News Archives: January, 2021

The Securities and Exchange Commission's latest monthly "Money Market Fund Statistics" summary shows that total money fund assets decreased by $26.1 billion in December to $4.782 trillion. (Month-to-date in January through 1/22, assets have decreased by $32.8 billion according to our MFI Daily.) The SEC shows that Prime MMFs fell by $42.7 billion in December to $913.5 billion, Govt & Treasury funds rose by $19.2 billion to $3.754 trillion and Tax Exempt funds decreased $2.6 billion to $113.8 billion. Yields were flat 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 overall asset decrease follows an increase of $18.7 billion in November and declines of $73.6 billion in October, $117.8 billion in September, $57.0 billion in August, $66.4 billion in July and $127.3 billion in June. Prior to this, we saw increases of $31.0 billion in May, $461.6 billion in April and $704.8 billion in March. Over the 12 months through 12/31/20, total MMF assets have increased by a stunning $760.8 billion, or 18.9%, according to the SEC's series. (Note that the SEC's series includes a number of internal money funds not tracked by ICI, though Crane Data includes most of these in its collections.)

The SEC's stats show that of the $4.782 trillion in assets, $913.5 billion was in Prime funds, down $42.7 billion in December. This follows decreases of $5.8 billion in November, $30.7 billion in October, $145.6 billion in September (when Vanguard converted its massive Prime MMF to Govt) and $7.1 billion in August. Earlier this year, we saw increases of $16.4 billion in July, $21.3 billion in June, $50.6 billion in May and $105.2 billion in April. Prime funds saw decreases of $124.5 billion in March and $13.9 billion in February. Prime funds represented 19.1% of total assets at the end of December. They've decreased by $181.6 billion, or -16.6%, over the past 12 months.

Government & Treasury funds totaled $3.754 trillion, or 78.5% of assets. They increased $19.2 billion in December, after increasing $27.7 billion in November, and decreasing $41.4 billion in October, rising $35.3 billion in September and falling $49.3 billion in August and $42.6 billion in July. They plummeted $145.1 billion in June, fell $18.6 billion in May, and skyrocketed $347.3 billion in April and $838.3 billion in March. Government & Treasury funds increased $32.0 billion in February. Govt & Treasury MMFs are up a staggering $971.0 trillion over 12 months, or 34.9%. Tax Exempt Funds decreased $2.6 billion to $113.8 billion, or 2.4% of all assets. The number of money funds was 344 in December, down four from the previous month, and down 22 funds from a year earlier.

Yields for Taxable MMFs were flat to mostly lower in December. Steady declines over the past 21 months follow 25 months of straight increases. The Weighted Average Gross 7-Day Yield for Prime Institutional Funds on December 31 was 0.16%, unchanged from the previous month. The Weighted Average Gross 7-Day Yield for Prime Retail MMFs was 0.21%, up a basis point. Gross yields were 0.14% for Government Funds, down a basis point from last month. Gross yields for Treasury Funds were also down a basis point at 0.13%. Gross Yields for Muni Institutional MMFs were down a basis point to 0.14% in December. Gross Yields for Muni Retail funds were down two basis points at 0.18% in December.

The Weighted Average 7-Day Net Yield for Prime Institutional MMFs was 0.11%, up a basis point from the previous month and down 1.61% since 12/31/19. The Average Net Yield for Prime Retail Funds was 0.03%, unchanged from the previous month and down 1.61% since 12/31/19. Net yields were 0.02% for Government Funds, unchanged from last month. Net yields for Treasury Funds were also unchanged from the previous month at 0.01%. Net Yields for Muni Institutional MMFs were down a basis point from November at 0.06%. Net Yields for Muni Retail funds were down a basis point at 0.01% in December. (Note: These averages are asset-weighted.)

WALs and WAMs were also mixed in December. The average Weighted Average Life, or WAL, was 57.5 days (up 0.9 days from last month) for Prime Institutional funds, and 51.5 days for Prime Retail funds (down 1.7 days). Government fund WALs averaged 102.8 days (up 3.8 days) while Treasury fund WALs averaged 101.2 days (up 3.4 days). Muni Institutional fund WALs were 16.6 days (unchanged from the previous month), and Muni Retail MMF WALs averaged 27.6 days (down 1.4 days).

The Weighted Average Maturity, or WAM, was 40.7 days (up 1.3 days from the previous month) for Prime Institutional funds, 44.3 days (down 1.2 days from the previous month) for Prime Retail funds, 48.1 days (up 4.6 days) for Government funds, and 50.5 days (up 2.5 days) for Treasury funds. Muni Inst WAMs were down 0.1 days to 15.7 days, while Muni Retail WAMs decreased 1.3 days to 26.2 days.

Total Daily Liquid Assets for Prime Institutional funds were 54.8% in December (down 0.3% from the previous month), and DLA for Prime Retail funds was 36.0% (down 3.3% from previous month) as a percent of total assets. The average DLA was 65.6% for Govt MMFs and 95.3% for Treasury MMFs. Total Weekly Liquid Assets was 67.3% (up 0.3% from the previous month) for Prime Institutional MMFs, and 45.5% (down 4.9% from the previous month) for Prime Retail funds. Average WLA was 79.7% for Govt MMFs and 99.3% for Treasury MMFs.

In the SEC's "Prime Holdings of Bank-Related Securities by Country table for December 2020," the largest entries included: Canada with $130.2 billion, Japan with $82.0 billion, the U.S. with $81.1 billion, France with $67.0B, the U.K. with $26.1B, Aust/NZ with 25.8B, Germany with $23.8B, Switzerland with $17.2B and the Netherlands with $12.9B. The biggest gainers among the "Prime MMF Holdings by Country" were: Canada (up $22.9 billion), the U.S. (up $9.8B), Aust/NZ (up $3.4B), and Japan (up $0.2B). The biggest decreases were: France (down $20.5B), the Netherlands (down $10.1B), Germany (down $12.9B), the U.K. (down $3.9B) and Switzerland (down $1.0B).

The SEC's "`Prime Holdings of Bank-Related Securities by Major Region" table shows Europe had $66.7B (down $18.4B from last month), the Eurozone subset had $108.3B (down $56.8B). The Americas had $211.7 billion (up $32.7B), while Asia Pacific had $119.1B (up $3.4B).

The "Prime MMF Aggregate Product Exposures" chart shows that of the $910.2B billion in Prime MMF Portfolios as of December 31, $418.8B (46.0%) was in Government & Treasury securities (direct and repo) (up from $410.9B), $164.9B (18.1%) was in CDs and Time Deposits (down from $220.7B), $153.1B (16.8%) was in Financial Company CP (up from $150.0B), $127.3B (14.0%) was held in Non-Financial CP and Other securities (down from $134.7B), and $46.1B (5.1%) was in ABCP (down from $46.7B).

The SEC's "Government and Treasury Funds Bank Repo Counterparties by Country" table shows the U.S. with $166.9 billion, Canada with $140.9 billion, France with $177.5 billion, the U.K. with $80.3 billion, Germany with $12.4 billion, Japan with $124.9 billion and Other with $28.5 billion. All MMF Repo with the Federal Reserve was up $9.7 billion in December at $9.7 billion.

