 3.1%), Bank Nederlandse Gemeenten ($7.0B, 3.1%), Societe Generale ($6.8B, 3.0%) Credit Agricole ($6.7B, 3.0%) and Westpac Banking Co ($6.5B, 2.9%).

The largest increases among Issuers include: US Treasury (up $54.4B to $958.3B), JP Morgan (up $17.8B to $93.6B), RBC (up $10.1B to $125.5B), Deutsche Bank AG (up $5.8B to $22.4B), Fixed Income Clearing Co (up $4.6B to $106.8B), DNB ASA (up $4.1B to $14.9B), Toronto-Dominion Bank (up $3.2B to $34.9B), Federal Home Loan Mortgage Co (up $3.0B to $43.4B), Federal Farm Credit Bank (up $2.1B to $85.4B) and National Australia Bank Ltd (up $1.9B to $12.0B).

The largest decreases among Issuers of money market securities (including Repo) in March were shown by: Credit Agricole (down $44.2B to $23.5B), Credit Suisse (down $15.5B to $20.9B), Natixis (down $14.8B to $27.2B), Mizuho Corporate Bank Ltd (down $13.4B to $27.6B), Barclays PLC (down $7.0B to $59.8B), Swedbank AB (down $6.7B to $8.9B), Citi (down $3.5B to $33.1B), Nomura (down $2.1B to $34.3B), HSBC (down $2.1B to $46.4B) and Goldman Sachs (down $2.0B to $20.4B).

The United States remained the largest segment of country-affiliations; it represents 64.3% of holdings, or $2.067 trillion. Canada (8.8%, $284.6B) moved up to the No. 2 spot, and France (7.5%, $240.2B) was third. Japan (6.7%, $214.0B) occupied fourth place. The United Kingdom (4.2%, $134.9B) remained in fifth place. Germany (2.0%, $63.6B), in sixth place, followed by The Netherlands (1.7%, $54.9B) and Sweden (1.5%, $47.0B), Australia (1.2%, $38.9B) and Switzerland <b:>`_ (1.0%, $30.7B), round out the Top 10. (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 March 31, 2019, Taxable money funds held 32.5% (down from 35.1%) of their assets in securities maturing Overnight, and another 16.3% maturing in 2-7 days (up from 15.7% last month). Thus, 48.9% in total matures in 1-7 days. Another 21.6% matures in 8-30 days, while 12.6% matures in 31-60 days. Note that over three-quarters, or 83.0% 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 6.6% matures in 91-180 days, and just 1.6% matures beyond 181 days.

Crane Data's latest monthly Money Fund Portfolio Holdings statistics will be published Tuesday, April 9, and we'll be writing our normal monthly update on the March 31 data for Wednesday's News. But we also generate 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 March 31, 2019, includes holdings information from 1,184 money funds (the same number as last month), representing assets of $3.526 trillion (up from $3.439 trillion). We review the latest data below, and we also quote from a Wall Street Journal article on Ultrashort Bond Funds.

Our latest Form N-MFP Summary for All Funds (taxable and tax-exempt) shows Repurchase Agreement (Repo) holdings in money market funds totaling $1,034 billion (down from $1,092.9 billion on Feb. 28), or 29.3% of all assets. Treasury holdings total $1,010 billion (up from $918.0), or 28.7%, and Government Agency securities total $712.8 billion (up from $683.0 billion), or 20.2%. Commercial Paper (CP) totals $312.6 billion (up from $275.9 billion), or 8.9%, and Certificates of Deposit (CDs) total $226.9 billion (down from $232.6 billion), or 6.4%. The Other category (primarily Time Deposits) totals $123.7 billion (down from $131.2 billion), or 3.5%, and VRDNs account for $105.6 billion (unchanged from last month), or 3.0%.

Broken out into the SEC's more detailed categories, the CP totals were comprised of: $186.9 billion, or 5.3%, in Financial Company Commercial Paper; $57.2 billion or 1.6%, in Asset Backed Commercial Paper; and, $68.5 billion, or 1.9%, in Non-Financial Company Commercial Paper. The Repo totals were made up of: U.S. Treasury Repo ($595.1B, or 16.9%), U.S. Govt Agency Repo ($402.1B, or 11.4%), and Other Repo ($37.0B, or 1.0%).

The N-MFP Holdings summary for the 217 Prime Money Market Funds shows: CP holdings of $307.5 billion (up from $270.8 billion), or 31.6%; CD holdings of $226.9 billion (down from $232.6B), or 23.3%; Repo holdings of $138.7 billion (down from $144.5B), or 14.3%; Other (primarily Time Deposits) holdings of $80.2 billion (down from $87.0B), or 8.3%; Treasury holdings of $160.1 billion (unchanged), or 16.5%; Government Agency holdings of $52.1 billion (up from $36.7B), or 5.4%; and VRDN holdings of $6.4B (down from $6.8B), or 0.7%.

The SEC's more detailed categories show CP in Prime MMFs made up of: $186.9 billion (up from $167.8 billion), or 19.2%, in Financial Company Commercial Paper; $57.2 billion, or 5.9%, in Asset Backed Commercial Paper; and, $63.4 billion, or 6.5%, in Non-Financial Company Commercial Paper. The Repo totals include: U.S. Treasury Repo ($47.3B, or 4.9%), U.S. Govt Agency Repo ($54.5B, or 5.6%), and Other Repo ($36.9B, or 3.8%).

