News Archives: January, 2020

The Investment Company Institute released its latest "Trends in Mutual Fund Investing – December 2019" and "Month-End Portfolio Holdings of Taxable Money Funds" reports yesterday, as well as its latest weekly "Money Market Fund Assets" update. Their most recent numbers show that money fund assets increased by $67.0 billion to $3.632 trillion in December, but they've fallen year-to-date in 2020. Last month's increase follows increases of $47.0 billion in November, $77.4 billion in October and $74.4 billion in September. For the 12 months through Dec. 31, 2019, money fund assets increased by $595.0 billion, or 19.6%.

ICI's "Trends" release states, "The combined assets of the nation's mutual funds increased by $406.95 billion, or 1.9 percent, to $21.29 trillion in December, according to the Investment Company Institute's official survey of the mutual fund industry. In the survey, mutual fund companies report actual assets, sales, and redemptions to ICI."

It explains, "Bond funds had an inflow of $36.59 billion in December, compared with an inflow of $34.96 billion in November.... Money market funds had an inflow of $63.67 billion in December, compared with an inflow of $44.19 billion in November. In December funds offered primarily to institutions had an inflow of $39.57 billion and funds offered primarily to individuals had an inflow of $24.19 billion."

ICI's latest statistics show that Taxable MMFs gained assets last month while Tax Exempt MMFs lost assets. Taxable MMFs increased by $67.0 billion in December to $3.632 trillion. Tax-Exempt MMFs decreased $0.7 billion in December to $137.6 billion. Taxable MMF assets increased year-over-year by $602.0 billion (20.8%). Tax-Exempt funds fell by $7.7 billion over the past year (-0.05%). Bond fund assets increased by $50.3 billion in December (0.1%) to $4.704 trillion; they've risen by $643.1 billion (15.8%) over the past year.

Money funds represent 17.1% of all mutual fund assets (the same as the previous month), while bond funds account for 22.1%, according to ICI. The total number of money market funds was 364, up one from the month prior and down from 368 a year ago. Taxable money funds numbered 284 funds, and tax-exempt money funds numbered 80 funds.

ICI's "Month-End Portfolio Holdings" update confirms an increase in Repo and Agencies and a drop in Treasuries last month. Repurchase Agreements remained in first place among composition segments; they increased by $62.8 billion, or -5.6%, to $1.180 trillion, or 33.8% of holdings. Repo holdings have risen $160.7 billion, or 15.8%, over the past year. (See our Jan. 13 News, "Jan MF Portfolio Holdings: Big FICC Repo, Agency Rebound; CDs, CP Drop.")

Treasury holdings in Taxable money funds decreased by $4.6 billion, or -0.4%, to $1.036 billion, or 29.7% of holdings. Treasury securities have increased by $136.0 billion, or 18.7%, over the past 12 months. U.S. Government Agency securities were the third largest segment; they increased $38.8 billion, or 5.4%, to $755.0 billion, or 21.6% of holdings. Agency holdings have risen by $110.7 billion, or 17.2%, over the past 12 months.

Certificates of Deposit (CDs) stood in fourth place; they decreased by $24.5 billion, or -8.7%, to $257.1 billion (7.4% of assets). CDs held by money funds have grown by $66.5 billion, or 34.9%, over 12 months. Commercial Paper remained in fifth place, down $13.4 billion, or -5.5%, to $232.2 billion (6.6% of assets). CP has increased by $43.5 billion, or 23.0%, over one year. Notes (including Corporate and Bank) were down $811 million, or -6.4%, to $11.8 billion (0.3% of assets), while Other holdings decreased to $1.7 billion to $14.0 billion.

The Number of Accounts Outstanding in ICI's series for taxable money funds increased by 266.8 thousand to 37.223 million, while the Number of Funds increased by one from last month to 284. Over the past 12 months, the number of accounts rose by 3.948 million and the number of funds decreased by three. The Average Maturity of Portfolios was 37 days, one less than in November. Over the past 12 months, WAMs of Taxable money have increased by six.

ICI's latest weekly "MMF Assets" report shows money fund assets declining in the latest week. It explains, "Total money market fund assets decreased by $12.79 billion to $3.62 trillion for the week ended Wednesday, January 29, the Investment Company Institute reported today. Among taxable money market funds, government funds decreased by $11.11 billion and prime funds increased by $96 million. Tax-exempt money market funds decreased by $1.78 billion." ICI's weekly series shows Institutional MMFs falling $11.0 billion and Retail MMFs decreasing $1.8 billion. Total Government MMF assets, including Treasury funds, were $2.689 trillion (74.1% of all money funds), while Total Prime MMFs were $794.8 billion (21.9%). Tax Exempt MMFs totaled $136.9 billion, 3.8%.

Money fund assets are now down year-to-date in 2020 (down $11B, or -0.3%), but they've increased in 11 out of the last 15 weeks. Over the past 52 weeks, ICI's money fund asset series has increased by $583 billion, or 19.2%, with Retail MMFs rising by $190 billion (16.0%) and Inst MMFs rising by $393 billion (21.2%).

ICI explains, "Assets of retail money market funds decreased by $1.78 billion to $1.38 trillion. Among retail funds, government money market fund assets decreased by $2.01 billion to $779.60 billion, prime money market fund assets increased by $1.77 billion to $472.16 billion, and tax-exempt fund assets decreased by $1.54 billion to $124.98 billion." Retail assets account for over a third of total assets, or 38.0%, and Government Retail assets make up 56.6% of all Retail MMFs.

The release adds, "Assets of institutional money market funds decreased by $11.01 billion to $2.24 trillion. Among institutional funds, government money market fund assets decreased by $9.10 billion to $1.91 trillion, prime money market fund assets decreased by $1.67 billion to $322.59 billion, and tax-exempt fund assets decreased by $237 million to $11.94 billion." Institutional assets accounted for 62.0% of all MMF assets, with Government Institutional assets making up 85.1% of all Institutional MMF totals. Money fund assets ended 2019 with their fastest growth rate and biggest asset increase since 2008. Assets increased by more than 2 1/2 times 2018's 7.2% gain.

The Securities and Exchange Commission released its latest "Money Market Fund Statistics" summary Wednesday, which confirmed that total money fund assets increased in December, rising by $37.2 billion, to a record $4.021 trillion. It was the 18th straight month of gains for money fund assets overall. Prime MMFs decreased $26.5 billion in December to close at $1.095 trillion, while Govt & Treasury funds rose by $64.7 billion to a record $2.783 trillion. Tax Exempt funds fell by $1.0 billion to $142.8 billion. Yields fell for Prime MMFs and Govt MMFs, while Tax-Exempt MMFs increased rates in December. 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. We review their latest numbers below.

December's asset gains follow increases of $45.6 billion in November, $88.6 billion in October, $82.9 billion in September, $76.3 billion in August, $75.6 billion in July, $41.9 billion in June, $78.2 billion in May, $690 million in April, $87.9 billion in March, $76.9 billion in February and $31.4 billion in January. Over the 12 months through 12/31/19, total MMF assets increased by $722.9 billion, or 21.9%, according to the SEC's series. (Note that the SEC's series includes a number of internal money funds not reported to ICI or others, though Crane Data tracks most of these.)

The SEC's stats show that of the $4.021 trillion in assets, $1.095 trillion was in Prime funds, which fell $26.5 billion in December. This follows increases of $20.2 billion in November, $38.4 billion in October, $11.7 billion in September, $10.6 billion in August and $22.3 billion in July. Prime funds represented 27.2% of total assets at the end of December. They've increased by a stunning $330.9 billion, or 43.3%, over the past 12 months.

Government & Treasury funds totaled $2.783 trillion, or 69.2% of assets. They rose $64.7 billion in December, after rising $24.2 billion in November, $46.6 billion in October, $72.9 billion in September, $66.0 billion in August and $53.5 billion in July. Govt & Treas MMFs are up $399.0 billion over 12 months, or 16.7%. Tax Exempt Funds decreased $1.0B to $142.8 billion, or 3.6% of all assets. The number of money funds was 366 in December, up one from the previous month and down 4 funds from a year earlier.

Yields for Taxable MMFs were mixed in December. The declines of the past 9 months follow almost 24 months of straight increases. The Weighted Average Gross 7-Day Yield for Prime Institutional Funds on Dec. 31 was 1.80%, down 3 basis points from the previous month. The Weighted Average Gross 7-Day Yield for Prime Retail MMFs was 1.88%, down 2 basis points. Gross yields fell to 1.67% for Government Funds, down 4 bps from last month. Gross yields for Treasury Funds decreased 5 basis points to 1.66%. Gross Yields for Muni Institutional MMFs jumped from 1.14% in November to 1.58%. Gross Yields for Muni Retail funds rose from 1.17% to 1.54% in December.

The Weighted Average 7-Day Net Yield for Prime Institutional MMFs was 1.72%, down 4 bps from the previous month and down 77 bps since 12/31/18. The Average Net Yield for Prime Retail Funds was 1.64%, down 2 bps from the previous month and down 0.71% since 12/31/18. Net yields fell to 1.40% for Government Funds, down 4 bps from last month. Net yields for Treasury Funds decreased 5 basis points to 1.43%. Net Yields for Muni Institutional MMFs rose from 1.01% in November to 1.44%. Net Yields for Muni Retail funds increased from 0.90% to 1.26% in December. (Note: These averages are asset-weighted.)

WALs and WAMs were mostly lower in December, with only Government WAMs increasing. The average Weighted Average Life, or WAL, was 62.1 days (down 2.6 days from last month) for Prime Institutional funds, and 70.2 days for Prime Retail funds (down 8.0 days). Government fund WALs averaged 96.1 days (down 1.5 days) while Treasury fund WALs averaged 97.7 days (down 1.9 days). Muni Institutional fund WALs were 18.8 days (down 0.5 days), and Muni Retail MMF WALs averaged 36.6 days (down 3.8 days).

The Weighted Average Maturity, or WAM, was 30.4 days (down 3.4 days from the previous month) for Prime Institutional funds, 36.5 days (down 7.2 days from the previous month) for Prime Retail funds, 35.5 days (up 1.1 days) for Government funds, and 42.6 days (down 1.5 days) for Treasury funds. Muni Inst WAMs were down 0.5 days to 18.5 days, while Muni Retail WAMs decreased 3.5 days to 34.6 days.

Total Daily Liquid Assets for Prime Institutional funds were 37.0% in December (up by 1.5% from the previous month), and DLA for Prime Retail funds was 24.3% (up 0.4% from previous month) as a percent of total assets. The average DLA was 45.6% for Govt MMFs and 91.6% for Treasury MMFs. Total Weekly Liquid Assets was 53.3% (up 1.3% from the previous month) for Prime Institutional MMFs, and 39.4% (up 0.5% from the previous month) for Prime Retail funds. Average WLA was 70.3% for Govt MMFs and 98.4% for Treasury MMFs.

In the SEC's "Prime MMF Holdings of Bank-Related Securities by Country table for December 2019," the largest entries included: Canada with $168.8 billion, the Japan with $117.3 billion, the U.S. with $106.9 billion, France with $76.7B, New Zealand/Australia with $54.6B, Germany with $35.8B, the UK with $35.8B, the Netherlands with $34.0B and Switzerland with $28.1B. The biggest gainers among the "Prime MMF Holdings by Country" include: Canada (up $8.5B), Japan (up $5.7B) and Australia/New Zealand (up $2.7B). The biggest decreases were the France (down $16.6B), Germany (down $15.5B), the UK (down $13.5B), the Netherlands (down $8.5B), Switzerland (down $3.2B) and the US(down $1.3B).

The SEC's "Trend in Prime MMF Holdings of Bank-Related Securities by Major Region" table shows Europe had $105.2B (down $30.5B from last month), the Eurozone subset had $156.3B (down $42.9B). The Americas had $276.0 billion (up $6.9B), while Asia Pacific had $196.4B (up $8.4B).

The "Prime MMF Aggregate Product Exposures" chart shows that of the $1.090 trillion in Prime MMF Portfolios as of December 31, $307.9B (28.2%) was in CDs and Time Deposits (down from $346.1), $359.3B (33.0%) was in Government & Treasury securities (direct and repo) (up from $314.8B), $146.7B (13.5%) was held in Non-Financial CP and Other securities (down from $158.0B), $214.0B (19.6%) was in Financial Company CP (down from $236.5B) and $62.3B (5.7%) was in ABCP (down from $64.0B).

The SEC's "Government and Treasury MMFs Bank Repo Counterparties by Country" table shows the U.S. with $165.6 billion, Canada with $196.3 billion, France with $125.6 billion, Germany with $11.8 billion, Japan with $138.6 billion, the U.K. with $75.4 billion and Other with $33.9 billion. All MMF Repo with the Federal Reserve jumped by $46.9 billion in December to $46.9 billion.

Finally, a "Percent of Securities with Greater than 179 Days to Maturity" table shows Prime Inst MMFs with 9.8%, Prime Retail MMFs with 10.8%, Muni Inst MMFs with 2.4%, Muni Retail MMFs 7.0%, Govt MMFs with 17.7% and Treasury MMFs with 17.3%.

Crane Data published its latest Weekly Money Fund Portfolio Holdings statistics and summary yesterday. Our Weekly Holdings track a shifting subset of our monthly Portfolio Holdings collection. The most recent cut (with data as of Jan. 24) includes Holdings information from 84 money funds (up 17 from a week ago), which represent $1.841 trillion (up from $1.481 trillion) of the $3.811 trillion (48.3%) in total money fund assets tracked by Crane Data. (See our Jan. 13 monthly Money Fund Portfolio Holdings update, "Jan MF Portfolio Holdings: Big FICC Repo, Agency Rebound; CDs, CP Drop." Note that our Weekly MFPH are e-mail only and aren't available on the website.)

Our latest Weekly MFPH Composition summary again shows Government assets dominating the holdings list with Repurchase Agreements (Repo) totaling $640.4 billion (up from $502.4 billion a week ago), or 34.8%, Treasury totaling $545.9 billion (up from $543.3 billion a week ago), or 29.6% and Government Agency securities totaling $335.9 billion (up from $256.9 billion), or 18.2%. Certificates of Deposit (CDs) totaled $108.7 billion (up from $60.2 billion), or 5.9%, and Commercial Paper (CP) totaled $95.2 billion (up from $57.8 billion), or 5.2%. A total of $79.3 billion or 4.3%, was listed in the Other category (primarily Time Deposits), and VRDNs accounted for $36.2 billion, or 2.0%.

The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $545.9 billion (29.6% of total holdings), Federal Home Loan Bank with $239.4B (13.0%), Fixed Income Clearing Co with $114.8B (6.2%), BNP Paribas with $58.9B (3.2%), Federal Farm Credit Bank with $58.5B (3.2%), RBC with $54.0B (2.9%), Credit Agricole with $41.7B (2.3%), Mitsubishi UFJ Financial Group with $34.1B (1.9%), Wells Fargo with $32.5B (1.8%) and JP Morgan with $32.2B (1.7%).

The Ten Largest Funds tracked in our latest Weekly include: JP Morgan US Govt ($156.1B), Fidelity Inv MM: Govt Port ($130.9B), Goldman Sachs FS Govt ($126.8B), Federated Govt Oblg ($102.5B), Wells Fargo Govt MM ($86.5B), Fidelity Inv MM: MM Port ($75.9B), JP Morgan 100% US Treas MMkt ($75.8B), JP Morgan Prime MMkt ($66.2B), Goldman Sachs FS Treas Instruments ($65.0B) and Morgan Stanley Inst Liq Govt ($64.3B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary, or our Bond Fund Portfolio Holdings data series.)

In other news, rates on money market funds and brokerage sweep accounts remained largely flat last week. Our Money Fund Intelligence Daily shows that the flagship Crane 100 MF Index dropped a basis point to 1.42%. The Crane 100 is down from 1.81% on Sept. 30 and down from 2.18% on June 30. It is down 77 bps from the beginning of 2019 (2.23%), but up from its near low of 0.06% ten years ago (12/31/09). The Crane Brokerage Sweep Index, which is currently 0.12%, is up 7 bps from ten years ago (0.05%) and down 16 bps from the end of 2018 (0.28%). Our latest Brokerage Sweep Intelligence, with data as of Friday, Jan. 24, shows only one major brokerage lowering rates in the past week.

The Crane Money Fund Average, which includes all taxable funds tracked by Crane Data, shows a 7-day yield of 1.30%, down a basis point in the week through Friday, Jan. 24. Treasury Inst MFs were down by 1 bps to 1.32%. Government Inst MMFs and Prime Inst MMFs were also down 1 bps, finishing the week at 1.38% and 1.52%, respectively. Treasury Retail MFs currently yield 1.05%, (down 0.01%), Government Retail MFs yield 1.07% (down 0.01%), and Prime Retail MFs yield 1.36% (down 0.01%), Tax-exempt MF 7-day yields decreased 0.01% to 0.48%.