Finally, a "Percent of Securities with Greater than 179 Days to Maturity" table shows Prime Inst MMFs 6.9%, Prime Retail MMFs with 2.4%, Muni Inst MMFs with 2.3%, Muni Retail MMFs with 4.4%, Govt MMFs with 15.4% and Treasury MMFs with 14.9%.

State Street Global Advisors published a series of articles and called them its "Global Cash Outlook." The pieces include: "For Cash, 2020 Was a Year of Sustained Strength," which reviews the credit profiles of global banks; "LIBORs' 11th Hour: The Urgent Need to Phase Out the Reference Rate," which discusses the coming demise of the rate benchmark; "Lower for Even Longer: Secular US Rates Framework in a COVID-19 World," which reviews economic growth and rates; and "Transformed Overnight: How COVID-19 Changed Cash," which talks about several major themes in the money markets last year. We quote from this last article below. (Note: Thanks to those who attending our Money Fund University! Crane Data Subscribers and MFU Attendees may visit the "Money Fund University 2021 Download Center" to access the recordings and conference materials.)

SSGA's Will Goldthwait writes, in a section entitled, "The Quest for Yield: Lower for Much Longer," "Entrenched low interest rates are prompting concern that the corporate treasury department will revert from profit center to cost center. While safety and liquidity remain top priorities, cash managers 'have never before kept such a sharp eye on yield across their providers,' observed one relationship manager. 'Every basis point matters now.'"

He continues, "Careful cash management is prized more than ever. Clients are looking to improve cash-flow forecasting so they can allocate more efficiently to funds offering the best rate. They are searching for ways to generate yield while still ensuring liquidity. As such, State Street Global Advisors is having more frequent conversations with clients about separately managed accounts, which can be customized according to a company's needs, and about enhanced cash and ultra-short-term bond strategies. The bottom line: there are options for clients willing to take the initiative and get creative."

Under the heading "Technology to the Rescue," Goldthwait explains, "Both the pandemic and the low-rate environment are highlighting the importance of technology, without which treasury functions would have foundered since confinement. Treasuries that were more digitally advanced proved far more resilient to the obstacles of remote work. Those that were behind at the beginning of the pandemic scrambled to catch up. Two-thirds of non-financial corporations said that remote work had accelerated their treasury's digital transformation according to a State Street Global Advisors survey; the number rose to 83% for insurers. Digital workflows and electronic verification are proliferating, while manual processes and hard copies are becoming relics of a pre-pandemic past."

He states, "Cash management portals have proved essential, both to remote operations and to meeting the challenges posed by low rates. Clients are searching for portals with superior functionality. They want portals that enable operational efficiencies, such as letting them set dollar restrictions on authorized traders. They also seek to be able to trade seamlessly among various cash products, rather than calling each sponsor separately. Instead of investing in a main banking partner's money funds, they are making more informed decisions using platforms that aggregate information across all of their strategies."

SSGA also says, "Finally, we hear that automation is also accelerating. 'Our treasury leadership is always interested in new technology that our banking partners are creating,' said one client. 'Many treasury, finance and accounting positions will be automated over the next 10 to 15 years, dramatically changing the size of teams and how they work.'"

A section called, "A New Frontier for ESG Cash," tells us, "The events of 2020 -- Black Lives Matter, expanding political chasms, the #MeToo movement, the forest fires in Australia and the West Coast of the US, and of course COVID-19 -- have inspired an upsurge in social awareness. This is true among both individuals and corporations, as evidenced by the proliferation of CEO statements on events and issues making headlines including race and gender inequalities."

It continues, "Social awareness is fueling interest in ESG money market funds. Our COVID-era survey found that 69% of cash managers believe integrating ESG into cash investments will be a mainstream practice within the next three years. Commonly cited drivers for this shift include client pressure and mitigating reputational and investment risks. Among the range of issues covered by ESG, clients tell us that diversity and inclusion has become a particularly strong focus."

Goldthwait adds, "For the moment, ESG funds remain small, and therefore subscriptions tend to be modest, due to allocation limits. Additionally, there is a significant opportunity for investor education, since ESG cash methodologies are relatively new. Some companies report researching ESG, but have yet to invest due to a lack of selection criteria. Given client interest in ESG cash, assets under management could increase significantly in the near future."

The piece concludes, "Looking ahead, we expect and sincerely hope that 2021 is a better year. The approval of vaccinations is certainly a key step. Meanwhile, 2020 has clearly inspired meaningful changes in the way companies in general, and treasuries in particular, work. One thing that has not changed: State Street Global Advisors continues to strive to be our clients' best partner."

This month, MFI interviews ICD CEO Tory Hazard. We ask him about San Francisco-based ICD's history in cash and discuss Prime funds, fee waiver pressures, current priorities, and ICD's outlook for the coming year. Hazard reminds us why money market funds are "a valuable part of institutional investment portfolios in all yield environments," and tells us that investors are "looking for products that earn at least some yield." 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. Note Also: Welcome and thanks to those attending our Money Fund University, which took place yesterday and continues this afternoon. Crane Data Subscribers and MFU Attendees may visit the "Money Fund University 2021 Download Center" to access conference materials and recordings.)

MFI: Give us a little history. Hazard: ICD has been solely focused on the treasury marketplace from day one. As an agnostic provider of money market funds and short-term investments for institutional investors, we bring institutional investors together with hundreds of investment products. ICD was founded by three money market fund sales executives over 17 years ago, in 2003. Prior to forming ICD, the founders were working for big banks and were relegated to offering only their respective banks' funds, using primitive technology. They recognized the opportunity to create an independent marketplace of investment products that could be accessed through an investment portal. Their vision was to provide clients with the best products and services in the industry, and that remains our mission today.

I joined the company in 2009 and served as CFO, COO and President before becoming CEO in 2017. Coming in, my key focus was to continue scaling the business while extending the value of the firm’s service and technology. We were the first portal company with operations in Europe. We were the first portal company to release a robust exposure analytics application. We led the portal industry in integrating treasury technologies, and we introduced the industry’s first multi counterparty secure automated settlement solution. We'll be announcing more industry innovations in 2021. Today, we serve over 400 companies across 65 industries in 43 countries around the world.

MFI: What are your current priorities? Hazard: ICD is always iterating our technology based on client feedback. At ICD, we have a dedicated technology team in Golden, Colorado, and using agile methodology, we release ICD portal enhancements and updates every two weeks. Over the past 17 years, we've seen a massive move towards digitizing treasury, during which time organizations have developed a tech stack of different vertical applications to satisfy requirements for critical treasury functions. Today, we are focused on helping corporates unlock the value of data that resides within these systems and amplifying efficiencies around specific treasury workflows using API.

We continue to co-innovate with clients on various touch points to gain new efficiencies and solve their unique problems. Examples include: new compliance rules, custom integrations and enhanced reporting. While we are continuously advancing our technology, we remain committed to our core principle of providing extraordinary service to our clients.