In other news, The Wall Street Journal writes on "The Current Allure of 'Ultrashort' Bond Funds." They say, "A Federal Reserve policy shift that has created uncertainty over interest rates, is generating renewed interest in ultrashort-term bond funds. Slowing economic growth and quiescent inflation -- the same factors that led the central bank to pause its interest-rate increases earlier this year -- have left short-term and long-term interest rates at about the same level."

The piece continues, "That's good for ultrashort bond funds, which typically invest in high-grade paper with duration of less than a year. Ultrashort funds have yields that aren't far from longer-term funds, and their short durations make them less vulnerable to rising market interest rates. Duration is a measure of the sensitivity of a bond's price to a change in interest rates. When rates rise, bonds with longer durations fall more in price than those with shorter durations."

The Journal explains, "As of Feb. 28, ultrashort mutual funds and exchange-traded funds yielded 2.67% on average, versus 2.99% for intermediate-term funds, which typically have durations of 3.5 to six years, according to fund researcher Morningstar Inc."

They comment, "The volatility that has kicked up in the market amid the uncertainty over Fed policy also is making ultrashort funds more alluring now, as they generally are less volatile than longer-term funds, says Mary Ellen Stanek, chief investment officer at Baird Advisors. 'Why take risks in this part of your portfolio,' she says, when investors generally hold bonds for safety and stability. A net total of $1.46 billion flowed into ultrashort bond mutual funds and exchange-traded funds in the year ended Feb. 28, according to Morningstar."

The WSJ piece tells us, "Two ultrashort-term bond funds that are highly rated by Morningstar are Fidelity Conservative Income Bond Fund (FCONX) and DFA One-Year Fixed Income Portfolio (DFIHX), both of which have low fees, according to analysts. The Fidelity fund's annual expense ratio is 0.35%, while the DFA fund's ratio is 0.17%."

Finally, it adds, "Through March, the Fidelity fund had annualized returns of 2.36% for one year, 1.58% for three years and 1.08% for five years, according to Morningstar. Its trailing 12-month yield is 2.33%.... Through March, the DFA fund had annualized returns of 2.53% for one year, 1.33% for three years and 0.97% for five years, according to Morningstar. Its trailing 12-month yield is 2.01%." (See also, yesterday's "Link of the Day," "Barron'​s on Ultra-​Short Alternatives," and let us know if you'd like to see our latest Bond Fund Intelligence newsletter.)

Crane Data's latest Money Fund Market Share rankings show assets were mixed to lower for most U.S. money fund complexes in March. Money fund assets decreased by $9.8 billion, or -0.3%, last month to $3.291 trillion, but assets have climbed by $79.0 billion, or 2.5%, over the past 3 months. They have increased by $306.9 billion, or 10.3%, over the past 12 months through March 31, 2019. The biggest increases among the 25 largest managers last month were seen by Fidelity, Northern, and Federated, which increased assets by $7.1 billion, $4.1B, and $3.9B, respectively. We review the latest market share totals below, and we also look at money fund yields in March.

The most noticeable declines in assets among the largest complexes in March were seen by Wells Fargo, whose MMF assets dropped by $6.6 billion, or -5.7%, JP Morgan, down $6.5 billion, or -2.2%, Morgan Stanley, with a decline of $5.2 billion, or -4.5%, and HSBC, off $3.1 billion, or -18.6%. 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 March 31, 2019, Fidelity (up $91.1B, or 15.7%), Vanguard (up $68.4B, or 23.2%), JP Morgan (up $46.7B, or 18.7%), Federated (up $43.5B, or 21.7%), Goldman Sachs (up $15.5B, or 8.4%), and Schwab (up $15.0B, or 10.5%) were the largest gainers. These complexes were followed by UBS (up $14.4B, or 31.6%), Northern (up $12.5B, or 11.6%), First American (up $10.4B, or 20.9%) and Wells Fargo (up $4.5B, or 4.3%).

Vanguard, Fidelity, Federated, T Rowe Price, and SSgA had the largest money fund asset increases over the past 3 months, rising by $21.5B, $9.4B, $9.1B, $9.0B, and $7.8B, respectively. The biggest decliners over 3 months include: Goldman Sachs (down $6.8B, or -3.3%), Dreyfus (down $4.1B, or -2.5%), Wells Fargo (down $2.9B, or -2.6%), Western (down $2.3B, or -10.3%) and DWS (down $1.8B, or -8.2%).

Our latest domestic U.S. Money Fund Family Rankings show that Fidelity Investments remains the largest money fund manager with $670.5 billion, or 20.4% of all assets. That was up $7.1 billion in March, up $9.4 billion over 3 mos., and up $91.1B over 12 months. Vanguard ranked second with $363.8 billion, or 11.1% market share (up $2.6B, up $21.5B, and up $68.4B for the past 1-month, 3-mos. and 12-mos., respectively). JPMorgan was third with $295.6 billion, or 9.0% market share (down $6.5B, up $4.1B, and up $46.7B). BlackRock ranked fourth with $282.8 billion, or 8.6% of assets (down $2.8B, up $3.6B, and up $3.6B for the past 1-month, 3-mos. and 12-mos.), while Federated remained in fifth with $243.9 billion, or 7.4% of assets (up $3.9B, up $9.1B, and up $43.5B).