Crane's Brokerage Sweep Index remained flat at 0.14% in the week ended January 24 (for balances of $100K), and Raymond James was the only firm that lowered rates. They dropped their rates on most balances by 3 bps; their 100K tier now offers a 0.05% rate. RJ also lowered rates on their higher tiers by 5 and 10 bps. E*Trade and TD Ameritrade currently have the lowest rate for balances at the $100K level (0.01%). Meanwhile, Fidelity continues to have the highest sweep rate (0.82%). (Fidelity also has a higher-yielding money fund option for new accounts.) Morgan Stanley is paying 0.03%. UBS, Merrill, Raymond James and Wells Fargo are all paying 0.05%, and Schwab is paying 0.06%. Ameriprise is paying 0.08% and RW Baird is paying 0.33% for balances of $100K.

Crane Data has also started tracking some of the other brokerages beyond the largest ones in our Brokerage Sweep Intelligence, just for internal purposes. Securities America currently has the lowest rate for balances at the $100K level (0.05%). Meanwhile, Betterment has the highest sweep rate (1.83%) with Robinhood in second (1.80%). LPL and SSN Securities are paying 0.10% and 0.12%, respectively. Folio Institutional offers rates of 0.14% and Edward Jones offers rates of 0.15% on balances of 100K. JPMS Brokerage is paying 0.20%, while Commonwealth is paying 0.25%. TIAA is paying 0.26%, Cetera is paying 0.40% (up 8 bps from two weeks ago), Pershing and Ally Bank are paying 0.75%, Pershing Dreyfus is paying 0.79%. And, JPMS Advisory is paying 1.50% for balances of $100K.

Finally, a website named Quartz published, "China no longer runs the world’s largest money market fund." They write, "China's flagship money market fund is no longer the world's largest. Ant Financial's Yu'e Bao, which means 'leftover treasure,' has ceded this title to two American funds. The shift comes as Chinese authorities wrestle with the country's fast-growing investment industry. Yu'e Bao ... took the global lead for assets under management in 2017, but has recently fallen behind money market funds managed by JPMorgan and Fidelity, according to data from Fitch Ratings.... The fund has $157 billion in assets under management as of December, compared with around $268 billion in March 2018." (See Crane Data's April 11, 2019 News, "China's Yu'e Bao No Longer World's Largest MMF.")

The piece explains, "Yu'e Bao shocked banking executives around the world with its immense growth. It started when the widely used payment service Alipay (operated by Ant Financial, an affiliate of Alibaba at the time) added the money market fund to its app. The fund was designed for spare cash, and Chinese consumers began using it like a checking account. They are able to pay for anything, from haircuts to hot pot dinners, directly out of their high-yielding investment holdings, seamlessly and easily."

It adds, "As concerns about the sheer size of Yu'e Bao grew, Ant Financial adopted voluntary measures that likely curtailed its expansion. In 2017, for example, Tianhong Asset Management capped Yu'e Bao's individual users' daily and total subscriptions at 20,000 RMB ($2,800) and 100,000 RMB respectively. Those measures have since been lifted."

Late last week, Crane Data hosted its "basic training" conference, Money Fund University in Providence, R.I. J.P. Morgan Securities' Teresa Ho presented the "Instruments of the Money Markets Intro," and gave an overview of the money markets and securities owned by money market funds. She tells us, "Borrowers use [the money markets] as a way to finance their short-term expenses, and investors use [it] as a way to temporarily invest their cash. Others use it as a way to manage their interest rate risk. Basically, as long as there's a demand for liquidity and as long as there's a mismatch between cash inflows and cash outflows, there is a need for money markets.... I think what happened in 2007 and 2008 has shown us just how interwoven money markets are with the fixed income markets, especially as it relates to how repo is traded on a daily basis, how Fed funds get traded on a daily basis as well as LIBOR." (Note: Crane Data Subscribers and recent Money Fund University Attendees may access the Powerpoint and recording for the MFU in our "Money Fund University 2020 Download Center.")

JPM's Ho explains, "To give you an idea of the different types of borrowers participating in money markets ... the list ranges from banks, to the U.S. government, to municipalities, to corporations, to GSEs, but by far the majority of the money markets are dominated by banks. They access the market not only in the form of commercial paper, time deposits, Fed funds, via the interbank market, and repo, but also via Eurodollar futures. From what we can gather about supply in the money markets, we estimate that banks make up about 35 percent of the entire money markets.... It seems like a lot, but that's a far cry from where we were in 2007 and 2008."

She comments, "At its peak in early 2008, total supply peaked at around $11.5 trillion dollars. If you exclude Treasuries, now we're just talking about credit supply, that number was closer to $9.5 trillion. Today those figures are closer to $10 trillion and $5.9 trillion, respectively. Which means that over the past 12 years, as far as credit supply goes, it's fallen by a dramatic $3.7 trillion. A lot of that, as you would expect, was driven by banks. They were overly reliant on short-term, wholesale funding, and they had to deleverage significantly after the crisis. But I would say even more so, the regulatory environment has been exerting a lot of pressure."

Ho tells us, "The same could be said about repo, which has historically been one of the largest sources of funding for a lot of the banks, both foreign and domestic. This is the sector that suffered tremendous liquidity pressure during the financial crisis, and today it's basically half the size of where we were in 2007 and 2008.... That being said ... I think over the past two years we have seen a little bit of growth in the repo markets, largely aided by the increase in Treasury issuance ... and dealers getting more efficient in terms of how they fund their balance sheets. Both of these things have prompted repo balances to increase over the past 24 months. But again, if you compare back to where it was in 2007 and 2008, it's still a far cry from where we were."

She states, "One of the things that's happened in money markets is the evolution of the composition of borrowers in the market. When we look at the underlying composition, what we have seen is that foreign banks have increasingly dominated the space. Just looking at the repo market ... you can see that foreign repo counterparties make up about 65 percent of the top five counterparties. This demonstrates just how much foreign banks are being involved in the money markets."

Ho adds, "Another driver ... is development of sponsored repo. This is a new development that's come to market over the past couple of years. It's a way for dealers to basically net the reverse repos or repos off balance sheet. So they're able to basically source this funding in the repo market without having an impact on their balance sheets. And it's been very successful.... At the end of December, it was even higher at around $250 billion. [At] yearend, there's always a lot of balance sheet concerns, a lot of window dressing, [and] using FICC sponsored repo is a way for the dealers to basically continue that funding without having an impact on all those regulatory ratios. It's certainly provided relief for the markets in having this particular product."

She also says, "Away from banks, when we look at the other borrowers in the money markets, such as the GSEs, we've actually seen a similar decline in the space as well, the likes of Fannie and Freddie.... Offsetting this, though ... has been balances at Federal Home Loan Banks.... The one outperformer ... is Treasury bills.... Over the past three years, outstandings have grown by almost $1 trillion."

JPM's Ho comments, "In terms of how we think about money market supply balances for the year 2020, we're projecting an increase of $345 billion this year, which is an increase of 3.0 percent. This is the lowest increase that we've seen in the past three years. Again, a large part of that moderation is because we're seeing that negative bill issuance in the marketplace.... We're also expecting dealer repo to only increase by $100 billion next year, in part because with the Fed coming in and buying all these Treasury securities there's less securities that the dealers are actually holding on their inventory. With less inventory on their balance sheets, there's actually less need for financing on the dealer side. When you think about those two things, those two things are basically driving our money market supply balances this year, much lower than we've seen over the past couple of years. As far as the other sectors go, between agencies, and CP, CD, and bonds that are rolling into the money market space, kind of small increases here and there, nothing really dramatic."

Next, Ho tells us, "Money funds, obviously are a very big buyer of money market supply. And if we look at how these cash balances evolved over the past year ... they've had just phenomenal growth. I think [for] 2019 ... balances grew by over $500 billion. I would say there's a couple of reasons for that growth. One, I think with the inversion of the yield curve last year, a lot of people just didn't want to extend duration. They wanted to be in a short duration space to maintain their higher yield. I think the second reason is that we saw a lot of volatility in the marketplace, both on the equity side and fixed income side.... It was a good place for some investors to hide out in the money markets without having a lot of volatility and still get that higher yield."

She adds, "I would say the third reason why we saw a lot of cash going into the money funds is because even when we think about what happened with interest rates, where the Fed decreased interest rates three times, when we compare bank deposit yields versus where money fund yields were offering, there was still a pretty substantial gap between these two products. On the margin, we also saw some savers out there that actually shifted their cash from bank deposits into the money funds. All of that drove money into the money fund space.... All that money went into Treasuries, it went into agencies, it went into repo, as well to bank CP, CDs."

Ho explains, "As we look forward to 2020 ... are we anticipating the same growth in the money fund space? ... I think we will continue to get positive growth. I'm not sure we're going to get as much as we saw last year, but certainly I think, the trajectory is for more inflows that come into the money funds. Going back through those same three reasons I just talked about with the curve, the curve is not inverted anymore, but it's still pretty flat. I would say investors are still not very much incentivized to go out and take duration risk when they're not taking that much extra yield. So, again, the short end is a place where they could hide out for the time being. We're still seeing some sort of volatility in the marketplace."

Finally, she states, "Despite all the changes that we've seen, I would say the money markets are here to stay. As I said at the beginning, as long as there is a demand for liquidity, as long as there's a mismatch between cash inflows and cash outflows, money markets will continue to exist. Certainly, regulations have changed the structure, but as you can see with some of the products that are coming onto the market, the markets have adapted to that.... The money markets are not going away anytime soon."

Ten years ago, the SEC voted to approve the first phase of its Money Market Reform Proposals, which were later followed by another set of reforms in 2014 (these went into effect in 2016). We reprint much of the rules and coverage from our Jan. 27, 2010 News, "SEC Approves Money Market Fund Reform Proposals, Hosts Webcast," and our 1/28/10 News, "More on SEC Money Fund Reforms; Industry Responds, Awaits Full Rules," below, as a reminder of where regulations stand. Their 1/27/10 summary statement says, "The Securities and Exchange Commission today will consider adopting new rules designed to significantly strengthen the regulatory requirements governing money market funds. The rules will, if adopted, increase the resilience of these funds to economic stresses and reduce the risks of runs on the funds." We also wrote a decade ago: "The Securities & Exchange Commission approved its long-awaited Money Market Fund Reforms, the latest changes to Rule 2a-7, the regulations governing money market mutual funds. The SEC voted 4-1 in favor of the new rules, which tighten maturity and quality rules, and add new liquidity mandates. (For more on current regulations, Crane Data Subscribers and recent Money Fund University Attendees may access the Powerpoint and recording for the "Money Fund Regulations: 2a-7 Basics" via our "Money Fund University 2020 Download Center.")

Then SEC Chairman Mary Shapiro explained, "The Commission [adopted] significant revisions to our oversight of money market funds -- revisions that include increasing credit quality, improving liquidity, shortening maturity limits, and requiring the disclosure of a fund's actual 'mark-to-market' net asset value, known as a 'shadow NAV,' on a delayed basis. Today's action grows out of the financial crisis of 2008 and the weaknesses revealed by the 'breaking of the buck' of the Reserve Primary Fund in September 2008. Those events precipitated a full-scale review of the money market fund regulatory regime by the SEC. And the adoption of today's rules is an important step -- but just a first step -- in our efforts to strengthen that regime."

She said, "The rules will tighten the maturity and credit quality standards for money market funds, and impose new liquidity requirements.... [Our] new rules will impose a 60-day [WAM] standard, rather than the current 90-day standard.... [and] will impose a weighted average life restriction [of] 120 days. With respect to 'second tier' securities ... we are limiting such securities to 3 percent of a money market fund's total portfolio.... Under the new liquidity standards, money market funds would have to meet both daily liquidity requirements of 10 percent of assets in cash and cash equivalents, and weekly liquidity requirements of 30 percent.... [T]he rules will create a substantial new disclosure regime so that everyone from investors to the SEC itself can better monitor a money market fund's investments and risk characteristics."

The SEC continues, "The rules would improve liquidity, increase credit quality and shorten maturity limits. They also would enhance disclosures by, among other things, requiring the posting on a delayed basis of a fund's 'shadow' net asset value or NAV, rather than the stable $1.00 NAV at which shareholder transactions occur. This information would enable the SEC and fund investors to better assess the risk profile of a money market fund and acclimate investors to the idea that money market funds may not always maintain a stable $1.00 share value."

The rules would "Further Restrict Risks by Money Market Funds via "Improved Liquidity: The rules would require that money market funds have a minimum percentage of their assets in highly liquid securities so that those assets can be readily converted to cash to pay redeeming shareholders (currently there are no minimum liquidity mandates): Daily Requirement: For all taxable money market funds, at least 10% of assets must be in cash, U.S. Treasury securities, or securities that convert into cash (e.g., mature) within one day. Weekly Requirement: For all money market funds, at least 30% of assets must be in cash, U.S. Treasury securities, certain other government securities with remaining maturities of 60 days or less, or securities that convert into cash within one week."

It also says, "The rules would further restrict the ability of money market funds to purchase illiquid securities by: Restricting money market funds from purchasing illiquid securities if, after the purchase, more than 5% of the fund's portfolio will be illiquid securities (rather than the current limit of 10%). Redefining as 'illiquid' any security that cannot be sold or disposed of within 7 days at carrying value."

The new rules also address: "Higher Credit Quality: The rules would place new limits on a money market fund's ability to acquire lower quality ('Second Tier') securities. They would do this by: Restricting a fund from investing more than 3% of its assets in Second Tier securities (rather than the current limit of 5%). Restricting a fund from investing more than 1/2 of 1% of its assets in Second Tier securities issued by any single issuer (rather than the current limit of the greater of 1% or $1 million). Restricting a fund from buying Second Tier securities that mature in more than 45 days (rather than the current limit of 397 days)."

There will be: "Shorter Maturity Limits: The rules would shorten the average maturity limits for money market funds, which would help to limit the exposure of funds to certain risks such as sudden interest rate movements. They would do this by: Restricting the maximum 'weighted average life' maturity of a fund's portfolio to 120 days (currently there is no such limit). The effect of the restriction is to limit the ability of the fund to invest in long-term floating rate securities. Restricting the maximum weighted average maturity of a fund's portfolio to 60 days (currently the limit is 90 days)."

It also requires: "'Know Your Investor' Procedures: The rules would require funds to hold sufficiently liquid securities to meet foreseeable redemptions (currently there are no such requirements). In order to meet this requirement, funds would need to develop procedures to identify investors whose redemption requests may pose risks for funds. As part of these procedures, funds would need to anticipate the likelihood of large redemptions. Periodic Stress Tests: The rules would require fund managers to examine the fund's ability to maintain a stable net asset value per share in the event of shocks -- such as interest rate changes, higher redemptions, and changes in credit quality of the portfolio (currently there are no stress test requirements).

Regarding, "Nationally Recognized Statistical Rating Organizations (NRSROs): The rules would continue to limit a money market fund's investment in rated securities to those securities rated in the top two rating categories (or unrated securities of comparable quality). At the same time, the rules also would continue to require money market funds to perform an independent credit analysis of every security purchased. As such, the credit rating serves as a screen on credit quality, but can never be the sole factor in determining whether a security is appropriate for a money market fund. In addition, the rules would improve the way that funds evaluate securities ratings provided by NRSROs. They would do this by: Requiring funds to designate each year at least four NRSROs whose ratings the fund's board considers to be reliable. This will permit a fund to disregard ratings by NRSROs that the fund has not designated, for purposes of satisfying the minimum rating requirements, while promoting competition among NRSROs. Eliminating the current requirement that funds invest only in those asset backed securities that have been rated by an NRSRO."

The SEC says on, "Repurchase Agreements: The rules would strengthen the requirements for allowing a money market fund to 'look through' the repurchase issuer to the underlying collateral securities for diversification purposes: Collateral must be cash items or government securities (as opposed to the current requirement of highly rated securities). The fund must evaluate the creditworthiness of the repurchase counterparty."

Under "Enhance Disclosure of Portfolio Securities," the new rule says, "Monthly Web Site Posting: The rules would require money market funds each month to post on their Web sites their portfolio holdings (currently there is no website posting requirement). Portfolio information must be maintained on the fund's website for no less than six months after posting. Monthly Reporting: The rules would also require money market funds each month to report to the Commission detailed portfolio schedules in a format that can be used to create an interactive database through which the Commission can better oversee the activities of money market funds (currently the Commission has no such database of money market fund information). Information reported to the Commission would be available to the public on a 60 day delay. This information would include a money market fund's 'shadow' NAV, or the mark-to-market value of the fund's net assets, rather than the stable $1.00 NAV at which shareholder transactions occur (currently a money market fund's 'shadow' NAV is reported twice a year, with a 60-day delay)."