MFI: Talk about the portal marketplace. Hazard: Technology, which was already extremely important, became even more so with the challenges brought on by Covid-19 as treasury groups revamped processes to work remotely. This change in the way organizations operate has led to increased portal adoption across the board. Interestingly, in 2020 -- and we believe it will continue in 2021 -- our clients are investing in a broader array of investment products. We are seeing asset accumulation in greater magnitude than in is reflected in the ICI data. For 2020, our assets were up 90% versus the broader market's 52%. That is due, in part, to annual new client growth, which reinforces the demand for money market investing through independent portals.

MFI: What are your biggest challenges? Hazard: In this low-rate environment, the challenge for portals will be to keep up with evolving technology and additional investment product demand. For the funds, the challenge will be to get creative in their product offerings. I think institutional investors are looking for products that earn at least some yield, especially for non-operating cash, where they feel comfortable going a little further out on the curve. In our ICD November webinar on investments, 71% of the participants said that they are currently invested in alternative treasury investments or are considering doing so in the near future. Those are listed as non-money market fund and deposit products. We're seeing much more interest in short duration bond funds and also the federally insured products we offer -- that includes federally insured deposit accounts and FDIC-insured CDs.

MFI: What about investors and Prime? Hazard: We are seeing investors return to the Prime space, not just back to pre-Covid levels, but above these levels. We are also seeing a lot of new entrants into the Prime money market funds space; 14% of our Prime investors are invested in Prime for the very first time in 2020.

MFI: What else is your base looking at? Hazard: Many of our clients are more comfortable with variable products through Prime, which has increased interest in short duration bond funds. Money market reform has provided somewhat of a bridge to those investments. Another area of increased interest is around ESG products. On that same webinar in November, 32% said they planned on investing in ESG focused products or are currently invested in ESG offerings. There still seems to be confusion around what constitutes an ESG fund. Hopefully over the course of the year the definition around ESG products will become more standardized to ensure that the funds that claim to be ESG are doing well for the environment, society and corporate governance.

MFI: How about fee pressures? Hazard: There are pressures for portals and asset managers in near-zero interest rate environments. But there are also great opportunities for those who offer superior investment products, technology and service solutions. Fee waivers have recently become necessary on institutional Sterling funds, which is a headwind for our international business. To date, we have seen minimal impacts on institutional US Dollar funds. However, with Treasury bills and repo rates in the 7 to 12 basis point range, we expect fee waiver pressures in 2021. As happened in the last near-zero interest rate environment, we expect certain fund companies and portals will pick up market share. The portals and fund companies that work together to serve client needs will emerge from this period stronger than they were before.

With or without fee pressures, we still must take care of our clients where the focus remains on enhanced technology solutions. We're seeing that rather than add more bodies, teams are implementing updating and integrating their technology. They’re taking a closer look at what they have in place and seeing if they can optimize that technology or make a change to new technologies. In our 2020 client survey, nearly half of the client respondents said that they were in progress or were planning treasury transformations within the year. And 25% said that they are going to add or update their treasury management systems. ICD implemented over 150 new integrations in 2020 and expect to see more in 2021. This is a combination of new clients and existing clients enhancing their workflow.

MFI: What about your client base? Hazard: Our client base is split pretty evenly between North America and Europe, and they represent virtually every industry from the largest companies in the world to nonbank financial institutions and municipalities.

MFI: Any thoughts on negative rates? Hazard: If you recall, back in early 2016 we were doing webinars and had white papers to show how clients could navigate through the new regulations, whether it be with trading, workflow, reporting or compliance rules. Based on that work, the flexibility of our portal and our development team, we are all set regardless of negative rates or new regulations that may come our way.

With regard to investment products in a negative environment, we can look at institutional investment behavior on Euro products as they have operated negative for some time. For Euro investors we continue to see high MMF volume. However, there is higher asset allocation into Euro short duration bond products than in other currencies. Going back to USD institutional investments, we are not seeing much interest in SMA offerings, even though investors have large amounts of strategic cash. With two-year Treasuries yielding a few basis points more than one- month Treasury bills, yield increases are not enough to offset taking on the additional risk and locking up the money.

MFI: What's your outlook for 2021? Hazard: We have been down this near-zero interest rate road before, not with a pandemic but the global financial crisis over 10 years ago. That certainly tested ICD and the portal space more broadly. In the end, we took the approach that wrapping our arms around our clients and doubling down on investments in technology and people would yield a positive result for ICD, our clients and the industry. We are taking the same approach as we step into 2021.

A press release entitled, "Vanguard Announces Plans to Launch Ultra-Short Bond ETF," tells us that, Vanguard ... filed an initial registration statement with the Securities and Exchange Commission to launch Vanguard Ultra-Short Bond ETF. The actively managed ETF will offer a low-cost, diversified option for investors seeking income and limited price volatility. Vanguard Fixed Income Group will serve as investment advisor to the new ETF, which is expected to launch in the second quarter of 2021." (Note: Welcome to those joining us for this afternoon's Money Fund University ($250), which takes place Jan. 21-22. Crane Data Subscribers and MFU Attendees may visit the "Money Fund University 2021 Download Center" to access conference materials and recordings.)

Kaitlyn Caughlin, head of the Vanguard Portfolio Review Department comments, "We are excited to present investors with a new solution for managing short-term cash needs and to offer our world-class active fixed income expertise through an ETF.... Vanguard's history of competitive active performance is enabled by rigorous fund oversight, access to a diverse roster of active management talent, and our ability to keep costs low."

Vanguard's release continues, "The ETF will invest in a diversified portfolio consisting of high-quality and, to a lesser extent, medium-quality fixed income securities, including investment-grade credit and government bonds. With an expected average duration of approximately one year, the ETF's interest rate risk sits between money market funds and short-term bond funds, offering investors a solution for anticipated cash needs in the range of six to 18 months. It will have an estimated expense ratio of about 0.10%, compared with the average expense ratio for ultra-short-term bond ETFs of 0.22% (source: Morningstar)."

They add, "Vanguard Ultra-Short Bond ETF will be Vanguard's first active bond ETF. Vanguard currently offers the $16.0 billion actively managed Vanguard Ultra-Short-Term Bond Fund, which debuted in 2015. The new ETF will be separate from, but have a similar strategy to, the existing mutual fund and will offer investors and advisors the ability to trade at intraday market prices and invest by buying one share. The ETF will be managed by the same portfolio management team as the mutual fund."

Jeff DeMaso, Editor and Research Director of The Independent Adviser for Vanguard Investors writes, "Competition in the active bond ETF arena just got hotter. Today, Vanguard filed with the SEC to launch its first actively managed bond ETF in the form of Vanguard Ultra-Short Bond ETF."

He explains, "The fund has been Vanguard's answer for investors looking to earn some income in exchange for taking on a little bit of risk in this environment where money market yields are pinned at the near-zero bound. It is a bond fund -- so its price does fluctuate -- but you can think of the fund as the next step out from cash.... And risk has been low. Ultra-Short-Term Bond's worst decline was a 1.2% drop this past March. (Again, it is a bond fund, not a money market fund.) But the fund recouped its losses in just two months."