Goldman Sachs remained in sixth place with $199.8 billion, or 6.1% of assets (up $1.4 billion, down $6.8B, and up $15.5B), while Schwab held seventh place with $157.9 billion, or 4.8% (up $2.0B, up$6.4B and up $15.0B). Dreyfus ($157.0B, or 4.8%) was in eighth place (down $2.7B, down $4.1B and down $12.8B), followed by Northern, which occupied ninth place ($119.5B, or 3.6%, up $4.1B, up $4.7B, and up $12.5B). Morgan Stanley was in 10th place ($111.5B, or 3.4%, down $5.2B, up $255M, and down $3.4B).

The 11th through 20th-largest U.S. money fund managers (in order) include: Wells Fargo ($108.8B, or 3.3%), SSgA ($86.7B, or 2.6%), Invesco ($60.8B, or 1.8%), First American ($60.4B, or 1.8%), UBS ($59.7B, or 1.8%), T Rowe Price ($36.2B, or 1.1%), Franklin ($22.2B, or 0.7%), DFA ($21.9B, or 0.7%), DWS ($20.4B, or 0.6%), and Western ($19.8B, or 0.6%). Crane Data currently tracks 69 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 Dreyfus/BNY Mellon moves ahead of Schwab. 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 ($679.5 billion), J.P. Morgan ($451.4B), BlackRock ($425.6B), Vanguard ($363.8B) and Goldman Sachs ($305.3B). Federated ($252.8B) was sixth and Dreyfus/BNY Mellon ($174.9B) was in seventh, followed by Schwab ($157.9B), Northern ($145.6B) and Morgan Stanley ($143.8B), which round 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 April issue of our Money Fund Intelligence and MFI XLS, with data as of 3/31/19, shows that yields were slightly higher in March across most of our taxable Crane Money Fund Indexes. The Crane Money Fund Average, which includes all taxable funds covered by Crane Data (currently 755), increased to 2.09% for the 7-Day Yield (annualized, net) Average, and the 30-Day Yield was flat at 2.07%. The MFA's Gross 7-Day Yield also increased to 2.52%, while the Gross 30-Day Yield held steady at 2.50%.

Our Crane 100 Money Fund Index shows an average 7-Day (Net) Yield of 2.27% (up 2) and an average 30-Day Yield that increased to 2.25%. The Crane 100 shows a Gross 7-Day Yield of 2.54% (up 2), and a Gross 30-Day Yield of 2.52% (up 2). For the 12 month return through 3/31/19, our Crane MF Average returned 1.73% and our Crane 100 returned 1.93%. The total number of funds, including taxable and tax-exempt, increased by 1 to 946. There are currently 755 taxable, up by 1, and 191 tax-exempt money funds (unchanged).

Our Prime Institutional MF Index (7-day) yielded 2.26% (down 1) as of March 31 while the Crane Govt Inst Index was 2.19% (up 4 basis point) and the Treasury Inst Index was up by 2 at 2.16%. Thus, the spread between Prime funds and Treasury funds is 10 basis points, while the spread between Prime funds and Govt funds is 7 basis points. The Crane Prime Retail Index yielded 2.13% (down 1 basis point), while the Govt Retail Index yielded 1.85% (up 2 bps) and the Treasury Retail Index was 1.91% (up 3 bps). The Crane Tax Exempt MF Index yield decreased in March to 1.10% (down 18 bps).

Gross 7-Day Yields for these indexes in March were: Prime Inst 2.64% (down 4 basis points), Govt Inst 2.48% (up 1 bp), Treasury Inst 2.46% (up 2 bps), Prime Retail 2.66% (up 1 bp), Govt Retail 2.46% (up 3 bps), and Treasury Retail 2.48% (up 3 bps). The Crane Tax Exempt Index deceased 18 basis points to 1.59%. The Crane 100 MF Index returned on average 0.19% over 1-month, 0.56% over 3-months, 0.55% YTD, 1.93% over the past 1-year, 1.05% over 3-years (annualized), 0.65% over 5-years, and 0.35% over 10-years. (Contact us if you'd like to see our latest MFI XLS, Crane Indexes or Market Share report.)

The April issue of our flagship Money Fund Intelligence newsletter, which was sent to subscribers Friday morning, features the articles: "Ultra-Short Bond Funds Big; Highlights from BF Symposium," which reviews our recent conference and developments in the short-term bond fund sector; "BFS Keynote: Schneider & Mejzak; Fidelity's Pope," which quotes from a couple of featured conference sessions; and, "Worldwide MF Assets at $6T; US Jumps, China Drops in Q4," which talks about the about money fund markets beyond the U.S. We've also updated our Money Fund Wisdom database with March 31 statistics, and sent out our MFI XLS spreadsheet Friday a.m. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our March Money Fund Portfolio Holdings are scheduled to ship on Tuesday, April 9, and our March Bond Fund Intelligence is scheduled to go out Friday, April 12.

MFI's "Ultra-Short Bond Funds Big; Highlights from BF Symposium," article says, "Crane's Bond Fund Symposium, our event focusing on the 'enhanced cash' and ultra-short bond fund space, took place recently in Philadelphia, and all signs indicate that the party is still going strong in this sector of the marketplace. Crane Data's Bond Fund Intelligence shows Conservative Ultra-Short Bond Funds grew by 48% (vs. 3% for all bond funds) in the 12 months through 2/28/19, the fastest growth among any bond fund category. We review some of the highlights our recent event below, and we take a closer look at the growth of ultra-short bond fund assets."