Finally, the SEC says to "Improve Money Market Fund Operations," under, "Processing of Transactions: The rules would require that all money market funds and their administrators be able to process purchases and redemptions electronically at a price other than $1.00 per share (currently there is no such explicit requirement). This requirement would facilitate share redemptions if a fund were to 'break the buck.' A money market fund 'breaks the buck' when its net asset value falls below $1.00 per share, meaning investors in that fund will lose money. Suspension of Redemptions: The rules would permit a money market fund's board of directors to suspend redemptions if the fund is about to break the buck and decides to liquidate the fund (currently the board must request an order from the SEC to suspend redemptions). In the event of a threatened run on the fund, this would allow for an orderly liquidation of the portfolio. The fund would be required to notify the Commission prior to relying on this rule. Purchases by Affiliates: The rules would expand the ability of affiliates of money market funds to purchase distressed assets from funds in order to protect a fund from losses. Currently, an affiliate cannot purchase securities from the fund before a ratings downgrade or a default of the securities -- unless it receives individual approval. The change would permit such purchases without the need for approval under conditions that protect the fund from transactions that disadvantage the fund. The fund would have to notify the Commission when it relies on this rule."

Goldman Sachs and Drexel Hamilton recently announced the launch of two new money market funds: Drexel Hamilton share classes of the Goldman Sachs Financial Square Government Market Fund (VETXX) and GS Financial Square Prime Obligations Money Market Fund (VTNXX). According to a statement, "These share classes achieve the benefits of Sustainability and Impact investing. The funds generate competitive financial returns and create positive social impact for Drexel Hamilton's mission of training and employing disabled veterans." We review this news, as well as some other developments in the ESG and Social money fund and cash investing space, below. (Note: Thanks those who attended Crane's Money Fund University, which took place Thursday and Friday in Providence! Attendees and Crane Data subscribers may access our conference materials at the bottom of our "Content" page or our via our Money Fund University 2020 Download Center. Safe travels home!)

John Martinko, the president of Drexel Hamilton discussed the new funds on CNBC's "The Exchange," explaining, "These two share classes VETXX, cleverly named, and VTNXX are share classes of the parent Financial Square classes of Goldman Sachs. There's been a lot of commentary even today on Goldman, but I will tell you that Goldman Sachs has given us this first half of this trade. They've reached down into our veteran ranks and pulled us up to have a seat at their table for this opportunity to help corporations and municipalities and states satisfy those social governance goals of investing with military veterans. So Goldman ... I cannot thank them enough, and the corporations and the demand there."

In related news, a press release entitled, "Tiedemann Advisors to Offer an Impact-Investing Cash Solution," tells us, "Tiedemann Advisors is offering a new program to help clients put their cash to work in impact investment, the New York-based independent investment and wealth advisors announced on Wednesday. This program, called FICA (short for Federally Insured Cash Account) Impact, will allow investors to invest in more than 700 community banks across the U.S.... The cash solution is enabled through StoneCastle Cash Management, LLC."

Tiedemann's Brad Harrison comments, "Cash has traditionally been held at large financial institutions, which don't necessarily have socially responsible lending criteria that align to core values of our clients.... The real advancement of financial technology enables us to allocate cash to this network of 700 different community banks to unlock impact opportunities in communities nationwide.... What's interesting, he says, is that FICA Impact has similar yields and liquidity as money market accounts at large financial institutions."

Also, UBS Asset Management recently posted a "Statement of Additional Information" which provides some details on their pending UBS Select ESG Prime Fund. The filing says about UBS Select ESG Prime Institutional Fund, UBS Select ESG Prime Preferred Fund and UBS Select ESG Prime Investor Fund, "Each fund's investment objective is to earn maximum current income as is consistent with liquidity and preservation of capital while incorporating select environmental, social, and governance criteria ('ESG') into the investment process. Under normal circumstances, each fund invests at least 80% of its net assets ... in securities that meet UBS AM's sustainability criteria. In developing its sustainability criteria, UBS AM draws upon firm-wide resources of the UBS Asset Management Division of UBS Group AG, of which UBS AM is a member."

It explains, "Each fund's investments include (1) US and non-US government securities, (2) obligations of issuers in the financial services group of industries, (3) commercial paper and other short-term obligations of US and non-US corporations, partnerships, trusts and similar entities, (4) funding agreements and other insurance company obligations, (5) repurchase agreements, (6) investment company securities, and (7) municipal money market instruments." The fund is expected to go live in coming weeks.

Finally, a press release entitled, "Credit Suisse arranges the industry's first green ABCP note," tells us, "Credit Suisse today announces the successful inaugural issuance of a green Asset-Backed Commercial Paper (ABCP) note, raising USD 200 million. Credit Suisse understands this to be the industry's first green ABCP note. The note was issued by Alpine Securitization (a special purpose vehicle sponsored by Credit Suisse to issue ABCP)."

It adds, "Credit Suisse independently sourced the solar assets financed by the proceeds of this green ABCP issuance. The assets will be distinct from the asset pool used for Credit Suisse's Yankee Certificates of Deposit (YCD) green issuances, which were announced last year.... In June 2019, Credit Suisse announced the inaugural issuance of green Yankee Certificates of Deposit (YCD), raising $200 million in proceeds."

According to Crane Data's most recent MFI XLS, Social MMFs total $5.0 billion and include (largest share classes only listed): Dreyfus Govt Sec Cash Instit (DIPXX, $3.3B) and Goldman Sachs FS Fed Instr Inst (FIRXX, $1.7B). ESG MMFs hold $5.6B and include: BlackRock LEAF Direct (LEDXX, $800M), DWS ESG Liquidity Cap (ESIXX, $300M), Morgan Stanley Inst Liq ESG MMP I (MPUXX, $3.6B) and State Street ESG Liq Res Prem (ELRXX, $880M). (UBS Select ESG Prime Inst Fund is pending.)

For more on ESG and Social Money Market Funds, see these Crane Data News articles: Mischler Financial Joins "Impact" or Social Money Market Investing Wave (12/5/19), BNP Insticash Adds ESG Overlay (11/29/19), Dreyfus Launches "Impact" or Diversity Government Money Market Fund (11/21/19), Goldman Adds ESG Screen (11/14/19), Aviva Investors Discusses ESG MMFs; Fitch Rates MS ESG (11/6/19), UBS Asset Mgmt Files to Launch Select ESG Prime Institutional Fund (11/4/19), BlackRock Launches First Offshore ESG MMF; ICS LEAF in EUR, GBP, USD (7/22/19), SSGA Goes Live with ESG Money Market Fund (7/3/19) and Cap Advisors Group Demystifies ESG Investing (6/19/19).

This month, MFI interviews BlackRock's Global Head of Cash Management Tom Callahan. He discusses a number of issues in the money market fund space, including the outlook for 2020, technology, ESG, European money funds and more. Our Q&A follows. (Note: The following is reprinted from the January issue of Money Fund Intelligence, which was published on Jan. 8. Contact us at info@cranedata.com to request the full issue or to subscribe. Also, for those attending Crane's Money Fund University, which takes place Thursday and Friday morning, welcome to Providence! Attendees and Crane Data subscribers may access our conference materials at the bottom of our "Content" page or our via our Money Fund University 2020 Download Center. Feel free to drop by the Providence Renaissance if you're in town!)

MFI: Give us some history. Callahan: BlackRock's Cash business is actually older than BlackRock itself. You can trace our history back to 1973 when TempFund was launched by Provident National Bank. In '95, when PNC made an investment in BlackRock, they merged their entire fixed income business, including their money funds, into BlackRock. Cash has been a core, critical part of BlackRock’s franchise since the firm was founded.

For my own history, I came to BlackRock in 2013, by way of Merrill Lynch and the New York Stock Exchange. When I joined, the Cash management industry was plagued by zero interest rates, outflows and fee waivers. Back then, BlackRock's cash management business had roughly $250 billion. Now, 5 1/2 years later, we have enjoyed terrific growth, much of it organic. As we announced in our last earnings report, in mid-2019 we crossed our long-term goal of $500 billion in total client cash management assets, and we've kept growing! It's been a great run and a lot of fun.

MFI: What are your big priorities? Callahan: Let me start with technology and then talk a little bit about LEAF. They're both absolutely critical, and I believe are indicative of the profound changes happening industry-wide right now. Competition around technology is heating up in a very healthy way. I think this was really precipitated by Money Fund Reform in 2016, when we saw $1 trillion move out of Prime funds. The cash management industry has always been a relatively commoditized business, but when essentially 80% of the assets in the industry moved into government funds, it became hyper-commoditized.

That dynamic then intersects with the longer-term trends of clients' use of portals and intermediaries -- which are taking a larger percentage of the total volume in the industry every year. I think a lot of us, certainly at BlackRock, realized that we needed a different distribution strategy. That's what led us to acquire Cachematrix in 2017. In the last 12 months, other large providers have announced new investments in their own tech platforms. So, I think it's clear that the new competitive front in cash management is technology.

We believe that what clients care most about in cash is convenience. And the way to deliver convenience to clients is through technology. These tech-driven enhancements are ultimately going to benefit clients through enhanced ease of use, improved functionality, better transparency and ultimately lower fees. More recently, we acquired the NEX Treasury platform to try to expand in the European market. We're continuing to invest enormous amounts of time, energy and resources to making sure that we stay on the cutting edge of this technology transformation that's happening in cash management.

The second transformation that I think is underway in cash management is sustainability. ESG funds are quickly moving from being interesting fringe products to the mainstream. We launched the Liquid Environmentally Aware Fund, or LEAF, very early on in the movement, in April 2019, largely in response to client demand. Since launch, the LEAF family of funds has been incredibly successful. Across the four funds (U.S. domestic, plus offshore Dollar, Sterling and Euro), we're coming up on $8 billion in assets combined. We've really seen stunning growth in such a short period of time. What we've uncovered is that bringing values-based investing to cash is resonating with investors, frankly, even more than we even expected.

We built our LEAF funds to be a no brainer. They are priced and perform nearly identically to the traditional options. So if you can buy a large, liquid, diversified money fund that is green, offers benefits in terms of sustainability, all while getting nearly the same return that you would get in a traditional cash product, we think that is an incredibly compelling value proposition. LEAF has some other features that help make this fund truly unique. A partnership with World Wildlife Fund helps support their ongoing conservation efforts and helps us make better investment decisions. We also take 5% of the revenue of the fund to buy and retire carbon offsets.... It seems like every month there are new funds announced and if we look out three or four years, ESG funds will be the default, not the exception in cash.

MFI: What are your biggest challenges? Callahan: I would say our biggest challenge, and luckily it plays to all of our strengths, is just managing scale. If you add up all of our client assets and also the funds that we manage for other BlackRock products, we're now managing over $800 billion and our yearly trading volume is measured in the tens of trillions. Doing that in an efficient, scalable way that relies on technology and doesn't expose us to any undue risk, that's our biggest challenge today.

Most of the inflows that you saw in 2019 went to the largest players. In a way, it almost appears to me that the industry is organically consolidating -- i.e., there is such a huge preference from clients for big, scaled funds that those funds are naturally attracting most of the new money. So the big are getting bigger which, fortunately, offers advantages to clients in terms of liquidity and diversity. But what it means for us as a provider is that we need to be constantly investing in our systems and our platforms to be as efficient as we can. Luckily, our global business is built on the Aladdin platform, which is the best investment technology and risk management platform in the industry.

MFI: How are you positioning the funds? Callahan: In terms of positioning of the portfolios, generally we think that the risk is to lower yields. [A] new geopolitical risk has arisen, and the market really hasn't changed its pricing in terms of Fed expectations, with only one cut currently priced in for 2020. We've seen that the Fed is willing to cut rates at any sign of an economic slowdown. We think given where we are in the business cycle and where risk assets are priced, there is a very asymmetric risk towards lower rates.

Fortunately, to help us manage through this risk, we think we have some of the best PMs in the business. Rich Mejzak is our global cash CIO and he's been here since the MLIM days. On the government fund side, Joe Markowski, Eion D'Anjou, Chris Linsky and team are fantastic. They were here through the crisis, [and] reforms in '16. [W]e are very lucky to have that steady hand in Philadelphia investing our clients' assets.

MFI: Any customer concerns? Callahan: The number one concern we hear from clients is managing their own time and bandwidth. I think since the financial crisis, the role of the corporate treasurer and the definition of what that job encompasses has expanded three-or-four-fold. Ultimately, what our corporate treasurer clients care about more than anything is convenience. They don't want to have to stress about the task of cash investing. They want it to be effortless [and] integrated with other tools ... like TMSs. They want automation. They want sweeps. They want to 'set it and forget it.' That's why we're investing in technology the way that we are and I think that's why the industry is moving so aggressively in this direction.

MFI: What about fees and waivers? Callahan: If you look across the industry, I think cash management has been more resistant to fee compression than some other sectors of the asset management industry. I think there are a couple of reasons behind that. One of them, again, is that scale in cash is just so critical. The other are the various hidden taxes money fund investors are paying currently in terms of distribution fees. Most money fund providers pay in certain distribution networks over half their management fee to their distributors, which ultimately reduces the return investors earn. I think that as technology evolves and as greater competition is created in the distribution, buying and selling of money funds, a lot of those implied fees and tolls will be reduced. That's what technology does. It eliminates fees and reliance on middlemen. So, I do think you will see distribution fees drop due to technology and then you will see money fund fees drop commensurately as well.

MFI: What about ultra-short or offshore? Callahan: 2019 was a year where every single sector you just mentioned saw record or near record inflows. Our core Government funds, our Prime funds, our LEAF funds, our SMAs, all grew across both onshore and offshore. I think the offshore story is really an incredible one. This time last year we were all in the teeth of European Money Fund Reform and there was a huge amount of uncertainty. The fact that not only did we not see outflows in our funds but we actually hit new record highs was one of the great successes of 2019. We also saw fantastic growth of our SMA book in EMEA and APAC.

We have a fund called Short Obligations, which is our U.S. Ultra-Short Bond Fund. For us, it's a high net worth product that two years ago had $200 million in assets. It crossed $3 billion last year. For high net worth clients looking to get a slightly enhanced return on their cash by accepting floating NAV and going out a few months in duration, it has proved to be a homerun product, especially in a declining yield environment. It was another really strong performer for us in 2019.

MFI: What about the future? Callahan: I think that the industry has enormous room to continue to grow. I'm very, very bullish on the future of money funds. 2019 was a spectacular year for the industry and it was a terrific double-digit growth year for BlackRock's cash management business. It's not a surprise when you look at the shape of the yield curve, overall volatility in the markets, M&A activity, etc., all of those things kind of conspired together to create an ideal environment. Clients could earn, for much of 2019, 2.25-2.5% in a money fund, while the 10-year Treasury was yielding 1.60%.

I think for a lot of investors that was a no brainer. It was a really positive year for the industry. As great as 2019 was, I believe there is room for even more growth in 2020. You could make an argument that the cash management industry could double again in the coming years, which is exciting.

I firmly believe that transformative technology is going to be that growth accelerant. It's going to make money market funds cheaper, easier to use and more transparent. It's going to diminish or eliminate all the headaches of account setups and complexity around buying and selling of money funds. The lesson of the digital economy is when you make things easier to buy and sell, people buy and sell more of them.

Late last week, more publications weighed in on the recent FINRA Risk Monitoring and Examination Priorities letter. (See our Jan. 15 Link of the Day, "Finra Latest to Scrutinize Sweeps.") Mutual fund news source ignites published, "Finra Probing Cash-Sweep Arrangements," which tells us, "Big brokerages have been pushing client assets out of money market funds and into lower-yielding bank sweep accounts -- which also earn brokerages higher rates. And these sweep programs have become even more important to brokerages' business models in recent months, as many have recently eliminated trading commissions." (Note: Crane's Money Fund University starts tomorrow in Providence, R.I., and runs through Friday. Attendees and Crane Data subscribers may access our conference materials at the bottom of our "Content" page or our via our Money Fund University 2020 Download Center. Feel free to drop by the Providence Renaissance!)

The ignites piece explains, "Last week, Finra said its exam staff is looking at whether brokerages are breaking the rules with such programs and related disclosure to clients. Just two months ago, an enforcement division official at the Securities and Exchange Commission said the regulator was investigating conflicts in cash-sweep programs, too. Brokerages' services that sweep customer cash into affiliated banks or money market funds 'have taken on a greater significance' as a result of changing 'commission practices,' according to Finra's recent disclosure." (FINRA stands for the Financial Industry Regulatory Authority.)

They quote Crane Data's Peter Crane, who comments, "It's not just ‘make sure your investors know they're getting a crappy yield on their sweeps'.... There's a lot of other nuance in there, too." He adds, "No matter what regulators are doing, investors keep slowly voting with their feet."

The article also says, "The average bank deposit sweep rate for customers with $100,000 is currently 12 basis points, Crane says, citing his firm's data on the 10 largest brokerages. That compares to an average seven-day yield of 146 bps among the 100 largest money funds."