DeMaso also tells us, "Technically, the new ETF, which is due to launch in the second quarter, will be a separate entity from the existing mutual fund. This is different from Vanguard's index ETFs which are often just different share classes of the mutual funds. Still, given the same trio will be managing both the ETF and the mutual fund -- and expenses appear to be the same between the ETF and the Admiral shares of the mutual fund -- investors can expect substantially similar performance."

Lastly, he comments, "The ETF is entering a somewhat crowded space. PIMCO, BlackRock (iShares), Invesco, JP Morgan and Janus Henderson all manage active ultra-short bond ETFs with assets ranging from $3 billion to $15 billion or so. Vanguard pricing its Ultra-Short-Term Bond ETF at 0.10% is on the low end, but not the lowest -- BlackRock charges just 0.08% for their active option. Given it's an ultra-short-term bond fund, this is akin to Vanguard just dipping a toe in the pool. But it sets the stage for Vanguard to put other active funds in the ETF wrapper -- I expect to see Core Bond ETF in short order if this goes well."

According to Crane Data's latest Bond Fund Intelligence publication, competitors in the bond ETF space include: iShares Short Treasury Bond ETF (SHV); JPMorgan Ultra-Short Income ETF (JPST); PIMCO Enhanced Short Maturity Active Exchange-Traded Fund (MINT); Barclays 1-3 Month T-Bill ETF (SPDR); iShares Ultra Short-Term Bond ETF (ICSH) and Goldman Sachs Treasury Access 0-1 Year ETF (GBIL). (For more, see these Crane Data News pieces: Jan. Bond Fund Intelligence: Top Stories of '20; Worldwide BFs $12 Tril; Dec. Bond Fund Intelligence: Bond Funds Break $5 Tril; European BFs; Nov. Bond Fund Intelligence: ICI's F-I ETF Report, BlackRock's Novick; ETFdb on PGIM Ultra-Short Bond and CNBC: Schneider at Inside ETFs.)

In other news, Crane Data published its latest Weekly Money Fund Portfolio Holdings statistics Wednesday (a day late due to the MLK Holiday), which track a shifting subset of our monthly Portfolio Holdings collection. The most recent cut (with data as of Jan. 15, 2021) includes Holdings information from 78 money funds (down 14 funds from two weeks ago), which represent $2.266 trillion (down from $2.593 trillion) of the $4.623 trillion (49.0%) in total money fund assets tracked by Crane Data. (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 Treasury totaling $1.255 trillion (down from $1.387 trillion two weeks ago), or 55.4%, Repurchase Agreements (Repo) totaling $544.7 billion (down from $630.2 billion two weeks ago), or 24.0% and Government Agency securities totaling $277.2 billion (down from $326.4 billion), or 12.2%. Commercial Paper (CP) totaled $69.1 billion (down from $99.1 billion), or 3.0%, and Certificates of Deposit (CDs) totaled $53.7 billion (down from $60.3 billion), or 2.4%. The Other category accounted for $37.8 billion or 1.7%, while VRDNs accounted for $28.3 billion, or 1.3%.

The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $1.260 trillion (55.6% of total holdings), Federal Home Loan Bank with $137.2B (6.1%), Fixed Income Clearing Corp with $83.5B (3.7%), BNP Paribas with $72.5B (3.2%), Federal Farm Credit Bank with $56.6B (2.5%), Federal National Mortgage Association with $49.9B (2.2%), RBC with $49.7B (2.2%), Federal Home Loan Mortgage Corp with $31.5B (1.4%), Mistubishi UFJ Financial Group Inc with $31.2B (1.4%) and JP Morgan with $29.9B (1.3%).

The Ten Largest Funds tracked in our latest Weekly include: JPMorgan US Govt MM ($197.1 billion), Goldman Sachs FS Govt ($157.7B), Wells Fargo Govt MM ($144.8B), Fidelity Inv MM: Govt Port ($140.9B), BlackRock Lq FedFund ($132.7B), Morgan Stanley Inst Liq Govt ($108.4B), BlackRock Lq T-Fund ($99.7B), JPMorgan 100% US Treas MMkt ($98.2B), Dreyfus Govt Cash Mgmt ($84.8B) and First American Govt Oblg ($82.6B). (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.)

As we wrote earlier this month (and reprint here), our January MFI issue recognized the top performing money funds, ranked by total returns, for calendar year 2020, 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, 2020, in each of our major fund categories — Prime Institutional, Government Institutional, Treasury Institutional, Prime Retail, Government Retail, Treasury Retail and Tax‐Exempt. (Note: We're still taking registrations for tomorrow's Money Fund University ($250), which takes place the afternoons of Jan. 21-22. Crane Data Subscribers and MFU Attendees may visit the "Money Fund University 2021 Download Center" to access conference materials and recordings.)

The Top-Performing Prime Institutional fund (and fund overall) was BlackRock Cash Inst MMF SL (BRC01), which returned 0.94%, but Western Asset Prem Inst Liquid Res Capital (WAAXX) was first if restricted funds are excluded with a return of 0.69%. For Prime Retail funds, Wells Fargo MMF Prm (WMPXX) had the best return in 2020 (0.68%). The Top‐Performing Govt Institutional fund in 2020 was Northern Instit Govt Select Svc (BSCXX), which returned 0.53%. Vanguard Cash Reserves Federal MM Admin (VMRXX) was the Top Government Retail fund over 1‐year with a return of 0.57%. BlackRock Cash Treas MMF Inst (BRIXX) ranked No. 1 in the Treasury Institutional class with a return of 0.52%. Federated Hermes Trust for US Treas Obl IS (TTOXX) was No. 1 among Treasury Retail funds, returning 0.34%.

For the 5‐year period through Dec. 31, 2020, DWS ESG Liquidity Cap (ESIXX) took top honors for the best performing `Prime Institutional money fund with a return of 1.39%. Fidelity Inv MM: MM Port Inst (FNSXX) ranked No. 1 among Prime Retail with an annualized return of 1.32%. Dreyfus Inst Pref Govt Plus MF (DRF03) and UBS Select Govt Preferred (SGPXX) ranked No. 1 among Govt Institutional funds with returns of 1.14%, while Vanguard Federal Money Mkt Fund (VMFXX) ranked No. 1 among Govt Retail funds over the past 5 years with a return of 1.10%. BlackRock Cash Treas MMF SL (BRC03) ranked No. 1 in 5‐year performance among Treasury Inst funds with a return of 1.10%. Vanguard Treasury Money Market (VUSXX) ranked No. 1 if restricted funds are excluded. Federated Hermes Trust for US Treas Obl IS (TTOXX) ranks No. 1 among Treasury Retail funds with a return of 1.00%.