It continues, "We also review BFS's 'Senior Portfolio Manager Perspectives' session, which featured PGIM MD of Fixed Income Joseph D'Angelo and J.P. Morgan Asset Management Portfolio Manager & Head of Managed Reserves Dave Martucci. The pair discussed ultra-short funds and investment strategies."

Our BFS Keynote, reads, "This month, BFI quotes from the keynote at our recent Bond Fund Symposium, 'Ultra-Shorts vs. SMAs: Round II,' which featured Rich Mejzak, Managing Director at BlackRock, and Jerome Schneider, Managing Director at PIMCO. Moderator Pete Crane commented, 'We want to talk about both [SMAs and ultra-short funds], since separately managed accounts are a big chunk of the enhanced cash, beyond-money fund marketplace.'"

Schneider commented, "For PIMCO for much of the past 40 years, we were one of the first in the mutual fund space for short term in the ultra-short space and we've evolved that over the past few decades.... The bulk of the $300 billion that we manage is quite honestly in the ultra-short and short term and low duration space. For us, the focal point has always been trying to find client solutions ... products that more precisely fit the demand functions that we're seeing from clients."

He explained, "These include the products that we've introduced over the past decade or so, including our short term ETF MINT which is the largest actively managed ETF.... It's about $12 billion now in size. [Also] our Short Asset Investment Fund, they've really been focused on providing risk adjusted returns, and more importantly a nuanced allocation. So as an example, no derivatives in MINT is something that's actually been a focal point of marketing.... I think the key thing is trying to find the balance between risk and return, and sometimes those are very different things to different people."

Our "Worldwide MF" update says, "The Investment Company Institute released its 'Worldwide Regulated Open-Fund Assets and Flows, Fourth Quarter 2018' late last month, and the most recent data collection on mutual funds in other countries (as well as the U.S.) shows that money fund assets globally rose by $97.1 billion, or 1.6%, in Q4'18, to retake the $6.0 trillion level ($6.076T). The increase was led by big gains in U.S. and Luxembourg-based money funds. Money fund assets in China and France fell sharply. MMF assets worldwide have increased by $176.4 billion, or 3.0%, the past 12 months, and money funds in the U.S. moved up to represent 50.0% of worldwide assets."

The latest MFI also includes the sidebar, "MMF Expenses Up in '18," which reviews a 'Research Perspective' entitled, 'Trends in the Expenses and Fees of Funds, 2018.' It tells us, "The average expense ratios for money market funds rose 1 basis point to 0.26 percent in 2018.... The report shows stock fund expenses averaging 0.55% and bond funds averaging 0.48%." It adds, "Their section on 'Money Market Funds' states, 'The average expense ratio of money market funds rose for the third consecutive year to 0.26 percent in 2018 <b:>`_... The past three years have generally been a reversal from the historical trend in which money market fund expense ratios had remained steady or fallen each year since 1997.'"

A News brief, entitled, "Kiplinger's Says Avoid Sweep Yields," states, 'Kiplinger's Retirement,' says, 'Retirees, Avoid Sweep Accounts With Low Yields,' They write, 'Many major brokerage firms in recent years have eliminated higher-yielding money-market funds as a sweep option, pushing customers into lower-yielding bank sweep accounts.' It adds, 'Brokerage firm Edward Jones eliminated its money-fund sweep option for new brokerage customers in February <b:>`_.'"

Our March MFI XLS, with March 31, 2019, data, shows total assets fell by $10.2 billion in March to $3.292 trillion, after gaining $56.4 billion in February, $14.4 billion in January, and $41.9 billion in December. Our broad Crane Money Fund Average 7-Day Yield rose 2 bps to 2.09% during the month, while our Crane 100 Money Fund Index (the 100 largest taxable funds) was up 2 basis points to 2.27% (its highest level since Oct. 2008).

On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA rose 1 basis point to 2.52% and the Crane 100 rose to 2.54%. 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 31 and 32 days, respectively (unchanged). (See our Crane Index or craneindexes.xlsx history file for more on our averages.)

The Federal Reserve Bank of New York's Liberty Street Economics addresses the question, "Are New Repo Participants Gaining Ground?" It tells us, "Following the 2007-09 financial crisis, regulations were introduced that increased the cost of entering into repurchase agreements (repo) for bank holding companies (BHC). As a consequence, banks and securities dealers associated with BHCs, a set of firms which dominates the repo market, were predicted to pull back from the market. In this blog post, we examine whether this changed environment allowed new participants, particularly those not subject to the new regulations, to emerge. We find that although new participants have come on the scene and made gains, they remain a small part of the overall repo market."

The NY Fed blog explains, "A repo is the sale of an asset, coupled with the promise to repurchase the asset at a future date at specified terms. Repo is a crucial financial market in the United States because it is a key source of short-term funding for securities dealers and facilitates secondary market liquidity in Treasuries and other securities."

It tells us, "The adoption of Basel III rules required banks to maintain a thirty-day liquidity coverage ratio and to hold additional capital to meet the requirements of the supplementary leverage ratio. At the time, repo desks spoke of actions to adjust their repo activity in order to reduce the costs associated with the new regulations."

On the new participants in the repo market, the piece comments, "In order to evaluate the market share of new participants, we first need to understand how their chosen trading strategies allow us to capture a significant portion of their activity in the data available to us. The typical trading strategy of these new participants is to act as a middle man in a matched-book trade."