In related coverage, Financial Planning posted the article, "Why fintech cash accounts are drawing heightened scrutiny." It tells us, "By partnering with chartered banks, Betterment, Wealthfront, Personal Capital, Acorns and dozens of other digital platforms, have added high-yield savings accounts -- in many cases with market-leading yields -- to their robo arsenals. The new partnerships leapfrogged the regulatory burden of obtaining a bank charter and allowed brokerages to effectively offer the same banking products. However, such cash management products are more complicated than traditional savings and checking accounts held at a single institution and require clients to pay extra attention, particularly when opening accounts, experts say. And, regulators are taking notice."

The piece continues, "Kate Wauck, a Wealthfront spokeswoman, responds that, as with all sweep programs, the deposited funds receive FDIC insurance once they reach the partner bank and because broker-dealers who offer sweep programs are not banks, the funds are guaranteed by the SIPC. Wealthfront explains the differences to clients when the account is being opened, she says in an email. Wauck adds that 'we have a pretty arduous process for vetting banks,' and says that the firm works with a cash management intermediary firm, Total Bank Solutions, which deals directly with the banks."

It explains, "The new offerings have certainly proved popular. In April, Wealthfront said it collected $1 billion in its first month after launching its cash product tool.... Not to be outdone, Betterment CEO Jon Stein says his firm tacked on a billion dollars in new assets in just a matter of weeks after launching a savings account called Betterment Everyday in July.... Since most digital platforms partner with a handful of partner banks, the firms advertise FDIC protection of up to $1 million on its website. However, the $1 million claim may prove akin to false advertising, according to experts."

Financial Planning comments, "FINRA says it will monitor how the cash accounts and bank sweeps accounts are being advertised to clients in the coming year, according to its 2020 Risk Monitoring and Examination Priorities letter. For example, the agency will check for compliance specifically including FINRA Rules 1017 and the Exchange Act Rule 15c3-1, which monitor business operations and communications with the public."

The letter explains, "While these bank sweep programs may offer useful features to customers — and in some but not all cases, offer higher-than-average interest rates -- they have also raised several concerns about firms’ compliance with a range of FINRA and SEC rules."

Finally, they add, "In the case of Personal Capital, the robo advisor displays the program bank names along with the amount of deposits held in each account within the platform architecture, according to Dan Stampf, head of the cash management program at Personal Capital [who] partners with UMB Financial Corporation.... [T]here are cases when firms have offered protections when none actually existed. In late 2018, for example, the online discount brokerage Robinhood had to backtrack on promises of a cash account which it said would pay a market-topping 3% interest. In reality, the accounts weren't actually covered by SIPC insurance.... The FDIC has also taken notice. In December, the agency’s chairman Jelena Williams delivered remarks specifically addressing brokered deposits -- a term which broadly describes deposits made into a insured institution by a third party broker."

Rates on money market funds and brokerage sweep accounts remained flat again in the latest week. Our Money Fund Intelligence Daily shows that the flagship Crane 100 MF Index fell a basis point to 1.43% over the past week. The Crane 100 is down from 1.81% on Sept. 30 and down from 2.18% on June 30. The Crane 100 is down 77 bps from the beginning of 2019 (2.23%), but up from its near low of 0.06% ten years ago (12/31/09). The Crane Brokerage Sweep Index, which is currently 0.12%, is up 7 bps from ten years ago (0.05%) and down 16 bps from the end of 2018 (0.28%). Our latest Brokerage Sweep Intelligence, with data as of Friday, Jan. 17, shows every major brokerage keeping rates steady in the past week.

Our broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data, shows a 7-day yield of 1.31%, down 1 basis point in the week through Friday, Jan. 17. Treasury Inst MFs were unchanged at 1.32%. Government Inst MMFs and Prime Inst MMFs were down 1 bps, finishing the week at 1.39% and 1.53%, respectively. Treasury Retail MFs currently yield 1.06%, (unchanged), Government Retail MFs yield 1.07% (down 0.01%) and Prime Retail MFs yield 1.37% (down 0.01%). Tax-exempt MF 7-day yields plummeted 0.21% to 0.48% in the past week.

Crane's Brokerage Sweep Index remained flat at 0.14% in the week ended January 17 (for balances of $100K). No firms changed rates. E*Trade and TD Ameritrade currently have the lowest rate for balances at the $100K level (0.01%). Meanwhile, Fidelity continues to have the highest sweep rate (0.82%). (Fidelity also have a higher-yielding money fund option for new accounts.) Morgan Stanley is paying 0.03%. UBS, Merrill and Wells Fargo are all paying 0.05%, and Schwab is paying 0.06%. Raymond James and Ameriprise are paying 0.08%. RW Baird is paying 0.33% for balances of $100K.

State Street Global Advisors published its "2020 Global Cash Outlook" recently, which is subtitled, "Insights for the Future." SSGA Senior MD & Global Head of Cash Management Pia McCusker tells us in the Foreword, "A year ago, the Fed's dot plot projected two rate hikes, for an end-of-year target range of 275-300 basis points (bps). Instead, the Fed cut rates three times, bringing the target range to 150-175 bps. Money market yields followed accordingly.... As noted in our outlook on rates, in 2020, markets are not expecting the Fed to change rates by more than 25 bps." She says the outlook addresses: why duration was so short as rates fell, the forecast for credit, September's repo rate spike and prime money fund assets. McCusker adds, "[T]his year's outlook continues our coverage of cash innovations, which are picking up speed. With private sector initiatives such as Libra, Fnality and JPM Coin and the Fed's efforts to modernize its payment system, the way treasurers move money is poised for some dramatic improvement."

SSGA writes, "As we approach the end of 2019, financial markets (both debt and equity) are striking a relatively optimistic tone, despite evidence that suggests that the credit and business cycles are in the latter stages.... For the last two years, our Credit Research team motto has been: 'Don't worry about the end of the credit cycle: be ready for it.' To us this means continuing to select cash investment counterparties that are best-equipped to maintain their fundamental credit profiles when a downturn inevitably occurs."

Under the section "Reinventing Cash," SSGA's Will Goldthwait comments, "The nature of money -- what it is, who issues it, and how it is exchanged -- is evolving at an unprecedented clip. Bitcoin celebrated its tenth birthday in 2019, in a crowded field of more than 1,600 cryptocurrencies. In the US, just 31% of transactions are now handled in cash. In Sweden it's down to 13%. Consumers, who have so far benefited the most from this transformation, are abandoning checks and cash in favor of peer-to-peer services such as Zelle and Venmo."

He continues, "The cash revolution arguably started in the early 1970s, with the launch of the first institutional money market fund. The money fund was akin to minting a new fiat currency: for the first time, customers could deposit cash outside of the banking system. For a variety of reasons, however, current innovations have had little impact on institutional money management, or on international transactions."

SSGA tells us, "Yet several new ventures are promising to begin phasing in new services as soon as 2020. The most prominent of these is Facebook's Libra. However, for institutional investors new initiatives including Fnality, JPM Token and FedNow could be more influential in delivering the 24/7/365 convenience that retail customers have come to expect, at scale and with the level of security demanded by businesses."

The section says, "Fnality seeks to create a decentralized, blockchain-based financial infrastructure, dramatically simplifying wholesale banking and enabling near instantaneous transfers. The initiative -- backed by a $63.2 million investment and about a dozen financial institutions (including State Street Corporation) -- also seeks to reduce or eliminate certain risks intrinsic in the global exchange system."

The Outlook explains, "The Federal Reserve (Fed) is also taking steps to modernize how cash is moved domestically in the US. Currently, the Fed's Automated Clearinghouse (ACH) payment system handles the vast majority of US domestic cash transfers.... In August 2019, the Fed announced that it would launch FedNow, a new real-time payment and settlement service, to make near instantaneous payments available to everyone, 24/7/365."

It adds, "As we wrote in last year's Global Cash Outlook, if the Fed implements real-time payments, we believe that money funds would seize the opportunity to eliminate deadlines and closures, and begin offering global access to funds in real-time, available at any given time, which the modern economy demands and retail banking customers take for granted.... The Fed is proceeding with the idea at a cautious pace.... Despite efforts for Libra, Fnality and JPM Coin, we anticipate that most financial transactions will still move through the Fed system, so the development of FedNow remains critically important to the modernization of institutional cash services."

This section concludes, "In the coming years, cash investors can expect more flexibility, with the current level of safety and liquidity. The private sector is moving quickly to enable a global solution unconstrained by working hours. Central banks are realizing they need to address this technological evolution and ensure the safety of the overall monetary system. Clearly regulation will play a very important part in this evolution. Post-money fund reform in the US and Europe, funds are safer and more liquid. Now is the time to progress beyond the traditional scheduling limits imposed by a payment framework that has not kept pace with technological evolution. Eliminating fund deadlines, allowing multi-regional settlement and embracing technological change are developments that would greatly benefit business."

SSGA's Outlook says about Prime MMFs, "In last year's Global Cash Outlook, we observed that many investors were considering moving some of their cash back into prime money fund strategies. Indeed, prime money fund assets under management (AUM) continued to grow in 2019, rising to $750 billion in November 2019, up from $536 billion a year earlier, and more than double from the low of $372 billion in the weeks after the October 2016 money fund reform deadline. This continues to support the observation that investors are comfortable with how prime money funds operate. We believe companies that invest exclusively in government money funds would be wise to weigh the prime fund yield benefits against the incremental risks inherent in these funds, and consider allocating to them."

Finally, it adds, "For what it's worth, at the time of writing in mid-December, there's a near total market consensus (at 98.5%) that the Fed won't raise rates in 2020. Instead, markets foresee a 38% probability that the range will be 125–150 bps and a 30% probability that rates will remain in the current range. Of course, these predictions could be as wrong as they were last year.... Also of interest to cash investors in 2020 will be the possibility that tighter funding in the repurchase agreement (repo) markets could trigger a repeat of the repo rate spike that occurred in the fourth quarter of 2019."

Money fund assets declined for the first time in four weeks, moving back down to the $3.63 trillion level after hitting their highest level since July 2009 the prior week, according to the ICI. Their latest "Money Market Fund Assets" report explains, "Total money market fund assets decreased by $7.18 billion to $3.63 trillion for the week ended Wednesday, January 15, the Investment Company Institute reported.... Among taxable money market funds, government funds decreased by $8.51 billion and prime funds increased by $2.32 billion. Tax-exempt money market funds decreased by $993 million." Money fund assets are flat year-to-date in 2020, but they've increased in 10 out of the last 13 weeks and rose by $584 billion in 2019, or 19.2%.

Over the past 52 weeks, ICI's money fund asset series has increased by $581 billion, or 19.1%, with Retail MMFs rising by $186 billion (15.6%) and Inst MMFs rising by $395 billion (21.3%). ICI's weekly series shows Institutional MMFs falling $6.6 billion and Retail MMFs decreasing $0.58 billion. Total Government MMF assets, including Treasury funds, were $2.700 trillion (74.4% of all money funds), while Total Prime MMFs were $790.3 billion (21.8%). Tax Exempt MMFs totaled $140.5 billion, 3.9%.

They explain, "Assets of retail money market funds decreased by $579 million to $1.38 trillion. Among retail funds, government money market fund assets decreased by $1.12 billion to $788.20 billion, prime money market fund assets increased by $1.07 billion to $468.27 billion, and tax-exempt fund assets decreased by $529 million to $127.73 billion." Retail assets account for over a third of total assets, or 38.0%, and Government Retail assets make up 56.8% of all Retail MMFs.

The release adds, "Assets of institutional money market funds decreased by $6.60 billion to $2.25 trillion. Among institutional funds, government money market fund assets decreased by $7.39 billion to $1.92 trillion, prime money market fund assets increased by $1.26 billion to $321.99 billion, and tax-exempt fund assets decreased by $464 million to $12.81 billion." Institutional assets accounted for 62.0% of all MMF assets, with Government Institutional assets making up 85.1% of all Institutional MMF totals.

Money fund assets ended 2019 with their fastest growth rate and biggest asset increase since 2008. Assets increased by more than 2 1/2 times 2018's 7.2% gain. The prior seven years showed relatively flat growth with MMFs increasing by 4.1% in 2017, decreasing 1.1% in 2016, increasing 1.0% in 2015, increasing 0.5% in 2014 and 2013, and increasing 0.4% in 2012. In 2011, money fund assets fell by 4.1%. In 2009 and 2010, assets plummeted by 14.0% and 14.7%, respectively.

Our separate MFI Daily asset series shows money fund assets down $30.5 billion month-to-date to $3.947 trillion. Prime assets are down $12.4 billion MTD, while Government assets are down by $20.8B. Tax-Exempt MMFs increased $2.8 billion. Prime and Government MF assets were up $378.7 billion and $492.6 billion in 2019, respectively. (Note: Crane Data, ICI and the SEC all have separate asset series, so totals will vary due to differences in the fund universes covered.)

In related news, ICI also released its monthly "Money Market Fund Holdings" summary, which reviews the aggregate daily and weekly liquid assets, regional exposure, and maturities (WAM and WAL) for Prime and Government money market funds. (For more, see our Jan. 13 News, "Jan MF Portfolio Holdings: Big FIIC Repo, Agency Rebound; CDs, CP Drop.)

The MMF Holdings release says, "The Investment Company Institute (ICI) reports that, as of the final Friday in December, prime money market funds held 25.5 percent of their portfolios in daily liquid assets and 40.9 percent in weekly liquid assets, while government money market funds held 59.3 percent of their portfolios in daily liquid assets and 76.6 percent in weekly liquid assets." Prime DLA decreased from 26.4% in November, and Prime WLA was unchanged from 40.9%. Govt MMFs' DLA decreased from 60.3% in November and Govt WLA decreased from 77.2% from the previous month.

ICI explains, "At the end of December, prime funds had a weighted average maturity (WAM) of 35 days and a weighted average life (WAL) of 73 days. Average WAMs and WALs are asset-weighted. Government money market funds had a WAM of 38 days and a WAL of 97 days." Prime WAMs and WALs decreased by five days from the previous month. Govt WAMs remained the same while WALs decreased by two from the previous month.

Regarding Holdings By Region of Issuer, ICI's release tells us, "Prime money market funds' holdings attributable to the Americas rose from $336.58 billion in November to $372.93 billion in December. Government money market funds' holdings attributable to the Americas rose from $2,179.84 billion in November to $2,350.29 billion in December."

The Prime Money Market Funds by Region of Issuer table shows Americas-related holdings at $372.9 billion, or 48.1%; Asia and Pacific at $167.5 billion, or 21.6%; Europe at $229.6 billion, or 29.6%; and, Other (including Supranational) at $5.1 billion, or 0.7%. The Government Money Market Funds by Region of Issuer table shows Americas at $2.350 trillion, or 86.4%; Asia and Pacific at $127.4 billion, or 4.7%; Europe at $228.8 billion, or 8.4%, and Other (Including Supranational) at $13.6 billion, or 0.5%."

Crane Data's latest MFI International shows assets in "offshore" European money market mutual assets rising in US Dollar, Sterling and Euro funds in the 30 days through January 15. These U.S.-style funds, domiciled in Ireland or Luxemburg and denominated in US Dollars, Sterling and Euro, increased by $12.8 billion over the last 30 days to $889.3 billion, and they're up by $12.7 billion year-to-date. Offshore USD money funds, which hit a record $500 billion on Jan. 2, are up $10.3 billion over 30 days and up $6.5 billion YTD. Euro funds are up E219 million over the previous 30 days, but YTD they're down E1.0 billion. GBP funds have risen by L1.8 billion over 30 days, and they're up by L6.0 billion YTD. U.S. Dollar (USD) money funds (189) account for over half $500.9 billion, or 56.3%) of our "European" money fund total, while Euro (EUR) money funds (87) total E97.6 billion (11.0%) and Pound Sterling (GBP) funds (120) total L231.0 billion (26.0%). We summarize our latest "offshore" money fund statistics and our Money Fund Intelligence International Portfolio Holdings (which went out to subscribers yesterday), below.

Offshore USD MMFs yield 1.57% (7-Day) on average (as of 1/15/20), down from 2.29% on 12/31/18, but up from 1.19% at the end of 2017. EUR MMFs yield -0.57 on average, compared to -0.49% at year-end 2018 and -0.55% on 12/29/17. Meanwhile, GBP MMFs yielded 0.64%, the same as 12/31/18 and up from 0.24% at the end of 2017. (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 12/31/19), show that European-domiciled US Dollar MMFs, on average, consist of 28% in Commercial Paper (CP), 21% in Certificates of Deposit (CDs), 19% in Repo, 18% in Treasury securities, 12% in Other securities (primarily Time Deposits) and 2% in Government Agency securities. USD funds have on average 35.5% of their portfolios maturing Overnight, 7.7% maturing in 2-7 Days, 14.4% maturing in 8-30 Days, 16.3% maturing in 31-60 Days, 10.4% maturing in 61-90 Days, 12.2% maturing in 91-180 Days and 3.6% maturing beyond 181 Days. USD holdings are affiliated with the following countries: the US (30.7%), Canada (12.0%), Japan (11.9%), France (11.4%), Germany (7.4%), the United Kingdom (5.7%), the Netherlands (4.1%), Australia (3.3%), Sweden (2.6%), Switzerland (2.6%), China (1.9%), Singapore (1.7%), Belgium (1.3%) and Norway (1.1%).