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 0.81% and 0.73%, respectively. Fidelity Inv MM: MM Port Inst (FNSXX), which returned 0.74%, was best among Prime Retail. Dreyfus Inst Pref Govt Plus MF (DRF03) and DWS Govt MM Series Instit (ICAXX), which returned 0.62% and 0.60%, respectively, ranked No. 1 among Govt Inst funds (and unrestricted Govt Inst funds). Vanguard Federal Money Mkt Fund (VMFXX) ranked No. 1 among Govt Retail funds, returning 0.56%. BlackRock Cash Treas MMF SL (BRC03) and Vanguard Treasury Money Market (VUSXX) returned the most among Treasury Inst funds over the past 10 years at 0.56% and 0.56%. Federated Hermes Trust for US Treas Obl IS (TTOXX) ranked No. 1 among Treasury Retail MMFs at 0.50%.

Finally, we also gave out awards for the best‐performing Tax‐Exempt money funds. Federated Hermes Muni Obligs WS (MOFXX) ranked No. 1 for the 1‐year, 5-year and 10-year period ended Dec. 31, 2020, with returns of 0.60%, 0.92% and 0.50%, respectively.

In other news, a press release entitled, "CAVU Securities Announces New Money Market Portfolios tells us, "CAVU Securities, LLC (CAVU), a registered broker dealer and Minority Business Enterprise (MBE) that is both US Veteran and Minority owned and operated ... announced the launch of three shares classes delivered by Invesco Global Liquidity." (See our Dec 18 Link of the Day, "Invesco Files for Cavu Secs Class.")

It continues, "The new product offerings include the CAVU Securities Treasury Portfolio (Symbol: CVTXX), the CAVU Securities Government & Agency Portfolio (Symbol: CVGXX) and the CAVU Securities Liquid Assets Portfolio (Symbol: CVPXX). These products deliver the deep institutional experience, expertise, scale and investment track record of Invesco while also serving as a solution to treasurers and cash management investors who share CAVU's focus on and commitment to making an impact via Environmental, Social and Corporate Governance (ESG) directives. The new share classes seek to maximize current income within a framework geared to maximum safety of principal and liquidity."

The release adds, "CAVU Securities recognizes the fact that, as a financial intermediary, we help facilitate the flow of capital and provide unusual access for investors in helping them to fulfill ESG mandates and realize ESG goals. Since its beginnings, CAVU has been committed, through its actions and monetary giving, to driving positive impact within minority and veteran constituencies as well as the community at large. The introduction of these share classes represents CAVU's continuously evolving actions to support its clients within this framework."

News source ignites covered the news in its article, "Invesco, B-D Launch 'Impact' Shares." They tell us, "A broker-dealer has partnered with Invesco to launch a new 'impact-oriented' share class on three of the Atlanta-based firm's money market funds, the companies announced this week. The $36 billion Invesco Government & Agency Portfolio, $21.6 billion Invesco Treasury Portfolio and $2.2 billion Invesco Liquid Asset Portfolio added the share classes last month, says Greg Parsons, CEO and founder of Cavu Securities, the broker-dealer that will distribute the share classes. Parsons is also CEO of Semper Capital, a role he has held since 2008, according to his LinkedIn profile. Cavu, founded in 2013, also distributes some of Semper's products."

The piece explains, "The money funds will continue to follow Invesco's investment mandate. About 10% of the gross revenue derived from the new share classes will be donated to nonprofit organizations selected by Cavu, Parsons says. These nonprofits include organizations such as Girls Who Code, The Vera Institute of Justice and Dog Tag, which tackles issues such as veteran transition, mental health, social justice and lack of diversity."

Ignites explains, "The expense ratios of the new share classes match those of each fund's institutional share class, a Cavu spokesperson says. The institutional share class of the Liquid Asset Portfolio and the Treasury portfolio charge 18 basis points, according to disclosures. The total expense ratio for the institutional share class of the Government & Agency Portfolio is 15 bps. Investors will need at least $1 million to access the new share class, Parsons notes. He expects the products to gain traction from both the institutional community and financial intermediaries who have a mandate to manage cash, he says."

They comment, "There are currently at least 13 ESG-focused money market funds with roughly $25.6 billion in asset under management as of Dec. 31, according to Crane Data. A handful of money market funds with social mandates focus on doing business with minority-owned companies, says Peter Crane, president and publisher at Crane Data. Five money market funds have 'veteran share classes' that aim to help or work with veteran-owned businesses, Crane notes. JPMorgan Asset Management, for example, has four money market funds that are sold only through Academy Securities, a brokerage with strong ties to veterans. BlackRock's $137 billion FedFund and $1.3 billion Liquid Environmentally Aware Fund also offer a share class that's available only to clients of Mischler Financial Group, a disabled veteran-owned broker-dealer."

Ignites writes, "Other ESG-focused money market funds have ESG considerations embedded in their investment mandates, Crane explains. For example, BlackRock's Liquid Environmentally Aware Fund steers clear of securities that derive more than 5% of their revenue from fossil fuel mining, nuclear energy–based power generation and other activities that are detrimental to the environment, according to the fund's brochure." Crane comments, "Margins are razor thin in the money market fund space.... It remains to be seen whether it's an easy or tough sale when you tell investors you're giving away a basis point or some of the returns."

For more Crane Data News on ESG, see: ESG and Social MMF Update: Mischler News, Green Deposits, Reg Debate; Academy Launches Treasury MMFs; Goldman Launches Social Class; Tiedemann Adds FICA; CS Green ABCP; Mischler Financial Joins "Impact" or Social Money Market Investing Wave and Dreyfus Launches "Impact" or Diversity Government Money Market Fund.

On Friday, mutual fund news source ignites published the article, "Sponsors Waived $3.1B in Money Fund Fees in 2020." They write, "Money market fund sponsors waived $3.1 billion in fees last year, according to Investment Company Institute data. An economic slowdown spurred by the coronavirus pandemic led the Federal Reserve to cut short-term interest rates twice last March, to zero, after about two years of keeping the benchmark rate above 1.5%. With those cuts, yields tumbled, and a growing number of money funds began waiving fees to avoid zero or negative yields." We quote from their piece, and we also review the latest MFI International statistics on European money fund assets, yields and portfolio holdings, below. (Note: We're still taking registrations for this week's Money Fund University ($250), our "basic training" event, which takes place the afternoons of Jan. 21-22. Crane Data Subscribers and MFU Attendees may visit the "Money Fund University 2021 Download Center" to access conference materials and recordings in coming days.)

Ignites explains, "As of December, 94% of all money fund share classes waived a portion of expenses, ICI data shows. That compares to 68% in January 2020. The annual figures for total waivers encompass fees waived for any reason, not just those connected to keeping yields above zero. The overall increase last year in money fund assets also pushed up the total amount of fees waived. Investors piled into money funds in March amid liquidity concerns, adding about $700 billion to the products that month, according to Crane Data."