It adds, "For the majority of cases, executing a repo matched-book strategy involves entering into a repo in an interdealer market.... (Cash-rich investors such as money market mutual funds, for example, tend to be wary of investing in smaller dealers, even on a secured basis.)"

The Liberty Street Economics update states, "To measure new repo dealers' activity we look at the two main interdealer repo markets in the United States, the General Collateral Finance Repo Service (GCF Repo) and the Fixed Income Clearing Corporation's Delivery vs. Payment Service (FICC DvP). In both markets, dealers can only execute trades if they are a member of FICC, a financial utility which acts as a central counterparty.... Strikingly, the total of new members' reverse repo and repo activity has more than doubled since the start of 2018."

Finally, it concludes, "Even with the recent explosion in their repo activity, these new participants remain a small part of the overall market. In GCF Repo, these participants make up about 6 percent of total gross activity in the last quarter of 2018. Similarly, in FICC DvP, new repo participants are 3 percent of total gross activity for the same time period. As a point of reference, the average amount of GCF Repo and FICC DvP activity for a top-ten dealer is larger than the sum of the repo activity for all new participants. The prediction of a tectonic shift in the repo market with new repo participants' gaining market share seems not to have materialized."

In other news, S&P Global Ratings published an update entitled, "Inside Global ABCP: Moderate Growth Expected For The U.S. And EMEA Despite Market Uncertainties." It says, "As U.S. sponsors expand their current asset portfolios and prime institutional money-market funds return to the ABCP market, we expect U.S. ABCP outstanding to grow moderately to between $255 billion-$260 billion in 2019. In EMEA, we expect issuance volumes to likely gain momentum once there is greater clarity on Brexit and regulations related to securitization."

S&P's Dev Vithani and Ildiko Szilank write, "Although traditional assets account for most of the funding commitments in the U.S., we expect recent shifts in investor preferences into nontraditional assets such as servicer advances, contract payment rights, marketplace loans, and wireless handset devices to continue. Generally, the credit quality of collateral backing ABCP has been stable and has performed in tandem with collateral backing term asset-backed securities (ABS). Macroeconomic factors, such as GDP growth, low unemployment rates, and consumer loan growth, have similarly affected both markets."

The piece adds, "In EMEA and Japan, funding commitments remain predominantly concentrated in traditional assets with low maturity mismatch, such as autos and trade receivables. While the U.K., Italy, Germany, and France account for over 60% of total asset portfolios in EMEA, we have observed some renewed interest from investors to fund assets domiciled in Asia. Globally, the top 10 sponsors accounted for almost three-fourths of all S&P Global Ratings-rated ABCP outstanding as of December 2018."

S&P shows a table of the "Global Top 10 Sponsors Based On ABCP Outstanding As Of December 2018," which includes: JPMorgan Chase Bank N.A. ($42.7 billion, including Chariot Funding, Collateralized Commercial Paper II Co. and Jupiter Securitization Co.), Guggenheim Treasury Services ($30.9B including Crown Point Capital Co., Ridgefield Funding Co. and Bennington Stark Capital Co.), Credit Agricole Corporate and Investment Bank ($30.6B, including Atlantic Asset Securitization, La Fayette Asset Securitization and LMA), Royal Bank of Canada ($30.6B, including Bedford Row Funding Corp, Old Line Funding and Thunder Bay Funding), Citibank ($18.8B, including CRC Funding, CAFCO and Charta), Societe Generale ($16.7B, including Barton Capital and Antalis), Bank of Tokyo - MUFJ Bank Ltd. ($16.4B, including Gotham Funding Corp., Victory Receivables Corp. and Albion Capital Corporation), BNP Paribas ($14.8B, including Starbird Funding and Matchpoint Finance), FMS Wertmanagement Anstalt des oeffentlichen Rechts ($10.9B, Kells Funding), and BSN Holdings/BSN Capital Partners ($10.9B, including Chesham Finance. The Top 10 Global Programs Total $223.4 billion, or 72.6% of all ABCP.

Asset TV posted a new "Masterclass video on "Stable Value," which features an interview with Invesco's Head of Stable Value Client Service Andy Apostol and MetLife's National Director of Stable Value Markets Wayne Howe. Host Susanna Lee comments, "Equity markets experienced a significant amount of volatility, especially in the fourth quarter.... It's a rare occurrence that stable value is one of the top performing asset classes relative to both equities and core bonds." We excerpt from the transcript of the sponsored interview below, and we also quote from a press release from online money market fund trading portal ICD.

MetLife's Howe explains, "Stable value has a lot of advantages, and it's always a good idea to have a stable value option in your defined contribution plan, especially when you think about plan sponsors who need to have a capital preservation option in the lineup. Typically, it's either going to be stable value, a short-term bond fund or money market funds. When you look at the three of those, stable value is clearly the superior alternative in that case. As Andy was talking about when we looked at the volatility in the market late last year, that's the key thing there when you think about a stable value fund. What does it provide? It provides a safe haven, capital preservation, and a reasonable return for participants."

Invesco's Apostol comments, "Stable value has met all of its objectives, providing positive returns on a daily basis over its inception. Strong equity market performance has resulted in significant transfers out of the stable value asset class.... Historically, stable value funds have produced returns that are roughly 100 to 150 basis points over money market funds. But if we look at the yields on money market funds, and yield on stable value funds from a historical context, the fed easing of monetary policy that happened after the financial crisis really created a decade for money market funds of almost a zero percent return.... That difference between earnings on money market funds and stable value funds has driven that difference to historical-wide."