The 10 Largest Issuers to "offshore" USD money funds include: the US Treasury with $102.7 billion (18.6% of total assets), Sumitomo Mitsui Banking Co with $17.8B (3.2%), BNP Paribas with $16.9B (3.1%), Bank of Nova Scotia with $15.9B (2.9%), RBC with $15.9B (2.9%), Mitsubishi UFJ Financial Group Inc with $15.1B (2.7%), Mizuho Corporate Bank Ltd with $14.6B (2.6%), Fixed Income Clearing Co with $14.3B (2.6%), Toronto-Dominion Bank with $13.5B (2.4%) and Barclays PLC with $12.1B (2.2%).

Euro MMFs tracked by Crane Data contain, on average 48% in CP, 22% in CDs, 21% in Other (primarily Time Deposits), 6% in Repo, 3% in Treasuries and 0% in Agency securities. EUR funds have on average 22.5% of their portfolios maturing Overnight, 11.6% maturing in 2-7 Days, 17.7% maturing in 8-30 Days, 16.8% maturing in 31-60 Days, 10.7% maturing in 61-90 Days, 17.5% maturing in 91-180 Days and 3.2% maturing beyond 181 Days. EUR MMF holdings are affiliated with the following countries: France (28.8%), Japan (14.3%), the US (10.6%), Germany (8.8%), Sweden (8.1%), the U.K. (7.3%), the Netherlands (4.7%), Switzerland (3.4%), China (2.5%), Belgium (2.5%), Canada (2.4%), Finland (1.8%) and Abu Dhabi (1.3%).

The 10 Largest Issuers to "offshore" EUR money funds include: Credit Agricole with E5.0B (5.2%), BNP Paribas with E4.2B (4.3%), Societe Generale with E3.7B (3.9%), Mitsubishi UFJ Financial Group Inc with E3.7B (3.8%), BPCE SA E3.5B (3.6%), Nordea Bank with E3.4B (3.5%), Republic of France with E3.4B (3.5%), Mizuho Corporate Bank Ltd with E3.0B (3.1%), Sumitomo Mitsui Banking Co with E3.0B (3.1%) and Svenska Handelsbanken with E2.9B (3.0%).

The GBP funds tracked by MFI International contain, on average (as of 12/31/19): 38% in CDs, 24% in Other (Time Deposits), 20% in CP, 12% in Repo, 6% in Treasury and 0% in Agency. Sterling funds have on average 27.8% of their portfolios maturing Overnight, 9.4% maturing in 2-7 Days, 13.9% maturing in 8-30 Days, 15.6% maturing in 31-60 Days, 12.6% maturing in 61-90 Days, 15.6% maturing in 91-180 Days and 5.1% maturing beyond 181 Days. GBP MMF holdings are affiliated with the following countries: the United Kingdom (20.8%), Japan (15.8%), France (15.0%), Canada (9.4%), Germany (6.5%), Sweden (4.1%), the Netherlands (4.1%), Australia (3.8%), the United States (3.6%), Switzerland (3.4%) and Singapore (3.4%).

The 10 Largest Issuers to "offshore" GBP money funds include: the UK Treasury with L21.4B (12.1%), Sumitomo Mitsui Banking Co with L8.3B (4.7%), Mizuho Corporate Bank Ltd with L7.6B (4.3%), Credit Agricole with L6.9B (3.9%), DZ Bank AG with L6.2B (3.5%), BPCE SA with L5.9B (3.3%), Nordea Bank with L5.5B (3.1%), BNP Paribas with L5.3B (3.0%), Mitsubishi UFJ Financial Group with L5.2B (2.9%) and Toronto-Dominion Bank with L5.0B (2.8%).

In other news, J.P. Morgan's latest "US Short Duration Update" tells us, "It appears there is another reason why the repo markets were so tame at year-end. In addition to the Fed's massive liquidity injections and Canadian banks' increased activity in the funding markets, market participants substantially increased their use of sponsored repo at the end of the year. The latest data released by FICC shows gross daily average volumes surged by 16% in December to $384bn, the highest monthly level reported thus far. Even more striking are monthly peak volumes, which show usage peaked at $524bn in December (presumably at year-end) versus $346bn in November and the prior high of $400bn in September."

The Update continues, "These are large volumes, particularly for a product that expanded its service only a couple of years, and underscore the growing use and popularity of sponsored repo among market participants. Indeed, December's monthly MMF holdings show that MMFs participated in $276bn of FICC sponsored repo, roughly twice what it had the previous month as well as last year-end.... In contrast, with the exception of Canadian banks which increased their repo exposures with MMFs by $30bn in December, MMFs saw reduced repo exposures to almost all other banks/dealers. In effect, sponsored repo has become the de facto source of backstop supply for MMFs, as opposed to the Fed's ON RRP, which is not surprising as the rate offered often sits above the ON RRP rate."

It explains, "With MMFs willing to transact in sponsored repo, this has, in turn, given banks/dealers greater capacity to lend (also via sponsored repo). Subtracting MMFs' participation from December's peak gross volumes, this suggests sponsoring members provided as much as $248bn of financing into the repo markets at year-end, either to sponsored members such as hedge funds or to other FICC members. Combining this with other liquidity provisions available in the marketplace at the time (i.e., ~$400bn in Fed liquidity and ~$30bn in incremental repo capacity from Canadian banks), it's no wonder year-end was a non-event."

Finally, JPM's piece adds, "Interestingly, a closer look at MMF holdings do not reveal any additional sponsoring members that are engaged with MMFs. Based on what is disclosed, it appears MMFs continue to be engaged in sponsored repo with BNY, JPM, and SST, in spite of the jump in the number of sponsoring members at the end of last year. Currently, there are 12 approved sponsors (Bank of America, Bank of New York Mellon, BNP Paribas, ED&F Man, JPMorgan Chase Bank, JPMorgan Securities, Mizuho, Morgan Stanley, NatWest Markets Securities, Palafox Trading, State Street, and UBS AG Stamford Branch), sponsoring cash and/or collateral providers."

The January issue of our Bond Fund Intelligence, which was sent to to subscribers Wednesday morning, features the lead story, "Top Stories & Funds of '19; Outlook for '20; BFI Turns 5," which looks at the top bond funds and bond fund articles of 2019, and a second article, "Worldwide BF Assets Dip to $11.4 Trillion, But US BFs Up," which reviews international bond fund markets in Q3'19. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show bond fund yields mixed and returns up in December. We excerpt from the new issue below. (Contact us if you'd like to see our Bond Fund Intelligence and BFI XLS spreadsheet, or our Bond Fund Portfolio Holdings data.)

Our "Top Stories & Funds of '19" article says, "Once again, 2019 proved to be a banner year for bonds, after a brief scare in late 2018. Bond fund and bond ETFs posted excellent returns and brought in waves of cash inflows. The year was undoubtedly one of the best ever for bond funds. We briefly review last year, including top stories from BFI, which celebrates its 5th birthday this month, and we list the top-performing funds in 2019."

It continues, "Bond fund assets rose above $4.65 trillion and bond ETFs broke above $800 billion in late 2019. According to ICI, bond fund assets stood at $4.653 trillion as of Nov. 30, 2019, up $553.9 billion, or 13.5%, from a year earlier. Bond ETFs totaled $801.7 billion on 11/30/19, up $187.1 billion, or 30.4%, over the past year. (Bond fund assets rose by $33.8 billion and Bond ETFs rose by $24.0 billion in December, according to BFI's numbers.) We show total bond funds averaging returns of 7.45% in 2019, after returning –0.09% in 2018 and 4.03% in 2017."

Our "Worldwide BF Assets" article reads, "Bond fund assets worldwide decreased slightly in the latest quarter to $11.4 trillion, though two of the four largest bond fund markets — the U.S. and Ireland — increased strongly. But No. 3-ranked market Brazil saw assets fall sharply. (It appears Brazil erroneously reported a sharp jump in assets last quarter, which was erased from the ICI's totals this quarter.) We review the ICI's 'Worldwide Open-End Fund Assets and Flows, Third Quarter 2019,' below.”

ICI's report says, "Worldwide regulated open-end fund assets increased 0.3% to $51.61 trillion at the end of the third quarter of 2019, excluding funds of funds. Worldwide net cash inflow to all funds was $676 billion in the third quarter, compared with $339 billion of net inflows in the second quarter…. The Investment Company Institute compiles worldwide open-end fund statistics on behalf of the International Investment Funds Association, the organization of national fund associations.'"

Our Bond Fund News includes the brief, "Yields Mixed, Returns Up in December," which tells us, "Bond fund yields were flat or mixed and returns were up last month. Our BFI Total Index returned 0.43% over 1-month and 7.46% over 12 months. The BFI 100 returned 0.41% in Dec. and 8.10% over 1 year. Our BFI Conservative Ultra-Short Index returned 0.17% over 1-mo and 2.86% over 1-yr; Ultra-Shorts averaged 0.24% in Dec. and 3.34% over 12 mos. Short-Term returned 0.33% and 5.11%, and Intm-Term gained 0.14% last month and rose 8.26% over 1-year. BFI's Long-Term Index returned -0.04% in Dec. and 11.27% for 1-yr; our High Yield Index rose 1.61% in Dec. and 12.04% for 1-year."

In another News brief, we quote the Financial Times piece, "Bond funds top inflow record." They write, "Global investors pumped a record amount of cash into fixed-income funds for the week ending Wednesday, after the threat of war prompted them to seek shelter in safe havens. Fixed income mutual funds and exchange traded funds around the world took in $23.2bn, the largest total in data going back to 2001, according to EPFR Global."

A third News update covers the Wall Street Journal article, "Morningstar's Big Bet on Bond Ratings Hits Turbulence." They explain, "In mid-November, bond investors got an unwelcome surprise from one of the main ratings firms in a hot corner of the bond market: About 25% of the bonds that it had rated were likely to be downgraded. Several days later, after calls poured in from confused investors, ratings firm DBRS Morningstar Inc. backtracked and said it had made an error."

Finally, BFI features a sidebar entitled "Columbia's 2020 Outlook." It says: "Columbia Threadneedle Investments' Deputy Global Head of Fixed Income Gene Tannuzzo gives a '2020 Fixed Income Outlook' in a recent Asset TV video. He says, 'Looking into 2020 the most important thing on our mind are the companies and industries that can cope with trade volatility the best. Trade is not something that's going to be resolved overnight, whether it's the US and China trade negotiation, or US and Europe or any other pair. And it's something that is going to be top of mind for all companies as they think about planning their businesses in 2020 and beyond.'"

Below, we reprint the article, "Top Money Funds of 2019; 11th Annual MFI Awards," from the January edition of our Money Fund Intelligence.... In this issue, we recognize the top-performing money funds, ranked by total returns, for calendar year 2019, as well as the top funds for the past 5-year and 10-year periods. We present the funds below with our annual Money Fund Intelligence Awards. These are given to the No. 1-ranked funds based on 1-year, 5-year and 10-year returns, through Dec. 31, 2019, in each of our major fund categories -- Prime Institutional, Government Institutional, Treasury Institutional, Prime Retail, Government Retail, Treasury Retail and Tax‐Exempt.

The Top-Performing Prime Institutional fund (and fund overall) was BlackRock Cash Inst MMF SL (BRC01), which returned 2.49% (with 125 funds total), but DWS ESG Liquidity Inst (ESGXX) was first if restricted funds are excluded with a return of 2.41%. For Prime Retail funds, Vanguard Variable Insurance MM Fund (VAN03) ranked No. 1 (2.32%, 81 funds total), but Fidelity Inv MM: MM Port Inst (FNSXX) had the best return in 2019 (2.30%) if restricted funds are excluded.

The Top‐Performing Government Institutional funds in 2019 were Fidelity Flex Govt Money Market Fund (FLGXX) and Fidelity Series Govt Money Market Fund (FGNXX), which both returned 2.27% (144 funds total). AIG Govt MMF Class A (SMAXX) and American Century US Govt MM G (AGGXX) were the Top Government Retail funds over 1‐year with returns of 2.25% (155 funds total).

BlackRock Select Treas Strategies Inst (MLSXX) ranked No. 1 in the Treasury Institutional class with a return of 2.39% (134 funds total). Federated Trust for US Treas Obl IS (TTOXX) was No. 1 among Treasury Retail funds, returning 2.05% (72 funds total).

Top Funds over Past Five Years. For the 5‐year period through Dec. 31, 2019, DWS ESG Liquidity Cap (ESIXX) took top honors for the best performing Prime Institutional money fund with a return of 1.31% (108 funds total). Fidelity Inv MM: MM Port Inst (FNSXX) ranked No. 1 among Prime Retail with an annualized return of 1.23% (62 funds total).

Dreyfus Inst Pref Govt Plus MF (DRF03) ranked No. 1 among Govt Institutional funds with a return of 1.06% (103 funds total), while Vanguard Federal Money Mkt Fund (VMFXX) ranked No. 1 among Govt Retail funds over the past 5 years with a return of 1.01% (137 funds total). BlackRock Select Treas Strategies Inst (MLSXX) ranked No. 1 in 5‐year performance among Treasury Inst money funds with a return of 1.00% (117 funds total). Federated Trust for US Treas Obl IS (TTOXX) ranked No. 1 among Treasury Retail funds with a return of 0.94% (66 funds total).

Best Money Funds of the Decade. The highest performer of the past 10 years and No. 1 among Prime Inst MMFs was BlackRock Cash Inst MMF SL (BRC01) or Morgan Stanley Inst Liq ESG MMP Inst (MPUXX) if you exclude restricted funds. They returned 0.74% and 0.68%, respectively (97 funds total). Fidelity Inv MM: MM Port Inst (FNSXX), which returned 0.71% (62 funds total), was best among Prime Retail.

UBS Liquid Assets Govt Fund (UBS02), which returned 0.60% (99 funds total), (No. 1 among Govt Inst funds); Vanguard Federal Money Mkt Fund (VMFXX) ranked No. 1 among Govt Retail funds, returning 0.51% (132 funds total). BlackRock Select Treas Strategies Inst (MLSXX) returned the most among Treasury Inst funds over the past 10 years at 0.56% (104 funds total). Federated Trust for US Treas Obl IS (TTOXX) ranked No. 1 among Treasury Retail MMFs at 0.47% (104 funds total).

Top Tax‐Exempt Funds. We're also giving out awards for the best‐performing Tax‐Exempt money funds. Fidelity SAI Muni Money Market Fund (FMQXX) ranked No. 1 for the 1‐year period ended Dec. 31, 2019, with a return of 1.55% (88 funds total). Over the last 5 years, Federated Municipal Obligs WS (MOFXX) was the top performer with a return of 0.81% (83 funds total). BMO Tax Free MMF Premier (MFIXX) was the top‐ranked fund for the 10‐year period with a return of 0.48% (78 funds total).

See the MFI Award Winner listings on page 6 of the MFI newsletter, and see our latest MFI XLS for more detailed rankings. The tables on page 6 show the No. 1 ranked money fund for each category based on 1‐year, 5‐year, and 10‐year annualized total returns.

Crane Data released its January Money Fund Portfolio Holdings Friday, and our most recent collection, with data as of Dec. 31, 2019, shows a big increase in Repo and Agencies, and a drop in Treasuries. Money market securities held by Taxable U.S. money funds (tracked by Crane Data) increased by $24.7 billion to $3.811 trillion last month, after increasing $20.8 billion in November, $75.8 billion in October and $92.6 billion in September. Repo continues to be the largest portfolio segment closely followed by Treasury securities, then Agencies. CP remained fourth ahead of CDs, Other/Time Deposits and VRDNs. Below, we review our latest Money Fund Portfolio Holdings statistics. (Visit our Content center to download the latest files, or contact us to see our latest Portfolio Holdings reports.)

Among taxable money funds, Repurchase Agreements (repo) rose by $75.3 billion (6.51%) to $1.234 trillion, or 32.4% of holdings, after decreasing $35.2 billion in November, $24.7 billion in October and $76.8 billion in September. Treasury securities fell $14.7 billion (-1.3%) to $1.112 trillion, or 29.2% of holdings, after increasing $55.3 billion in November, $30.2 billion in October and $134.7 billion in September. Government Agency Debt increased by $42.0 billion (5.5%) to $807.8 billion, or 21.2% of holdings, after decreasing $19.2 billion in November, increasing $39.4 billion in October and $39.2 billion in September. Repo, Treasuries and Agencies totaled $3.154 trillion, representing a massive 82.8% of all taxable holdings.