They continue, "The funds finished the year with $4.2 trillion in assets, up from $3.6 billion as of year-end 2019, ICI data shows. The 100 largest money funds charged an average expense ratio of 13 basis points in December 2020, according to Crane Data. A year earlier, the average was 27 bps. But the seven-day average yield for the 100 largest money funds was 2 bps as of Dec. 31, according to Crane Data. That's down from 131 bps a year earlier. 'That pain is spread across various entities,' says Peter Crane, CEO of Crane Data. 'Distribution fees are always the first to get cut,' he adds, noting that those cuts are normally shared with intermediaries."

Ignites also writes, "Roughly 60% of the waiver is borne by the asset manager, and distributors shoulder the rest, says Neal Epstein, VP and senior credit officer at Moody's. But increased assets in money funds, at least for the largest managers, compensates to some extent for the lost fee revenue, he says. This holds true for BlackRock, according to CFO Gary Shedlin. Almost 40% of gross money fund fee waivers are shared with distributors, he said Thursday during a call with analysts. The firm's cash management products, including money funds, garnered about $9 billion in net inflows in the fourth quarter, Shedlin said. The firm waived about $30 million in fees during the fourth quarter to support the yields on those products, he added. Shedlin expects fee waivers to increase this year."

The piece tells us, "Crane also expects total money fund fee waivers to increase in 2021, but he says it's hard to predict by how much, given all of the variables involved. The Federal Reserve has said that it plans to keep rates low for the next several years. Since fee waivers have hit revenues and regulators expect to further scrutinize the product, some industry players may decide to leave the business altogether, says Rory Callagy, senior credit officer at Moody's. This would give more market share to the leading players in an already concentrated industry, he says."

Finally, ignites adds, "The 10 largest money fund sponsors managed nearly 70% of total industry assets as of Dec. 31, according to Crane Data. However, assets in money funds may decline in 2021 as 'yield-sensitive' investors move their money to other products, Crane says. 'We're definitely in for some erosion [in assets],' he says. 'I'd guess money funds are in for a 5% decline [in total assets], maybe flat, but .. there's a ton of variables there, too.'"

In other news, Crane Data's latest MFI International shows that assets in European or "offshore" money market mutual funds moved substantially higher in 2020. These U.S.-style funds, domiciled in Ireland or Luxembourg and denominated in US Dollars, Pound Sterling and Euros, increased by $182.8 billion in 2020 and are up $27.4 billion over the last 30 days (when translated into dollars). They're down $3.1 billion (-0.3%) year-to-date in 2021 (through 1/14/21). Offshore US Dollar money funds, which broke over $500 billion last January, were up $41.3 billion in 2020 (8.3%). They're up $26.7 billion over the last 30 days and $600 million YTD to $536.3 billion. Euro money funds skyrocketed, up E58.7B in 2020 (59.5%). They're up E215 million over the past month but down E5.3 billion to E152.0 billion YTD. GBP money funds rose L31.6B in 2020, and have risen by L340 million over 30 days and L2.0 billion YTD to L258.6B. U.S. Dollar (USD) money funds (191) account for half (50.6%) of the "European" money fund total, while Euro (EUR) money funds (94) make up 16.5% and Pound Sterling (GBP) funds (119) total 29.4%. We summarize our latest "offshore" money fund statistics and our Money Fund Intelligence International Portfolio Holdings (which went out to subscribers Friday), below.

Offshore USD MMFs yield 0.04% (7-Day) on average (as of 01/14/20), down from 1.59% on 12/31/19 and 2.29% at the end of 2018. EUR MMFs yield -0.67% on average, compared to -0.59% at year-end 2019 and -0.49% on 12/31/18. Meanwhile, GBP MMFs yielded 0.01%, down from 0.64% as of 12/31/19 and 0.64% at the end of 2018. (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 December MFII Portfolio Holdings, with data as of 12/31/20, show that European-domiciled US Dollar MMFs, on average, consist of 23.0% in Commercial Paper (CP), 14.5% in Certificates of Deposit (CDs), 19.2% in Repo, 34.5% in Treasury securities, 7.5% in Other securities (primarily Time Deposits) and 1.3% in Government Agency securities. USD funds have on average 28.8% of their portfolios maturing Overnight, 5.8% maturing in 2-7 Days, 12.9% maturing in 8-30 Days, 15.6% maturing in 31-60 Days, 12.2% maturing in 61-90 Days, 19.0% maturing in 91-180 Days and 5.7% maturing beyond 181 Days. USD holdings are affiliated with the following countries: the US (45.0%), France (12.7%), Canada (10.2%), Japan (7.4%), Germany (4.8%), Sweden (3.7%), the U.K. (3.5%), Australia (2.6%), Switzerland (1.9%) and the Netherlands (1.9%).

The 10 Largest Issuers to "offshore" USD money funds include: the US Treasury with $195.1 billion (34.7% of total assets), Fixed Income Clearing Corp with $21.3B (3.8%), BNP Paribas with $19.3B (3.4%), RBC with $16.3B (2.9%), Societe Generale with $15.0B (2.7%), Toronto-Dominion Bank with $11.7B (2.1%), Mitsubishi UFJ Financial Group Inc. with $11.6B (2.1%), Credit Agricole with $10.7B (1.9%), Bank of Nova Scotia with $10.7B (1.9%) and Sumitomo Mitsui Banking Corp with $9.2B (1.6%).

Euro MMFs tracked by Crane Data contain, on average 43.1% in CP, 17.7% in CDs, 18.4% in Other (primarily Time Deposits), 10.0% in Repo, 10.3% in Treasuries and 0.4% in Agency securities. EUR funds have on average 26.4% of their portfolios maturing Overnight, 4.9% maturing in 2-7 Days, 19.3% maturing in 8-30 Days, 15.6% maturing in 31-60 Days, 10.2% maturing in 61-90 Days, 18.6% maturing in 91-180 Days and 4.9% maturing beyond 181 Days. EUR MMF holdings are affiliated with the following countries: France (37.7%), Japan (12.4%), the U.S. (8.4%), Sweden (5.9%), Germany (5.1%), Switzerland (4.4%), Canada (4.4%), Belgium (3.2%), the U.K. (2.6%) and the Netherlands (2.4%).

The 10 Largest Issuers to "offshore" EUR money funds include: Republic of France with E12.2B (8.6%), BNP Paribas with E6.9B (4.9%), Credit Mutuel with E6.2B (4.3%), Societe Generale with E6.0B (4.3%), Credit Agricole with E5.5B (3.8%), Sumitomo Mitsui Banking Corp with E5.1B (3.6%), Zürcher Kantonalbank with E4.8B (3.4%), BPCE SA with E4.6B (3.3%), Svenska Handelsbanken with E4.4B (3.1%) and Mitsubishi UFJ Financial Group Inc with E4.2B (3.0%).

The GBP funds tracked by MFI International contain, on average (as of 12/31/20): 32.8% in CDs, 24.4% in CP, 19.3% in Other (Time Deposits), 19.1% in Repo, 4.1% in Treasury and 0.3% in Agency. Sterling funds have on average 33.0% of their portfolios maturing Overnight, 9.5% maturing in 2-7 Days, 12.1% maturing in 8-30 Days, 14.0% maturing in 31-60 Days, 10.1% maturing in 61-90 Days, 15.8% maturing in 91-180 Days and 5.6% maturing beyond 181 Days. GBP MMF holdings are affiliated with the following countries: the U.K. (20.0%), France (19.9%), Japan (15.6%), Canada (10.2%), the U.S. (6.1%), Sweden (4.3%), Switzerland (3.5%), Germany (3.1%), Australia (2.6%), and Spain (2.4%).