He adds, "We also looked at return differences relative to inflation. Stable value funds have the typical risks, credit risks, the crediting rate risk, the lagging, lagging risk of market interest rates. But in terms of interest rate risks, that's often overlooked when you look at a capital preservation option."

Howe tells us, "Money market [funds are] the prime alternative to stable value in terms of [the] capital preservation space.... So when you look at those comparisons, that's a comparison to what would be your prime money market funds. `After money market reform in 2016, plan sponsors that are using money market are now in government money market funds. That return likelihood of money market funds themselves is likely to be lower by the nature of being in government-only funds as opposed to the previous prime funds.... Typically it's the plan sponsor making the decision. Is it going to be stable value or is it going to be money market? Many times ... they will offer both and let participants make the decision."

He continues, "What you see is 'money market' is easily understood: it's available outside of retirement plans, everybody knows what it is, and they think of it as safe.... Sometimes stable value is a little bit more complicated to explain, and one of the things we're both working on is educating plan sponsors about the value. Because with stable value you're getting these increased returns somewhere in the neighborhood of 200 basis points more over time, which is real return for participants, yet you have that advantage, and you have the liquidity that goes with money market for all plan-initiated events. You really don't need the money market option in place, and when plan sponsors understand the difference between stable value and money market, they'll opt for stable value."

Regarding the investments, Apostol explains, "Stable value funds have two primary investments: you have the benefit responsive wrap contract, and that is paired with a portfolio of high quality fixed income securities. Each of those two assets are gonna provide some unique characteristics to the stable value fund. For example, the benefit responsive wrap contract is gonna provide a zero percent floor crediting rate. It is also the mechanism that, as bond prices move up and down relative to changes in market interest rate, it's gonna provide that smoothing out effect in terms of the crediting rate that participants earn.... Switching to the underlying assets again, as we talked earlier, that's a portfolio of high credit quality fixed income securities. That component of the portfolio provides really the return generator behind the stable value funds."

Finally, Howe states, "The accounting rules that allow stable value to exist [is] such that it is only available in a defined contribution plan. You cannot get this outside of defined contribution, and that's an important thing. Plan participants that remain in their plan post-retirement, and wanna keep their balances there, they still have access to stable value. If you roll your money out into an IRA, you're no longer gonna have stable value available to you."

In other news, A press release entitled, "ICD Achieves 28% Asset Growth in 2018, Widening Position as Largest Independent Trading and Investment Risk Management Provider in the World," tells us that, "ICD, the leading independent trading and investment risk management platform, today announced 28% growth in investment assets last year, widely outpacing the .02% market increase in institutional money market fund use. Fueling this growth, the company increased its client base by 20%, many of which came from Fortune 500 and FTSE 350 companies. ICD growth was not only driven by net new assets, but by existing clients increasing their investment through the ICD Portal, with average client assets on the portal increasing by 12% YOY."

It explains, "ICD CEO Tory Hazard attributed the strong client growth to CFOs, Treasurers and corporate investment professionals seeking a secure, centralized investment platform, deeply integrated into their treasury technology environment. Growth was further fueled by corporate treasury organizations focusing on yield, moving funds out of low-return bank deposit products into higher-yielding money market funds. Another theme among new and existing clients was a move longer out on the maturity curve, with renewed interest in Prime Funds and Short Duration Bond Funds versus traditional government-backed products.

Hazard comments, "We could not be happier with the response from our clients and the corporate treasury community as a whole. This past year was a testament to the movement that we recognized over 16 years ago when ICD's journey began. Treasury professionals want an independent investment and risk management solution that offers a wide selection of investment options on a secure platform, wrapped in a global support infrastructure. The market shift away from biased bank portals and concentrated bank deposits seems to be increasing, and fund companies want to offer their investment products in a neutral marketplace. ICD is committed to continuing investment in personnel and technology and support infrastructure to meet the needs of our expanding client base." The release adds, "Additional 2018 highlights include: 99.6% Client Retention Rate, 25% Employee Growth, and a New Technology Development Facility."

We continue to review highlights from our recent Bond Fund Symposium conference, which took place last week in Philadelphia, Pa. Below, we excerpt from the session, "Senior Portfolio Manager Perspectives," which featured PGIM MD of Fixed Income Joseph D'Angelo and J.P. Morgan Asset Management Portfolio Manager & Head of Managed Reserves Dave Martucci. They discussed ultra-short investment strategies, as well a number of other issues. (See also our March 27 News, "BFS Keynote: PIMCO's Schneider and BlackRock's Mejzak USBFs vs. SMAs.") Attendees and Crane Data subscribers may access the Powerpoints, recordings and conference materials at the bottom of our "Content" page or our via our Bond Fund Symposium 2019 Download Center.

Martucci told us, "I'm a portfolio manager at J.P. Morgan Asset Management in the Global Liquidity Group. The team I'm responsible for is the Managed Reserves Group. I've been there for 19 years, all as a portfolio manager, in basically the ultra-short out to the intermediate part of the curve. The Managed Reserves product is the brand name for our ultra-short duration products, which totals around $76 billion, of which $21 billion is in commingled vehicles -- mutual funds as well as ETFs -- and the other $55B is in SMAs. We have a team of 11 portfolio managers/research analysts."