Money funds' holdings of CP, CD and Other (mainly Time Deposits) securities all fell in December. Commercial Paper (CP) decreased $37.6 billion (-10.9%) to $309.2 billion, or 8.1% of holdings, after increasing $5.1 billion in November, $13.9 billion in October and $7.4 billion in September. Certificates of Deposit (CDs) fell by $10.5 billion (-3.8%) to $264.6 billion, or 6.9% of taxable assets, after increasing $12.6 billion in November, $12.6 billion in October and decreasing $7.5 billion in September. Other holdings, primarily Time Deposits, decreased $29.5 billion (-27.5%) to $77.6 billion, or 2.0% of holdings, after increasing $2.3 billion in November, $5.0 billion in October and decreasing $4.6 billion in September. VRDNs dropped to $6.4 billion, or 0.2% of assets. (Note: This total is VRDNs for taxable funds only. We will publish Tax Exempt MMF holdings separately late Monday.)

Prime money fund assets tracked by Crane Data decreased $28.0 billion to $1.065 trillion, or 27.9% of taxable money funds' $3.811 trillion total. Among Prime money funds, CDs represent 24.9% (down from 25.2% a month ago), while Commercial Paper accounted for 29.1% (down from 31.7%). The CP totals are comprised of: Financial Company CP, which makes up 18.9% of total holdings, Asset-Backed CP, which accounts for 6.4%, and Non-Financial Company CP, which makes up 3.8%. Prime funds also hold 6.9% in US Govt Agency Debt, 9.2% in US Treasury Debt, 11.4% in US Treasury Repo, 1.2% in Other Instruments, 3.6% in Non-Negotiable Time Deposits, 5.8% in Other Repo, 5.4% in US Government Agency Repo and 0.5% in VRDNs.

Government money fund portfolios totaled $1.875 trillion (49.2% of all MMF assets), up $46.0 billion from $1.829 trillion in November, while Treasury money fund assets totaled another $871 billion (22.9%), up from $864 billion the prior month. Government money fund portfolios were made up of 39.2% US Govt Agency Debt, 16.7% US Government Agency Repo, 20.4% US Treasury debt, 23.6% in US Treasury Repo and 0.2% in Investment Company. Treasury money funds were comprised of 72.6% US Treasury debt, 27.4% in US Treasury Repo, and 0.0% in Government agency repo, Other Instrument, and Investment Company shares. Government and Treasury funds combined now total $2.746 trillion, or 72.1% of all taxable money fund assets.

European-affiliated holdings (including repo) fell by $176.4 billion in December to $517.6 billion; their share of holdings fell to 13.6% from last month's 18.3%. Eurozone-affiliated holdings fell to $319.6 billion from last month's $461.4 billion; they account for 8.4% of overall taxable money fund holdings. Asia & Pacific related holdings fell by $17.5 billion to $345.4 billion (9.1% of the total). Americas related holdings rose $221.0 billion to $2.945 trillion and now represent 77.3% of holdings.

The overall taxable fund Repo totals were made up of: US Treasury Repurchase Agreements (up $103.7 billion, or 14.8%, to $802.4 billion, or 21.1% of assets); US Government Agency Repurchase Agreements (down $36.3 billion, or -8.9%, to $369.8 billion, or 9.7% of total holdings), and Other Repurchase Agreements (up $8.0 billion, or 14.9%, from last month to $61.3 billion, or 1.6% of holdings). The Commercial Paper totals were comprised of Financial Company Commercial Paper (down $20.3 billion to $200.9 billion, or 5.3% of assets), Asset Backed Commercial Paper (down $3.1 billion to $68.3 billion, or 1.8%), and Non-Financial Company Commercial Paper (down $14.3 billion to $40.0 billion, or 1.0%).

The 20 largest Issuers to taxable money market funds as of Dec. 31, 2019, include: the US Treasury ($1,111.6 billion, or 29.2%), Federal Home Loan Bank ($602.8B, 15.8%), Fixed Income Clearing Co ($276.4B, 7.3%), RBC ($151.7B, 4.0%), Federal Farm Credit Bank ($87.7B, 2.3%), Federal Home Loan Mortgage Co ($87.3B, 2.3%), Mitsubishi UFJ Financial Group Inc ($82.6B, 2.2%), JP Morgan ($73.0B, 1.9%), BNP Paribas ($69.5B, 1.8%), Wells Fargo ($67.8B, 1.8%), Bank of Montreal ($59.6B, 1.6%), Bank of America ($58.1B, 1.5%), Sumitomo Mitsui Banking Co ($54.1B, 1.4%), ` Barclays <b:>`_ ($51.6B, 1.4%), Credit Agricole ($49.8B, 1.3%), Bank of Nova Scotia ($49.3B, 1.3%), Canadian Imperial Bank of Commerce ($48.9B, 1.3%), Federal Reserve Bank of New York ($47.4B, 1.2%), Toronto-Dominion Bank ($43.0B, 1.1%) and Societe Generale ($36.9B, 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: Fixed Income Clearing Co ($276.4B, 22.4%), RBC ($119.9B, 9.7%), JP Morgan ($62.4B, 5.1%), BNP Paribas ($60.5B, 4.9%), Wells Fargo ($56.6B, 4.6%), Mitsubishi UFJ Financial Group ($53.7B, 4.4%), Bank of America ($51.6B, 4.2%), Barclays ($48.5B, 3.9%), Federal Reserve Bank of New York ($47.4B, 3.8%) and Bank of Montreal ($38.4B, 3.1%). Fed Repo positions among MMFs on 12/31/19 included: Vanguard Market Liquidity Fund ($8.1B), Fidelity Cash Central Fund ($7.4B), Vanguard Prime MMF ($3.0B), Schwab Value Adv MF ($2.5B), Fidelity Sec Lending Cash Central Fund ($2.1B), Federated Government ObI ($2.0B), Wells Fargo Govt MM ($1.9B), Franklin US Govt Money Market Fund ( $1.8B), JPMorgan US Govt MM ($1.8B) and BlackRock Cash Inst MMkt ($1.6B).

The 10 largest issuers of "credit" -- CDs, CP and Other securities (including Time Deposits and Notes) combined -- include: RBC ($31.8B, 5.6%), Bank of Nova Scotia ($30.2B, 5.3%), Toronto-Dominion Bank ($30.1B, 5.3%), Mitsubishi UFJ Financial Group Inc ($28.9, 5.1%), Credit Suisse ($27.6B, 4.8%), Mizuho Corporate Bank Ltd ($22.4, 3.9%), Sumitomo Mitsui Banking Co ($21.4B, 3.8%), Bank of Montreal ($21.2B, 3.7%), Canadian Imperial Bank of Commerce ($19.0B, 3.3%) and Australia & New Zealand Banking Group Ltd ($18.0B, 3.2%).

The 10 largest CD issuers include: Mitsubishi UFJ Financial Group Inc ($21.9B, 8.3%), Bank of Montreal ($19.6B, 7.4%), Sumitomo Mitsui Banking Co ($17.2B, 6.5%), Toronto-Dominion Bank ($15.0B, 5.7%), Credit Suisse ($13.8B, 5.2%), Mizuho Corporate Bank ($13.3B, 5.1%), Bank of Nova Scotia ($11.5B, 4.3%), Sumitomo Mitsui Trust Bank ($10.9B, 4.1%), Wells Fargo ($10.8B, 4.1%) and Svenska Handelsbanken ($9.7B, 3.7%).

The 10 largest CP issuers (we include affiliated ABCP programs) include: RBC ($22.1B, 8.2%), Toronto-Dominion Bank ($14.7B, 5.5%), Bank of Nova Scotia ($14.1B, 5.3%), Credit Suisse ($13.7B, 5.1%), JP Morgan ($10.5B, 3.9%), Canadian Imperial Bank of Commerce ($10.5B, 3.9%), National Australia Bank Ltd ($10.0B, 3.7%), Australia & New Zealand Banking Group Ltd ($8.5B, 3.2%), DBS Bank ($8.5B, 3.2%) and Credit Agricole ($8.4B, 3.1%).

The largest increases among Issuers include: Fixed Income Clearing Co (up $136.2B to $276.4B), Federal Home Loan Bank (up $33.2B to $602.8B), RBC (up $16.8B to $151.7B), Bank of Montreal (up $10.2B to $59.6B), Federal Home Loan Mortgage Co (up $7.0B to $87.3B), Bank of America (up $5.6B to $58.1B), Bank of Nova Scotia (up $4.9B to $49.3B), Canadian Imperial Bank of Commerce (up $2.9B to $48.9B), National Australia Bank Ltd (up $1.0B to $17.1B) and Federal National Mortgage Association (up $0.8B to $23.9B).

The largest decreases among Issuers of money market securities (including Repo) in December were shown by: BNP Paribas (down $35.2B to $69.5B), Credit Agricole (down $27.9B to $49.8B), Natixis (down $16.5B to $33.1B), Societe Generale (down $15.4B to $36.9B), Barclays PLC (down $15.0B to $51.6B), US Treasury (down $14.7B to $1,111.6B), JP Morgan (down $10.8B to $73.0B), Goldman Sachs (down $7.6B to $16.8B), Sumitomo Mitsui Banking Co (down $7.6B to $54.1B) and DNB ASA (down $5.8B to $10.8B).

The United States remained the largest segment of country-affiliations; it represents 67.5% of holdings, or $2.572 trillion. Canada (9.8%, $373.4B) was number two, and Japan (6.9%, $261.7B) was third. France (5.4%, $207.3B) occupied fourth place. The United Kingdom (3.0%, $114.7B) remained in fifth place. Australia (1.6%, $59.7B) was in sixth place, followed by The Netherlands (1.4%, $54.7B), Germany (1.3%, $48.2B), Switzerland (1.0%, $39.0B) and Sweden (0.9%, $33.3B). (Note: Crane Data attributes Treasury and Government repo to the dealer's parent country of origin, though money funds themselves "look-through" and consider these U.S. government securities. All money market securities must be U.S. dollar-denominated.)

As of Dec. 31, 2019, Taxable money funds held 36.0% (up from 34.0%) of their assets in securities maturing Overnight, and another 13.8% maturing in 2-7 days (down from 15.9% last month). Thus, 49.8% in total matures in 1-7 days. Another 16.8% matures in 8-30 days, while 12.6% matures in 31-60 days. Note that over three-quarters, or 79.2% of securities, mature in 60 days or less (down slightly from last month), the dividing line for use of amortized cost accounting under SEC regulations. The next bucket, 61-90 days, holds 8.6% of taxable securities, while 8.9% matures in 91-180 days, and just 3.4% matures beyond 181 days.

Crane Data's latest monthly Money Fund Portfolio Holdings statistics will be released today, Friday, and we'll be writing our normal monthly update on the Dec. 31 data for Monday's News. But we also generate a separate and broader Portfolio Holdings data set based on the SEC's Form N-MFP filings, and we posted these to the website yesterday. (We continue to merge the two series, and the N-MFP version is now available via Holding file listings to Money Fund Wisdom subscribers.) Our new N-MFP summary, with data as of Dec. 31, 2019, includes holdings information from 1,078 money funds, representing assets of a record $4.016 trillion (up from $3.992 trillion last month), the first time MMFs have totaled over $4.0 trillion ever. We review the latest N-MFP data below.

Our latest Form N-MFP Summary for All Funds (taxable and tax-exempt) shows Repurchase Agreement (Repo) holdings in money market funds totaling $1,243 billion (up from $1,166 billion), or 31.0% of all assets. Treasury holdings total $1,123 billion (down from $1,138 billion), or 28.0%, and Government Agency securities totaled $828.7 billion (up from $785.4 billion), or 20.6%. Holdings of Treasuries, Government agencies and Repo (the vast majority of which is backed by Treasuries and agencies) combined total $3.195 trillion, or 79.6% of all holdings.

Commercial paper (CP) totals $323.0 billion (down from $362.1 billion), or 8.0%, and Certificates of Deposit (CDs) total $269.6 billion (down from $280.3 billion), or 6.7%. The Other category (primarily Time Deposits) totals $127.9 billion (down from $158.1 billion), or 3.2%, and VRDNs account for $100.7 billion (down from $101.6 billion last month), or 2.5%.

Broken out into the SEC's more detailed categories, the CP totals were comprised of: $214.0 billion, or 5.3%, in Financial Company Commercial Paper; $61.3 billion or 1.5%, in Asset Backed Commercial Paper; and, $47.7 billion, or 1.2%, in Non-Financial Company Commercial Paper. The Repo totals were made up of: U.S. Treasury Repo ($804.3B, or 20.0%), U.S. Govt Agency Repo ($377.7B, or 9.4%) and Other Repo ($61.3B, or 1.5%).

The N-MFP Holdings summary for the 214 Prime Money Market Funds shows: CP holdings of $317.0 billion (down from $356.4 billion), or 29.1%; CD holdings of $269.6 billion (down from $280.3 billion), or 24.7%; Repo holdings of $243.9 billion (up from $186.4 billion), or 22.4%; Treasury holdings of $101.3 billion (down from $118.9 billion), or 10.6%; Other (primarily Time Deposits) holdings of $77.6 billion (down from $108.2 billion), or 7.1%; Government Agency holdings of $75.4 billion (up from $63.7 billion), or 6.9%; and VRDN holdings of $5.4 billion (down from $5.6 billion), or 0.5%.

The SEC's more detailed categories show CP in Prime MMFs made up of: $214.0 billion (down from $236.5 billion), or 19.6% in Financial Company Commercial Paper; $61.3 billion (down from $62.8 billion) or, 5.6% in Asset Backed Commercial Paper; and $41.8 billion (down from $57.1 billion), or 3.8% in Non-Financial Company Commercial Paper. The Repo totals include: U.S. Treasury Repo ($123.5 billion, or 11.3%), U.S. Govt Agency Repo ($59.0 billion, or 5.4%), and Other Repo ($61.3 billion, or 5.6%).

In other news, ICI's separate "Money Market Fund Assets" report shows that money fund assets increased slightly in the latest week to $3.64 trillion, their highest level since July 2009. Money fund assets have increased in 10 out of the last 12 weeks and in 17 out of the past 18 weeks. Over the past 52 weeks, ICI's money fund asset series has increased by $571 billion, or 18.6%, with Retail MMFs rising by $183 billion (15.3%) and Inst MMFs rising by $388 billion (20.7%).

ICI writes, "Total money market fund assets increased by $5.95 billion to $3.64 trillion for the eight-day period ended Wednesday, January 8, the Investment Company Institute reported.... Among taxable money market funds, government funds decreased by $13.09 billion and prime funds increased by $15.13 billion. Tax-exempt money market funds increased by $3.90 billion." ICI's weekly series shows Institutional MMFs falling $3.8 billion and Retail MMFs increasing $9.8 billion. Total Government MMF assets, including Treasury funds, were $2.708 trillion (74.4% of all money funds), while Total Prime MMFs were $787.9 billion (21.7%). Tax Exempt MMFs totaled $141.5 billion, 3.9%.

They explain, "Assets of retail money market funds increased by $9.75 billion to $1.38 trillion. Among retail funds, government money market fund assets increased by $5.03 billion to $784.32 billion, prime money market fund assets increased by $2.55 billion to $467.21 billion, and tax-exempt fund assets increased by $2.17 billion to $128.26 billion." Retail assets account for over a third of total assets, or 37.9%, and Government Retail assets make up 56.8% of all Retail MMFs.

The release adds, "Assets of institutional money market funds decreased by $3.80 billion to $2.26 trillion. Among institutional funds, government money market fund assets decreased by $18.12 billion to $1.92 trillion, prime money market fund assets increased by $12.59 billion to $320.73 billion, and tax-exempt fund assets increased by $1.73 billion to $13.27 billion." Institutional assets accounted for 62.1% of all MMF assets, with Government Institutional assets making up 85.2% of all Institutional MMF totals.

Money fund assets ended 2019 with their fastest growth rate and biggest asset increase since 2008. Assets increased by more than 2 1/2 times 2018's 7.2% gain. The prior seven years showed relatively flat growth with MMFs increasing by 4.1% in 2017, decreasing 1.1% in 2016, increasing 1.0% in 2015, increasing 0.5% in 2014 and 2013, and increasing 0.4% in 2012. In 2011, money fund assets fell by 4.1%. In 2009 and 2010, assets plummeted by 14.0% and 14.7%, respectively.

Our separate MFI Daily asset series shows money fund assets up $9.7 billion month-to-date to $3.987 trillion. Prime assets are up $15.6 billion MTD, while Government assets are down by $10.1B. Tax-Exempt MMFs increased $4.2 billion. Prime and Government MF assets were up $378.7 billion and $492.6 billion in 2019, respectively while Tax Exempt assets were down $1.3B year-to-date. (Note: Crane Data, ICI and the SEC all have separate asset series, so totals will vary due to differences in the fund universes covered.)

Crane Data's latest Money Fund Market Share rankings show assets were up again for the vast majority of U.S. money fund complexes in December. Money market fund assets increased by $72.4 billion, or 1.8%, last month to $3.991 trillion. Assets have climbed by $204.7 billion, or 5.4%, over the past 3 months, and they've increased by $779.1 billion, or 24.3%, over the past 12 months through Dec. 31, 2019. The biggest increases among the 25 largest managers last month were seen by BlackRock, Goldman Sachs, Federated, Fidelity, JP Morgan, Dreyfus and Vanguard, which increased assets by $15.4 billion, $13.3B, $12.2B, $8.7B, $7.5B, $7.3B and $4.8B, respectively. Declines in assets among the largest complexes in December were seen by SSgA, UBS, T Rowe Price, First American and HSBC, which decreased by $3.6B, $1.6B, $232M, $222M and $101M. 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. We review the latest market share totals below, and we also look at money fund yields in December.