The 10 Largest Issuers to "offshore" GBP money funds include: the UK Treasury with L23.2B (10.6%), Mitsubishi UFJ Financial Group Inc with L10.3B (4.7%), Sumitomo Mitsui Banking Corp with L9.7B (4.4%), BNP Paribas with L9.4B (4.3%), RBC with L8.8B (4.0%), Agence Central de Organismes de Securite Sociale with L7.8B (3.6%), Standard Chartered Bank with L7.6B (3.5%), BPCE SA with L6.9B (3.2%), Sumitomo Mitsui Trust Bank with L6.3B (2.9%) and Mizuho Corporate Bank Ltd with L6.2B (2.8%).

The January issue of our Bond Fund Intelligence, which was sent to subscribers Friday morning, features the lead story, "Top Stories & Funds of '20: More Asset Gains, Low Yields," which reviews the biggest bond fund news and top-performing funds last year, and "Worldwide BF Assets Jump to $12.2 Trillion, Led by U.S.," which covers the previous quarter's increases among the largest global bond fund markets. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that bond fund yields fell and returns were up yet again in December. We excerpt from the new issue below. (Contact us if you'd like to see our Bond Fund Intelligence and BFI XLS spreadsheet, or our Bond Fund Portfolio Holdings data. Register too for next week's Money Fund University, Jan. 21-22 Online.)

BFI's "Top Stories and Funds" piece reads, "Yet again, 2020 proved to be a banner year for bonds, after another brief bear scare in March. Bond funds and bond ETFs posted outsized returns and saw record inflows as bond funds broke above $5.0 trillion and bond ETFs broke above $1.0 trillion. We briefly review last year and the top stories from BFI, which celebrates its 6th birthday this month. We also list the top-performing funds from 2020."

It continues, "Bond fund assets stood at $4.653 trillion as of Nov. 30, 2019, up $553.9 billion, or 13.5%, from a year earlier, according to ICI. Bond ETFs totaled $801.7 billion on 11/30/19, up $187.1 billion, or 30.4%, over 12 months. (Bond fund assets rose by $55.7 billion and Bond ETFs rose by $11.3 billion in December, according to BFI.) We show bond funds averaging returns of 5.18% in 2020, after returning –7.46% in 2019 and 0.09% in 2018."

Our Worldwide BF article explains, "Bond fund assets worldwide increased in the latest quarter to $12.2 trillion, the four largest bond fund markets -- the U.S., Luxembourg, Ireland and Germany -- increased noticeably. We review the ICI’s 'Worldwide Open-End Fund Assets and Flows, Third Quarter 2020' release and statistics below."

The piece quotes ICI's report, "'Worldwide regulated open-end fund assets increased during the third quarter of 2020 by 5.6 percent to $56.91 trillion at the end of the quarter, excluding funds of funds. Worldwide net cash inflow to all funds was $292 billion in the third quarter, compared with $910 billion of net inflows in the second quarter of 2020. The Investment Company Institute compiles worldwide regulated open-end fund statistics on behalf of the International Investment Funds Association (IIFA), the organization of national fund associations. The collection for the third quarter of 2020 contains statistics from 46 jurisdictions."

The BFI News brief, "Returns Up, Yields Down in Dec, '20," explains, "Bond fund yields were lower and returns were higher yet again last month. Our BFI Total Index returned 0.71% over 1-month and 5.18% over 12 months. The BFI 100 rose 0.66% in Dec. and rose 6.14% over 1 year. Our BFI Conservative Ultra-Short Index returned 0.04% over 1-mo and 1.37% over 1-yr; Ultra-Shorts averaged 0.22% in Dec. and 1.80% over 12 mos. Short-Term returned 0.52% and 3.86%, and Intm-Term rose 0.55% last month and 7.34% over 1-year. BFI's Long-Term Index rose 0.56% in Dec. and 9.97% for 2020. Our High Yield Index jumped 1.63% last month and is up 4.51% over 1-year.

Another News brief quotes Marketwatch's, piece, "Head of BlackRock's more than $2 trillion fixed-income division says investors should turn to cash as bonds don't offer enough of a 'parachute'." They tell us, "BlackRock's bond chief wants investors to think about holding more cash in a world of depressed interest rates, mainly so they can pounce on any bargains. The head of BlackRock's more than $2 trillion fixed-income division advised investors to shore up their cash buffers at the expense of government bonds … during an interview with MarketWatch."

In a third News update, Morningstar writes, "This Strong Bond Fund Thinks Outside the Box." They comment, "BlackRock Total Return's approach combines rigor and out-of-the-box thinking. Add in BlackRock's deep human and tech resources, and its cheaper share classes merit a Morningstar Analyst Rating of Gold, while some more-expensive ones earn a Silver rating."

Finally, BFI also features the sidebar, "MStar's Year in Bond Funds," which quotes two Morningstar pieces. It begins, "Morningstar's 'The Year in Bond Funds 2020 ' tells us, 'In the most tumultuous year since the global financial crisis in 2008, markets experienced significant volatility as investors got to grips with the coronavirus pandemic. The virus roiled fixed-income markets in the first quarter of 2020, causing a wide-scale selloff in risk assets and a flight to safety, before unprecedented monetary and fiscal stimulus paved the way for a rebound in credit that flowed throughout the remainder of the year.'"

Wells Fargo Asset Management's latest monthly "`Portfolio Manager Commentary" features a section entitled, "The Year in Review," which highlights some of the major market events of 2020. They write, "It's hard to believe, but the beginning of 2020 was relatively benign. In January, the Federal Reserve (Fed) was expected to keep engaging in Temporary and Permanent Open Market Operations through April in order to minimize volatility and maintain a stable rate environment, with yields generally bumping along at the bottom of its target range of 1.50% to 1.75%. The prime markets experienced a collapse in credit spreads, which began trading below benchmark London Interbank Offered Rate (LIBOR) rates, as well as a flattening of the yield curve, pricing in the possibility of Fed rate cuts late in the year.... In February, we examined the state of the credit environment in the money markets, both as it pertained to relevant asset classes as well as regional differences. We noted that, in general, corporate and financial balance sheets were in good shape and economies were stable and prosperous. While in retrospect it does not seem adequate, we devoted a paragraph to the novel coronavirus and the 'great deal of uncertainty about both the spread of the disease, its management, and the ultimate economic impact.'"

Wells continues, "In March, much of that uncertainty became manifest: with more than $204 billion flowing out of risk assets such as equity and bond funds and $160 billion redeemed from prime money market funds, the money market industry experienced the largest inflows ever seen in records dating back 28 years, with over $625 billion of new money flowing into those funds as individuals and businesses alike built liquidity to deal with the nascent pandemic. In response, the Fed not only slashed rates to the zero lower bound, they also unleased a veritable alphabet soup of programs designed to help dampen volatility and support smooth market functioning."