D'Angelo commented, "I work for PGIM which is effectively Prudential Financial's fixed income asset manager. We have $80 billion in the front end. There's five of us that do it, and I've been there 30 years. I grew up working for the treasurer of the company so I was involved in our direct issuance of commercial paper and or other sec lending borrowing programs and then I jumped over to do the reinvest about 20 years ago.... We have everything from 2a-7 funds to ultra-short bond funds, and then we launched an ETF in April."

When asked about the strategies of Managed Reserves, Martucci explained, "We were able to tell a story with the success of the money market fund business, particularly the approved for purchase list, we put risk parameters around concentration limits as well as a spread duration limits. That really resonated ... with clients who were looking for a little bit more ... return.... As Jerome was saying, a lot of it is hand-to-hand combat and educating our clients on really the benefits of taking a step outside of money market funds, and really being able to do that with a very low volatility and a very controlled fashion. That's the investment process that we've built using the expertise that we have at JP Morgan."

He added, "We are starting now to see money come down the curve, which was last year, and now we're starting to see money as more of an allocation play, where people are looking to de-risk.... Obviously, money market fund reform also has helped us, with the floating NAV. Now clients do have to consider us versus the prime fund. So that's been very beneficial for us."

When asked where he looks for adding yield, D'Angelo responded, "I think we choose to view ultra-short as sort of like a mini, multi-sector thing. In almost all of our ultra-short mandates, we have anywhere from 10%, 20%, up to 50% in structured product. So I think for us the biggest question is 'How much money do you need to have laying around based on what the client's needs are?' That to me is the trickiest part of ultra-short. That being said, from a bank exposure standpoint, I would say we're 20-25% in banks in ultra-short."

The PGIM manager explained, "We buy a lot of A2-P2 commercial paper in those products. We like the diversity there, and through 2008, we felt like that liquidity there was pretty strong. [There are] far fewer banks in ultra-short than you might expect given how heavy 2a-7 is. And from a multi-sector standpoint -- you talked about the trading floor being like a football field -- and we kind of run up and down the football field asking 'Can you find me some of this 3-year CMBS Triple-A fixed?' We'll put swaps on it and do we have to do with that, but a lot of what we do is ... is based on what's going on throughout our complex."

Martucci also told the Philadelphia crowd, "The only repo that you'll find in our ultra-short universe is going to be nontraditional repo.... Typically, SMAs we find that for the most part they're not around long enough where it makes sense to put the time and effort into setting up the repo docs.... But typically, that's a product that we use for our commingled vehicles that we know we'll be around for a while."

He stated, "As far as Treasuries and Agencies actually, right now we have probably the largest percentage that we've had in quite some time in our ultra-short universe.... About a month or two ago, we decided, well spreads have come in significantly and valuations are tight, we think that that will continue. But as kind of a hedge to that we decided let's start to add some Treasuries in here.... We have a Fed that has proven to be very dovish and will be there to react to the market.... How we move forward with that position, we're still we're still in discussion. But that's where we are right now."

Martucci added, "Coming out of the crisis, there was definitely a lot of clients didn't really want any structured products. I think just to get them to do credit cards and auto receivables at Triple-A level was an effort and an education process. I think the client base has become more knowledgeable and understands the process a little more. But still, I think in general mortgages for the most part, excluding a handful of accounts are excluded from most of our base.... We do have a 5% limit on high yield in the ETF that we do not currently use. That was more just to match us up with what the other ETFs are capable of doing.... I think structured product is probably the biggest area where clients either totally exclude or only allow certain types."

When asked about cash flows, D'Angelo commented, "Believe it or not that's pretty challenging for us, because most of the ultra-short products, especially for the insurance company, are around securities lending. So, the cash is being originated through securities lending activity and you're relying on those loans staying out. If you have volatility with overnight rates or you come into a quarter-end and have all this balance sheet stuff going on, a lot of times you get whipped around a little bit. That has been the most challenging aspect for us. That's specific to ultra-short that's largely driven by securities lending."

"So, what we try to do in that example would be to say, 'Look, you can't have all your money in ultra-short... You have to put some of the money somewhere else. And I think the biggest part is sitting down with clients and saying, 'How much do you need laying around? and how much are you really willing to take risk with? And if you are, you can't come to me in three days and say I need it back."

When asked about active vs. passive in the ultra-short space, Martucci responded, "I think it has to be active. Clients come to us with, for the most part, a principal preservation and liquidity [mandate]. They don't want to hear that an index will force you into doing something or buying something to match an index. I think that to me is why that won't work in this space. I think clients are looking for active management, and we're adding our expertise to kind of avoid those pitfalls."

Finally, D'Angelo added, "I lived through 2008, and I think the thing that resonated with me was just thinking about subprime and sitting around the table of analysts and everyone is like, 'This is a layup.' Nothing is a layup.... Nothing is a sure thing in what we do. You realize a lot of times the pendulum swings and everyone is on the same side of the trade. I think both of us will probably say we hate that right? You don't want everybody going the same way. That's when it gets dangerous."