Over the past year through Dec. 31, 2019, Fidelity (up $134.7B, or 20.4%), American Funds (up $120.0B, or 646.9%; this was inflated by the addition earlier last year of the $108 billion American Funds Central Cash Fund), Federated (up $85.7B, or 36.5%), BlackRock (up $73.4B, or 26.3%), Vanguard (up $71.1B, or 20.8%), JP Morgan (up $65.4B, or 22.4%) and Goldman Sachs (up $48.5B, or 23.5%) were the largest gainers. These complexes were followed by Schwab (up $47.0B, or 31.0%), SSgA (up $40.1B, or 50.8%), Morgan Stanley (up $25.3B, or 22.7%) and Wells Fargo (up $19.8B, or 17.7%). Fidelity, Goldman Sachs, BlackRock, Federated and JP Morgan had the largest money fund asset increases over the past 3 months, rising by $42.7B, $42.5B, $29.3B, $28.6B and $26.1B, respectively. Decliners over 3 months included: Invesco (down $8.8B, or -12.3%), UBS (down $6.9B, or -9.9%), Dreyfus/BNY Mellon (down $5.4B, or -3.2%), First American (down $4.2B, or -5.7%), Franklin (down $1.1B, or -5.3%), DWS (down $992M, or -3.7%) and T Rowe Price (down $821M,or -2.0%).

Our latest domestic U.S. Money Fund Family Rankings show that Fidelity Investments remains the largest money fund manager with $795.8 billion, or 19.9% of all assets. That was up $8.7 billion in December, up $42.7 billion over 3 mos., and up $134.7B over 12 months. Vanguard ranked second with $413.4 billion, or 10.4% market share (up $4.8B, up $19.9B and up $71.1B for the past 1-month, 3-mos. and 12-mos., respectively). JPMorgan was third with $357.0 billion, or 8.9% market share (up $7.5B, up $26.1B and up $65.4B). BlackRock ranked fourth with $352.7 billion, or 8.8% of assets (up $15.4B, up $29.3B and up $73.4B for the past 1-month, 3-mos. and 12-mos.), while Federated remained in fifth with $320.5 billion, or 8.0% of assets (up $12.2B, up $28.6B and up $85.7B).

Goldman Sachs remained in sixth place with $255.1 billion, or 6.4% of assets (up $13.3 billion, up $42.5B and up $48.5B), while Schwab was in seventh place with $198.5 billion, or 5.0% (up $1.3B, up $13.5B and up $47.0B). Dreyfus ($161.5B, or 4.0%) was in eighth place (up $7.3B, down $5.4B and up $444M), followed by American Funds ($138.6B, or 3.5%, unchanged, up $9.3B and up $120.0B). Morgan Stanley was in 10th place ($136.5B, or 3.4%; up $2.5B, up $18.4B and up $25.3B).

The 11th through 20th-largest U.S. money fund managers (in order) include: Wells Fargo ($131.5B, or 3.3%), Northern ($124.7, or 3.1%), SSgA ($119.0B, or 3.0%), First American ($69.3B, or 1.7%), Invesco ($62.9B, or 1.6%), UBS ($62.2B, or 1.6%), T Rowe Price ($39.5B, or 1.0%), DWS ($25.7B, or 0.6%), Western ($24.5B, or 0.6%) and HSBC ($20.7B, or 0.5%). Crane Data currently tracks 67 U.S. MMF managers, the same as last month.

When European and "offshore" money fund assets -- those domiciled in places like Ireland, Luxembourg and the Cayman Islands -- are included, the top 10 managers match the U.S. list, except JPMorgan and BlackRock move ahead of Vanguard, Goldman moves ahead of Federated, and Morgan Stanley, SSGA and Northern move ahead of Wells Fargo and American Funds. 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 ($807.2 billion), J.P. Morgan ($526.1B), BlackRock ($516.9B), Vanguard ($413.4B) and Goldman Sachs ($379.2B). Federated ($330.6B) was sixth, Schwab ($198.5B) was in seventh, followed by Dreyfus/BNY Mellon ($182.0B), Morgan Stanley ($175.0B) and Northern ($148.6B) 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 December issue of our Money Fund Intelligence and MFI XLS, with data as of 12/31/19, shows lower yields in December across all of our taxable Crane Money Fund Indexes, with the exception of a jump in Tax Exempt yields. The Crane Money Fund Average, which includes all taxable funds covered by Crane Data (currently 753), fell 3 basis points to 1.31% for the 7-Day Yield (annualized, net) Average, and the 30-Day Yield decreased by 5 bps to 1.32%. The MFA's Gross 7-Day Yield decreased by 3 bps to 1.72%, while the Gross 30-Day Yield fell 5 bps to 1.73%.

Our Crane 100 Money Fund Index shows an average 7-Day (Net) Yield of 1.46% (down 4 bps) and an average 30-Day Yield that decreased to 1.47%. The Crane 100 shows a Gross 7-Day Yield of 1.73% (down 4 bps), and a Gross 30-Day Yield of 1.74%. Our Prime Institutional MF Index (7-day) yielded 1.55% (down by 1 bps) as of December 30, while the Crane Govt Inst Index was 1.38% (down 4 bps) and the Treasury Inst Index was 1.33% (down 5 bps). Thus, the spread between Prime funds and Treasury funds is 22 basis points, while the spread between Prime funds and Govt funds is 17 basis points. The Crane Prime Retail Index yielded 1.39% (down 1 bps), while the Govt Retail Index was 1.09% (down 3 bps) and the Treasury Retail Index was 1.08% (down 5 bps). The Crane Tax Exempt MF Index yield jumped in December to 1.11% (up 39 bps).

Gross 7-Day Yields for these indexes in December were: Prime Inst 1.87% (down 2 bps), Govt Inst 1.66% (down 4 bps), Treasury Inst 1.65% (down 5 bps), Prime Retail 1.88 (down 1 bps), Govt Retail 1.67% (down 3 bps) and Treasury Retail 1.64% (down 5 bps). The Crane Tax Exempt Index increased 39 basis points to 1.55%. The Crane 100 MF Index returned on average 0.13% over 1-month, 0.40% over 3-months, 2.03% YTD, 2.03% over the past 1-year, 1.47% over 3-years (annualized), 0.94% over 5-years, and 0.49% over 10-years. The total number of funds, including taxable and tax-exempt, increased by four to 931. There are currently 749 taxable funds, four more than the previous month, and 182 tax-exempt money funds (the same as last month). (Contact us if you'd like to see our latest MFI XLS, Crane Indexes or Market Share report.

The January issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Wednesday morning, features the articles: "Highlights of '19: Assets Grow 20%; Inst, ESG Big Stories," which discusses the biggest cash stories of 2019; "BlackRock's Callahan Talks Cash, Tech, 2020," which profiles BlackRock's Global Head of Cash Management Tom Callahan; and, "Top Money Funds of 2019; 11th Annual MFI Awards," which writes about the top-performing money funds of 2019. We've also updated our Money Fund Wisdom database with Dec. 31 statistics, and sent out our MFI XLS spreadsheet Wednesday a.m. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our January Money Fund Portfolio Holdings are scheduled to ship on Friday, Jan. 10, and our Jan. Bond Fund Intelligence is scheduled to go out Wednesday, Jan. 15.

MFI's "Highlights of '19" article says, "Money fund assets jumped by over 20% in 2019, their fastest growth since 2008 (and one of the biggest years ever), even as yields retreated due to three cuts in the Federal funds target rate. Prime funds and retail MMFs continued their recovery, but heavier inflows were seen by Government and Institutional money funds. And unlike in 2018, money funds didn't benefit from declines in stocks and bonds. Below, we take a look at the highlights of 2019, and also provide a brief outlook for 2020."

It continues, "Crane Data's numbers showed assets rose by $707.7 billion, or 22.0%, to end just shy of $4.0 trillion ($3.992 trillion) in 2019. The SEC's MMF statistics collection, which is slightly larger than Crane Data's but released later, will likely show assets breaking $4.0 trillion in 2019. ICI's narrower asset collection settled at $3.632 trillion, up by $584 billion, or 19.2%."

Our "BlackRock" piece reads, "This month, we interview Tom Callahan, BlackRock's Global Head of Cash Management. We discuss a number of issues in the money market fund space, including the outlook for 2020, technology, ESG, European money funds and more. Our Q&A follows."

MFI says, "Give us some history. Callahan responds, "BlackRock's Cash business is actually older than BlackRock itself. You can trace our history back to 1973 when TempFund was launched by Provident National Bank. In '95, when PNC made an investment in BlackRock, they merged their entire fixed income business, including their money funds, into BlackRock. Cash has been a core, critical part of BlackRock’s franchise since the firm was founded."

He continues, "For my own history, I came to BlackRock in 2013, by way of Merrill Lynch and the New York Stock Exchange. When I joined, the Cash management industry was plagued by zero interest rates, outflows and fee waivers. Back then, BlackRock's cash management business had roughly $250 billion. Now, 5 1/2 years later, we have enjoyed terrific growth, much of it organic. As we announced in our last earnings report, in mid-2019 we crossed our long-term goal of $500 billion in total client cash management assets, and we've kept growing! It's been a great run and a lot of fun."

Our "Top Money Funds" piece says, "This issue recognizes the top performing money funds, ranked by total returns, for calendar year 2019, as well as the top funds for the past 5‐year and 10‐year periods. We present the funds below with our annual Money Fund Intelligence Awards. These are given to the No. 1‐ranked funds based on 1‐year, 5‐year and 10‐year returns, through Dec. 31, 2019, in each of our major fund categories -- Prime Institutional, Government Institutional, Treasury Institutional, Prime Retail, Government Retail, Treasury Retail and Tax‐Exempt."

It continues, "The Top-Performing Prime Institutional fund (and fund overall) was BlackRock Cash Inst MMF SL (BRC01), which returned 2.49%, but DWS ESG Liquidity Inst (ESGXX) was first if restricted funds are excluded with a return of 2.41%. For Prime Retail funds, Vanguard Variable Insurance MM Fund (VAN03) ranked No. 1 (2.32%), but Fidelity Inv MM: MM Port Inst (FNSXX) had the best return in 2019 (2.30%) if restricted funds are excluded."

The latest MFI also includes the News brief, "Money Market Yields Flat," which says, "Rates on money market funds, brokerage sweep accounts and bank accounts remained flat in December and early January after falling in the weeks after the Fed’s last (Oct. 30) rate cut."

A second News piece, "SEC Stats: MMF Assets Poised to Break $4.0 Tril, Up 17th Month in a Row," reads, "The Securities and Exchange Commission's separate 'Money Market Fund Statistics' summary shows total money fund assets increased by $45.6 billion in November to a record $3.984 trillion, the 17th straight month of gains for money fund assets overall. Prime MMFs increased $20.2 billion in November to close at $1.122 trillion, their highest level since July 2016, while Govt & Treasury funds rose by $24.2 billion to a record $2.718 trillion. Tax Exempt funds rose by $1.2 billion to $143.8 billion. Yields fell across the board with Prime MMFs, Govt MMFs and Tax-Exempt MMFs all decreasing in November."

Our January MFI XLS, with Dec. 31 data, shows total assets rose by $72.7 billion in December to $3.994 trillion, after rising $40.9 billion in November, $85.2 billion in October and $80.2 billion in September. Our broad Crane Money Fund Average 7-Day Yield fell to 1.31% during the month, while our Crane 100 Money Fund Index (the 100 largest taxable funds) was down 4 basis points to 1.46%.

On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA fell 4 basis points to 1.72% and the Crane 100 fell to 1.73%. Charged Expenses averaged 0.41% (up one basis point from last month) and 0.27% (up one basis point from last month), respectively for the Crane MFA and Crane 100. The average WAM (weighted average maturity) for the Crane MFA and Crane 100 was 33 (up one day) and 37 days (unchanged), respectively. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)

Federated Investors' Deborah Cunningham writes that "The liquidity space should continue to grow in popularity in 2020" in her latest update, entitled, "2020 Outlook: Optimism and opportunities." She says, "The stereotype of trading in the liquidity markets is that it's a ho-hum job. No battling for deals like those in a stock exchange; just grab whatever offer that comes along. Well, not only is that unconditionally wrong, 2020 might force traders for money markets and the like to be as fierce as those in any sector."

Cunningham continues, "With the Federal Reserve on hold, the yield curve relatively flat and the economy on a low-growth path, liquidity-market firms will contest for every basis point they can get. Relative outperformance will go to those best at identifying situations that can lead to an advantage. There will be periods when the yield curve offers a little more value, giving portfolio managers, analysts and traders opportunity to set them apart. I don't get to talk about our traders often enough. With an average of 16 years of experience and a variety of expertise, I have the utmost confidence in them."

She explains, "Key to this is how much money flows into the sector. Perhaps it won't rise to the level of the tremendous growth of 2019, especially in the prime space, but liquidity products should experience solid inflows. We anticipate growth in the low double digits. There are plenty of people who are uncomfortable about the ebullience of the equity market right now or foresee volatility stemming from the presidential election. If they want to take some of their winnings off the table, the liquidity markets can provide a good home for them. In the current environment, they can offer a competitive return. In this regard, 2020 should see liquidity products taking their traditional role of being an asset class that works in tandem with the equity and fixed-income portions of an investor's portfolio."

Cunningham also tells us, "The Fed was able to ward off volatility in the repo market in the days spanning year-end. Some market participants were concerned rates might spike as they did in September. But through overnight and term operations, the Fed made almost $500 billion available to primary dealers on Dec. 31. This move proved successful -- dealers took down roughly half of it -- and repo rates traded well within the federal funds target range. But policymakers have much more work to do."

Finally, Federated's Outlook adds, "Obviously the [Fed's actions in 2020] will have enormous consequences for cash managers, especially on the level of supply. But we are optimistic about 2020, and frankly can't wait to do our best work for clients. We extended that to our purchasing strategy for December, which focused on asset-back securities, bank instruments, government securities, commercial paper, Treasuries and more. The target weighted average maturity (WAM) of our funds remained in a range of 35-45 days for government and 40-50 days for prime and municipal."

In other news, rates on money market funds and brokerage sweep accounts remained flat again in the first week of January. Our Money Fund Intelligence Daily shows that the flagship Crane 100 MF Index held at 1.46% over the past week. The Crane 100 is down from 1.81% on Sept. 30 and down from 2.18% on June 30. The Crane 100 is down 77 bps from the beginning of 2019 (2.23%), but up from its near low of 0.06% ten years ago (12/31/09). The Crane Brokerage Sweep Index, which is currently 0.11%, is up 6 bps from ten years ago (0.05%) and down 17 bps from the end of 2018 (0.28%). Our latest Brokerage Sweep Intelligence, with data as of Friday, Jan. 3, shows every major brokerage keeping rates steady in the past week.

Our broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data, shows a 7-day yield of 1.34%, unchanged in the week through Friday, Jan. 3. Treasury Inst MFs were down by 1 bps to 1.34%. Government Inst MMFs and Prime Inst MMFs were up 1 bps, finishing the week at at 1.41% and 1.57%, respectively. Treasury Retail MFs currently yield 1.08%, (down 0.01%), Government Retail MFs yield 1.10% (unchanged) and Prime Retail MFs yield 1.40% (up 0.01%). Tax-exempt MF 7-day yields increased 0.03% to 0.86%.

Crane's Brokerage Sweep Index remained flat at 0.14% in the week ended January 3 (for balances of $100K). No firms changed rates. E*Trade and TD Ameritrade currently have the lowest rate for balances at the $100K level (0.01%). Meanwhile, Fidelity continues to have the highest sweep rate (0.82%). (Fidelity also have a higher-yielding money fund option for new accounts.) Morgan Stanley is paying 0.03%. UBS, Merrill and Wells Fargo are all paying 0.05%, and Schwab is paying 0.06%. Raymond James and Ameriprise are paying 0.08%. RW Baird is paying 0.33% for balances of $100K.

Crane Data has also started tracking some of the other brokerages beyond the largest ones in our Brokerage Sweep Intelligence, just for internal purposes. Securities America currently has the lowest rate for balances at the $100K level (0.05%). Meanwhile, Robinhood has the highest sweep rate (1.80%). LPL and SSN Securities are paying 0.10% and 0.12%, respectively. Edward Jones offers rates of 0.15% on 100K balances and Folio Institutional offers rates of 0.14%. JPMS Brokerage is paying 0.20%, while Commonwealth is paying 0.25%. TIAA is paying 0.30%, Cetera is paying 0.32%, Pershing and Ally Bank are paying 0.75%, Pershing Dreyfus is paying 0.79% (down 1 bps from last week; the only firm to shift rates in the 100K level). And, JPMS Advisory is paying 1.55% for balances of $100K.