Fitch Ratings and Morgan Stanley Investment Management recently published brief updates on European Money Fund Reforms, which caused a series of lineup changes and disclosure tweaks among funds domiciled in Ireland, Luxembourg and France. Fitch's "European MMF Reform: March 2019 Dashboard" tells us, "European money market fund (MMF) reform formally concluded on 21 March 2019, two months later than originally anticipated, following the last-minute European Commission ruling that reverse distribution mechanisms (RDMs) would not be permitted." We quote from both updates below. (Note: Crane Data has also posted the preliminary agenda and we're taking registrations for for our 7th annual European Money Fund Symposium, which will be held Sept. 23-24 at the Hilton Dublin.)

Fitch authors and analysts Cedric Verone and Abis Soetan write, "The low volatility net asset value (LVNAV) fund type has become the largest fund type in Europe by assets under management (AUM), accounting for 71% of converted short-term funds. On 15 March 2019, LVNAVs accounted for EUR560 billion, while Public Debt constant net asset value (CNAV) and short-term variable net asset value (VNAV) funds accounted respectively for EUR79 billion and EUR21 billion."

They explain, "Euro funds represented 56% of the AUM converted in March. Most delayed conversion until as late as possible. Negative yields only affected euro funds, and RDMs were necessary to pass these yields on to investors while maintaining stable prices on individual fund shares. Sterling and US dollar funds, unaffected by RDM issues, mostly converted earlier in 2019. Euro funds have seen outflows, decreasing by over 12% from January to mid-March. This was partly seasonal, but some investors appear unwilling or unable to accept varying share prices."

Fitch comments, "Average overnight and one-week liquidity of rated funds are at around 30% and 40% respectively as of end-February. This is markedly higher than regulatory and rating criteria levels, likely the result of increased investor sensitivity to the new liquidity limits, and a desire to mitigate the risk of redemptions during the conversion period.... Fitch believes liquidity levels will decrease from those seen during the conversion period, but that the average weekly liquidity level will settle at between 5% and 10% above pre-conversion levels in the post-reform era, especially for LVNAV funds."

They add, "The reform includes a five-year review, due in 2022. Work on that review could begin as soon as this year. The review will include the possibility of setting an 80% EU public debt quota in Public Debt CNAV and evaluating LVNAV as a potential alternative.... Fitch has affirmed the ratings on all funds converted to date, because all the main rating metrics have remained broadly within criteria limits. Any outflows have been managed with funds meeting redemptions and maintaining sufficient liquidity."

In related news, Morgan Stanley recently distributed a "Frequently Asked Questions" brief to European investors entitled, "European Money Market Fund Reform: MSLF Euro Liquidity Fund." On "What has changed?" They say, "Our 14 December announcement notified shareholders of our intention to convert the Morgan Stanley Liquidity Fund (MSLF) Euro Liquidity Fund to a Low Volatility Net Asset Value (LVNAV) Fund as at 14 January 2019. The Fund intended to utilise the Reverse Distribution Mechanism (RDM) based on prior discussions with our Luxembourg regulator, the CSSF. As communicated on 10 January, we were instructed at short notice by the CSSF that we should not proceed with the planned conversion on 14 January, as they would not authorise money market funds (MMFs) that utilise the RDM."

The update explains, "The MSLF Euro Liquidity Fund will still convert to the LVNAV structure. However, all investors currently in distributing share classes will be converted to an equivalent accumulation share class." Among share classes, Institutional converted to Institutional Accumulation D, Institutional Select converted to Institutional Select Accumulation D, MS Reserve converted to MS Reserve Accumulation D, and Qualified converted to Qualified Accumulation D.

It continues, "Accumulation share classes differ from distributing share classes in that they retain and effectively reinvest the income earned and this is reflected in the value of the accumulation shares. In a negative net yield environment, this equates to a reduction in share value. This proposal is subject to final approval by the CSSF. At the time of conversion, any holdings of distribution shares that are below the minimum holding amount will be liquidated and the proceeds paid to the Shareholder's bank account."

MSIM adds, "All MMFs must comply with the MMF reform (MMFR) regulatory obligations by 21 March 2019. We plan to undertake the proposed MSLF Euro Liquidity Fund changes on 18 March 2019. It is important to note that because of our decision to delay the conversion of all MSLF Liquidity funds, all of the MMFR changes that were previously notified to investors on 14 December 2018 will now also become effective on 18 March 2019."

They also tell us, "The fund will maintain intra-day liquidity and continue to rely on historic pricing. Each day's net income will be incorporated in the calculated NAV per share. De minimis investment unrealized gains and losses will be included in the calculated NAV per share. The end-of-day dealing cut-off time will remain the same, 13:00 GMT, and investors will continue to be able to transact in both cash and shares."

Finally, Morgan Stanley writes, "We have taken the opportunity to align the implementation date of a change in our administrator's operating entity with our MMFR effective date of 18 March 2019. The Depositary, Administrator and Transfer Agent will be The Bank of New York Mellon SA/NV, a bank incorporated under Belgian law.... This change in operating entity requires investors in all funds to use new bank instructions when paying for subscriptions. There is no change in any currently available method of submitting dealing requests." (Note: These funds are not available to U.S. investors.)

For more on European Reforms, see the following Crane Data News stories: "MFI International: Euro Assets Down; Holdings; Wells Offshore Goes Govt" (3/15/19), "Aberdeen, Fido Make European Reform Changes; Oppenheimer Merging" (3/1/19), "Not Done Yet: European Money Funds Continue Adjusting to Reforms" (2/6/19), "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). Finally, let us know if you'd like to see our latest Money Fund Intelligence International, which tracks the European money fund marketplace.