In related news, Barron's mentioned sweeps in its piece, "How Brokers Like LPL Use Commissions, Fees, and Other Practices to Profit." They write, "LPL also makes it clear that cash-sweep accounts (which investors use for liquidity) and money-market funds on its platform are more of a profit center for the company than its clients. LPL's client disclosures state that it receives fees of up to 0.35% from money-market fund sponsors for cash sweep purposes (such as settling trades). That is cash compensation that LPL doesn't share with advisors and that ultimately comes out of clients' pockets. For non-sweep money markets (which clients can still buy), LPL says that 'in many cases' it selects share classes with higher fees than the identical funds available outside its platform. Depending on market rates, investors may see 'negative overall investment returns' on cash reserves as a result, the firm says."

The article adds, "These practices aren't unusual. Most brokers no longer offer money-market funds for cash sweep accounts. LPL eliminated money-market funds for sweeps last spring, putting client cash in lower-yielding bank deposits (for which it receives fees from banks). It's hardly unique: E*Trade Financial, Charles Schwab, TD Ameritrade Holding, and Merrill Edge (the discount brokerage arm of Bank of America) have eliminated money markets for sweeps, leaving Vanguard and Fidelity as the two major holdouts."

Tax Exempt money funds jumped into the spotlight last week as yields spiked at yearend. (Municipal money fund yields jump at yearend and around April 15 as outflows and tax issues cause investors to shift large amounts of cash.) But Dan Wiener, Editor of The Independent Advisor for Vanguard Investors, warns us about the temporary nature of the jump in a brief entitled, "Soaring tax-exempt money fund yields bad for your wealth." He says, "Be forewarned, those sumptuous-looking yields on all manner of tax-exempt money funds are going to be fleeting. Because of vagaries in the municipal cash markets investors often see yields jumping at year-end on tax-exempt money funds, diverging quite a bit from the trends in the taxable markets."

He compares yields on Vanguard's tax-exempt money funds to its Prime Money Market fund in a chart, and comments, "Rising tax-exempt yields make tax-exempt money funds look a lot more attractive to investors in lower tax brackets who may think that after-tax yields will be a better bet going forward. And it's these higher yields that will appear on investors' year-end statements. Last year, for instance, my Vanguard year-end statement showed a yield on my New York Tax-Exempt Money Market of 1.55%. One month later it was down to 1.20%. Meanwhile, the taxable money fund Vanguard uses for my sweep account had seen its yield rise."

Wiener continues, "Unfortunately, the rising yields on tax-exempt money funds will begin dropping back down, fairly precipitously over the next few weeks. Investors considering moving money from a taxable money fund into a tax-exempt fund should keep an eagle eye on the bouncing yield because they'll most likely need to trade back before month's end."

Finally, he adds, "My advice: If you are currently using a money market that you've determined was best suited to your needs three weeks ago, stick with it. Nothing long-term has changed -- this is just a seasonal anomaly that will pass quickly."

For the week ended Dec. 31, our Crane Tax Exempt MF yield was up 24 bps to 1.11%. (It was unchanged on Jan. 2.) Over the past 30 days, Tax Exempt MF yields have jumped up by 85 bps. Tax Exempt assets have increased over the past week and month, but they have declined precipitously over the past decade. Currently, Tax Exempt MF assets total $143.5B, up $1.8B in the past week and up $1.5B month-to-date (through 1/2/2020).

It's been awhile since we covered the Municipal MMF world, but we wrote in our August 2017 MFI, "Mangers Flee from State Tax Exempt Money Funds." This piece says, "Though overall consolidations and liquidations in the money fund sector have slowed since money fund reforms went into effect and the Fed began raising rates, exits have continued in the Tax Exempt sector, particularly among State T-E MMFs. Just within the past two months, USAA, Schwab, Dreyfus and Western have all announced or implemented liquidations."

The article continues, "Another filing tells us, 'Effective on or about July 31, 2017, Participant shares of Dreyfus AMT-Free New York Municipal Cash Management and Dreyfus Institutional Preferred Money Market Fund will no longer be offered by either fund and will be terminated as a separately designated class of the fund.' (See the Dreyfus filing for more details)." It adds, "a filing for Western California Tax-Free Money Fund tells us, 'The fund's Board of Trustees has determined that it is in the best interests of the Fund and its shareholders to terminate and wind up the Fund.'"

More recently, we cited Wells Fargo's "Porfolio Manager Commentary" in our article, "Goldman Adds ESG Screen, Evolving; Fitch on China; Wells MMF Monthly." Wells wrote, "Yields in the municipal money market sector began to normalize following a mini spike in short-term rates during the volatile month of September. After reaching a multi-month high of 1.58% on September 25, the Securities Industry and Financial Markets Association (SIFMA) Municipal Swap Index fell for five straight weeks to close out the month at 1.12%, or 67% of 1-week LIBOR." (See the latest SIFMA Index here.)

The Wall Street Journal also addressed the Muni market on Friday in, "Muni-Bond Shopping Spree Shows No Sign of Stopping." The article tells us, "Investors are heading into this year still eager for municipal bonds after a 2019 buying binge supercharged returns. High-income households looking for tax relief drove record inflows into muni-bond mutual funds last year, with the S&P Municipal Bond Index up 7.26% during the 12 months ended Dec. 31. Some analysts project that muni-bond mutual funds will continue that growth in 2020."

The article explains, "In addition to investor demand, a lack of issuance from cities and states has also driven up prices. Following a decade of tight government budgets and new limitations on borrowing, tax-exempt debt outstanding fell slightly in the roughly $4 trillion bond market. Municipal borrowers, barred by the 2017 tax overhaul from accessing the tax exemption for certain early refinancings, instead sold taxable debt, doubling last year's taxable issuance to about $65 billion and draining tax-exempt bonds from the market. Expectations of continued low rates around the world have left investors willing to pay handsomely for muni bonds, including those that don't throw off tax-exempt interest."

The Journal continues, "There remains a rising risk of volatility, some analysts say, as the growing concentration of municipal bonds in mutual funds reflects changes in buying habits. American households are increasingly buying shares of funds, rather than holding bonds outright. At the same time, other longtime institutional investors in munis -- such as banks and insurance companies -- reduced their holdings after the 2017 law cut their tax rates.... After 12 straight months of inflows, it is hard to predict when the march of investors into muni-bond funds will end, but it will, said Tom Kozlik, head of municipal strategy and credit at Hilltop Securities."

For more on the Tax Exempt Money Fund marketplace, see these News articles: JPMorgan Latest to File for Inst Tax Free MMF; NY Fed on Safe Assets (11/28/17), Schwab Simplifies MMF Lineup, Lowers Minimums; Federated Muni Exit (10/25/17), and Dreyfus Liquidating AMT-Free MMF (8/1/17).

Money fund assets jumped in the last week of the year, moving above $3.6 trillion to their highest level since July 2009. Money fund assets have increased in 9 out of the last 11 weeks and in 16 out of the past 17 weeks. ICI's latest "Money Market Fund Assets" report shows that MMF totals have increased by $584 billion, or 19.2%, year-to-date in 2019. Over the past 52 weeks, ICI's money fund asset series has increased by $584 billion, or 19.2%, with Retail MMFs rising by $192 billion (16.4%) and Inst MMFs rising by $374 billion (20.0%).

ICI writes, "Total money market fund assets increased by $27.51 billion to $3.63 trillion for the week ended Tuesday, December 31, the Investment Company Institute reported.... Among taxable money market funds, government funds increased by $30.25 billion and prime funds decreased by $3.47 billion. Tax-exempt money market funds increased by $731 million." ICI's weekly series shows Institutional MMFs rising $21.3 billion and Retail MMFs increasing $6.2 billion. Total Government MMF assets, including Treasury funds, were $2.721 trillion (74.9% of all money funds), while Total Prime MMFs were $773.1 billion (21.3%). Tax Exempt MMFs totaled $137.6 billion, 3.8%.

They explain, "Assets of retail money market funds increased by $6.24 billion to $1.37 trillion. Among retail funds, government money market fund assets increased by $4.69 billion to $779.29 billion, prime money market fund assets increased by $1.05 billion to $464.66 billion, and tax-exempt fund assets increased by $498 million to $126.09 billion." Retail assets account for over a third of total assets, or 37.7%, and Government Retail assets make up 56.9% of all Retail MMFs.

The release adds, "Assets of institutional money market funds increased by $21.27 billion to $2.26 trillion. Among institutional funds, government money market fund assets increased by $25.56 billion to $1.94 trillion, prime money market fund assets decreased by $4.53 billion to $308.41 billion, and tax-exempt fund assets increased by $233 million to $111.54 billion." Institutional assets accounted for 62.3% of all MMF assets, with Government Institutional assets making up 85.9% of all Institutional MMF totals.

Money fund assets ended 2019 with their fastest growth rate and biggest asset increase since 2008. Assets increased by more than 2 1/2 times 2018's 7.2% gain. The prior seven years showed relatively flat growth with MMFs increasing by 4.1% in 2017, decreasing 1.1% in 2016, increasing 1.0% in 2015, increasing 0.5% in 2014 and 2013, and increasing 0.4% in 2012. In 2011, money fund assets fell by 4.1%. In 2009 and 2010, assets plummeted by 14.0% and 14.7%, respectively.

Our separate MFI Daily asset series shows money fund assets up $66.6 billion for the month of December to $3.977 trillion. Prime assets were up $699 million for the month, while Government assets jumped by $66.5B. Tax-Exempt MMFs inched down $611 million. For calendar 2019, total money fund assets jumped by $870.0 billion. (Note: Our MFI Daily totals were inflated by the addition of a number of funds, including the $108 billion American Funds Central Cash Fund.) Prime and Government MF assets were up $378.7 billion and $492.6 billion in 2019, respectively while Tax Exempt assets were down $1.3B year-to-date.

In other news, Kiplinger's Retirement Report posted the article, "Buttress a Nest Egg With a Cash Stash." It tells us, "As you enter retirement and start tapping your savings, most financial advisers recommend that you keep anywhere from one to three years' income in cash -- safe, easily liquid investments, such as money-market mutual funds, bank money-market accounts or certificates of deposit. Your longer-term investments, such as bonds for income and stocks for long-term gains, should be held in separate buckets."

Kiplinger's explains, "You'll need the cash bucket in case your riskier accounts, such as stocks or bonds, are in a bear market. If the stock market falls 12% in a year and you're withdrawing 5% a year, your account will be down 17%. If you take your money from your cash bucket, you'll give your stock account time to recover -- and avoid aggravating market losses with withdrawals."

The article says, "Next, try to get the highest yield possible. At the moment, any safe, highly liquid investment pays barely enough to feed a gnat. The average one-year bank money-market account, for example, yielded 0.73% at the end of October, according to Bankrate.com. The average bank money-market account yielded 0.21%. Neither is enough to overcome inflation, which has averaged 1.82% the 12 months ended October.... Aim for the highest yield you can get, without sacrificing safety or liquidity -- which gives you the ability to cash out quickly in a pinch."

It comments, "You can probably get at least 2% on your cash, if you shop around. At press time, for example, BMO Harris Bank offers a 2.05% money-market account, while TIAA Bank offers 1.85%. You won't be able to live on the interest from these accounts, but you'll have easy access to your money and beat inflation modestly. If you use bank CDs, don't lock into a term greater than one year -- these days, the additional interest you get from extending maturities is negligible. Bankrate's top-performing five-year CD recently yielded 2.25%, for instance."

Kiplinger's adds, "Money-market mutual funds are another solution. They aren't government guaranteed, but they have a good safety record and offer checking privileges, just like a bank. The average money fund yields 1.49%, while the top-yielding money fund, Vanguard Prime Money Market fund (symbol VMMXX), yields 1.76%.... In any event, it makes sense to have at least one year's worth of living expenses in a safe, liquid cash option. Manage it correctly and you won't have to worry about selling stocks in a bear market -- and making a bad situation worse."

With the coming of the New Year, Crane Data is ramping up preparations for its 2020 conference calendar and for its big show, Money Fund Symposium. Crane's Money Fund Symposium, the largest gathering of money market fund managers and cash investors in the world, will take place June 24-26, 2020 at The Hyatt Regency Minneapolis, in Minneapolis, Minn. The preliminary agenda is now available and registrations are now being taken. Money Fund Symposium attracts money fund managers, marketers and servicers, cash investors, money market securities dealers, issuers, and regulators. We review our draft agenda (which is still in flux), as well as the rest of Crane Data's 2020 conferences, below.

Our MF Symposium Agenda kicks off on Wednesday, June 24 with a keynote on "Money Funds, Banking & Funding" from Jim Palmer of U.S. Bancorp A.M. (and likely another U.S. Bank speaker). The rest of the Day 1 agenda includes: "Treasury Issuance & Repo Update," with Mark Cabana of Bank of America Merrill Lynch and Tom Katzenbach of the U.S. Treasury; a "Corporate Investor, Portal & ESG MMF Discussion" with Tom Callahan of BlackRock, Tom Hunt of AFP, and Mark Adamson of Wells Fargo Securities; and, a "Major Money Fund Issues 2020" panel with Tracy Hopkins of Dreyfus/BNY Mellon Cash Investment Strategies, Jeff Weaver of Wells Fargo Asset Management and Peter Yi of Northern Trust Asset Management. (The evening's reception is sponsored by Bank of America Merrill Lynch.)

Day 2 of Money Fund Symposium 2020 begins with "The State of the Money Fund Industry," which features Peter Crane of Crane Data and Deborah Cunningham of Federated Investors, followed by a "Senior Portfolio Manager Perspectives" panel, including Linda Klingman of Charles Schwab I.M., Nafis Smith of Vanguard and John Tobin of J.P. Morgan Asset Mgmt. Next up is "Government & Treasury Money Fund Issues," with Mike Bird of Wells Fargo Funds and Geoff Gibbs of DWS. The morning concludes with a "Muni & Tax Exempt Money Fund Update," featuring Colleen Meehan of Dreyfus, John Vetter of Fidelity and Sean Saroya of J.P. Morgan Securities.

The Afternoon of Day 2 (after a Dreyfus-sponsored lunch) features the segments: "Dealer's Choice: Supply, New Securities & CP" with moderator, Jeff Plotnik of U.S. Bancorp Asset Mgmt., Robe Crowe of Citi Global Markets, John Kodweis of J.P. Morgan Securities and Stewart Cutler of Barclays; "Fund Ratings Focus: Governance, Global & LGIPs" with Robert Callagy of Moody's Investors Service, Greg Fayvilevich of Fitch Ratings, and Michael Masih of S&P Global Ratings; "Ultra-Short, ETFs & Alt-Cash Update," with Alex Roever of J.P. Morgan Securities, Laurie Brignac of Invesco and Michael Morin of Fidelity Investments. The day's wrap-up presentation is "Brokerage Sweeps, Bank Deposits & Fin-Tech" involving Chris Melin of Ameriprise Financial and another speaker . (The Day 2 reception is sponsored by Barclays.)

The third day of the Symposium features the sessions: "Strategists Speak '20: Fed & Rates, Repo & SOFR" with Joseph Abate from the Barclays, Priya Misra of the TD Securities and Garret Sloan of Wells Fargo Securities; "Regulatory & Misc. Issues: ESG, ETF, European," with Brenden Carroll of Dechert LLP and Rob Sabatino of UBS Asset Mgmt; an additional session TBD; and, "Money Fund Statistics & Disclosures" with Peter Crane.

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

In other Crane conference news, we're also making final preparations for Crane's Money Fund University, which will be held January 23-24, 2020 at the Renaissance Providence Downtown Hotel. Our 10th annual Money Fund University will cover the history of money funds, interest rates, regulations (Rule 2a-7), ratings, rankings, money market instruments such as commercial paper, CDs and repo, and portfolio construction and credit analysis. We also include segments on offshore money funds and ultra-short bond funds.

Money Fund University's comprehensive program is good for both beginners and experienced professionals looking for a refresher. The final agenda is available online and we are still accepting registrations. (We're also willing to "comp" tickets for large Crane Data or sponsor clients, so let us know if you're interested.) Register and make your hotel reservations ASAP!

We're also getting ready for our fourth annual Crane's Bond Fund Symposium, which will be held at the Hyatt Regency Boston, March 23-24. (Click here to see the agenda.) Bond Fund Symposium is the only conference devoted entirely to bond mutual funds, bringing together bond fund managers, marketers, and professionals with fixed-income issuers, investors and service providers. The majority of the content is aimed at the growing ultra-short and conservative ultra-short bond fund marketplace.

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

Finally, we've also set the dates and location for our next European Money Fund Symposium. It is scheduled for Sept. 17-18, 2020, in Paris, France. Let us know if you'd like more details on any of our events, and we hope to see you in Providence, Boston, Minneapolis or Paris in 2020. Happy New Year!