The commentary explains, "Money market inflows continued to be the story in April, with prime funds regaining more than half the assets that had left the previous month. Asset inflows started to moderate slightly in May, as money market funds hit an industry record of $5.12 trillion under management. In June's quarterly recap, we noted that the resulting supply and demand imbalance had resulted in yields and credit spreads in both the government and prime markets grinding tighter."

Wells also says, "In late summer and early fall, investors gained clarity on the Fed's intentions going forward. At August's Jackson Hole summit, the Fed introduced the concept of Average Inflation Targets and made it official policy at its September meeting. The dot plots from the meeting also revealed committee members were anticipating rates would stay lower for longer, through the end of 2023. For the industry, outflows that began as a trickle in July were confirmed as a trend during the same period. Although in the absence of any stimulus or increased supply, yields ground ever tighter."

They add, "Finally, rolling into November, the combination of funds defensively elevating liquidity targets in the face of uncertain election results, declining asset levels, and ongoing supply constraints drove yields ever lower." (For more year-in-review stories, see our Crane Data News: "Rolling w/Reform Changes III: Recap of '20 Prime Exits, News & Moves" (1/7/21) and "Top 10 Stories of 2020: Assets Skyrocket; Yields Plunge; Regs Coming?" (12/17/20)).

Wells Fargo Asset Management also released a publication entitled, "Making sense of a market transformed," which contains a section called, "Managing cash balances in a sea of liquidity." They also write, "Since the onset of the COVID-19 pandemic, we have seen the cash balances of many of our institutional clients surge. Both companies and individuals have built significant rainy day funds to buffer against the risks of potentially damaging economic fallout. But how should investors go about managing this swelling 'sea of liquidity' to meet their unique return and risk requirements most efficiently? We'd like to share a real-life example of how we helped one of our large corporate clients go about answering this question."

It explains, "The client was sitting on the proceeds of a large bond issue, raised specifically to increase balance sheet liquidity as a type of insurance policy against uncertainties created by changing demand dynamics in the pandemic's wake. Potential answers may seem simple and straightforward at first blush, but a proper solution invariably requires an intimate understanding of client needs and the development of a sophisticated approach to help balance the competing challenges of maximizing investment returns while ensuring adequate safety and liquidity. Let's begin by considering the available levers for diversification of income."

The section continues, "There is typically a term premium that investors can pursue by holding longer-maturity instruments. Specifically, in the current market environment, the yield curve begins to steepen meaningfully after the two-year mark, allowing investors to pick up additional yield in bonds near these maturities. They also can benefit from 'rolling down the yield curve,' which refers to the natural decline in yields as maturity approaches, providing price appreciation that adds to total return."

It tells us, "Other sources of income include diversifying a cash portfolio into lower-rated credits or investing in a broader set of fixed-income sectors. For example, allocations to high-quality investment-grade corporate bonds, asset-backed securities, or agency mortgage-backed securities can add yield with relatively modest increases in risk. Investments in other high-quality sectors, like U.S. agency debentures, sovereigns, supranationals, or foreign agency bonds, may also be used to increase diversification of a portfolio and its sources of income."

Wells comments, "If the goal is to capture diversified sources of income to drive reliable long-term risk adjusted returns over time, it may often make sense to do both of the above. That is, to extend duration and invest in additional credit-quality categories and sectors. The key objective is to determine the most client-appropriate mix of duration and diversification to increase income, which is the primary driver of total return over time."

The piece states, "We also emphasized that, while income is important, prudent bottom-up security selection would be paramount to achieving the goal of capital preservation and liquidity, particularly in the current market environment. To mitigate credit risk in any portfolio we manage, we leverage the expertise of our Global Credit Research team to help ensure we select stable-to-improving credits and avoid those we expect to deteriorate."

Lastly, it adds, "Generalizing from the above, there are a number of ways to incorporate a high-quality one- to three-year duration strategy as part of an overall cash solution. It can be designed to pull both levers for diversifying income. That is, it can simultaneously extend to a steeper part of the yield curve and invest in high-quality yield-advantaged sectors, as client circumstances allow. The inherent flexibility of our approach may help bring appropriate, and potentially optimal, cash management solutions to many investors."

Crane Data released its January Money Fund Portfolio Holdings Tuesday, and our most recent collection, with data as of Dec. 31, 2020, shows decreases in every category except Treasuries last month. Money market securities held by Taxable U.S. money funds (tracked by Crane Data) decreased by $88.0 billion to $4.623 trillion in December, after increasing $86.6 billion in November, but decreasing $148.0 billion in October. Treasury securities remained the largest portfolio segment, followed by Repo, 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, or contact us to request our latest Portfolio Holdings reports.)

Among taxable money funds, Treasury securities increased by $8.1 billion (0.3%) to $2.448 trillion, or 53.0% of holdings, after increasing $19.0 billion in November and decreasing $39.8 billion in October. Repurchase Agreements (repo) decreased by $15.8 billion (-1.5%) to $1.060 trillion, or 22.9% of holdings, after increasing $92.0 billion in November but decreasing $58.4 billion in October. Government Agency Debt decreased by $13.8 billion (-2.0%) to $672.4 billion, or 14.5% of holdings, after decreasing $30.2 billion in November and $50.5 billion in October. Repo, Treasuries and Agencies totaled $4.181 trillion, representing a massive 90.4% of all taxable holdings.

Money funds' holdings of CP, CD, Other (mainly Time Deposits) and VRDNs all saw assets decrease in December. Commercial Paper (CP) decreased $8.3 billion (-3.6%) to $222.4 billion, or 4.8% of holdings, after increasing $8.5 billion in November but decreasing $9.7 billion in October. Certificates of Deposit (CDs) fell by $10.9 billion (-8.0%) to $125.5 billion, or 2.7% of taxable assets, after decreasing $11.4 billion in November and $8.4 billion in October. Other holdings, primarily Time Deposits, decreased $46.7 billion (-38.2%) to $75.6 billion, or 1.6% of holdings, after increasing $9.4 billion in November and $18.4 billion in October. VRDNs decreased to $18.7 billion, or 0.4% of assets. (Note: This total is VRDNs for taxable funds only. We will post our Tax Exempt MMF holdings separately late Wednesday.)

Prime money fund assets tracked by Crane Data decreased $53.0 billion to $897.0 billion, or 19.4% of taxable money funds' $4.623 trillion total. Among Prime money funds, CDs represent 14.0% (down from 14.4% a month ago), while Commercial Paper accounted for 24.8% (up from 24.3%). The CP totals are comprised of: Financial Company CP, which makes up 16.8% of total holdings, Asset-Backed CP, which accounts for 5.1%, and Non-Financial Company CP, which makes up 2.9%. Prime funds also hold 6.1% in US Govt Agency Debt, 25.2% in US Treasury Debt, 7.6% in US Treasury Repo, 0.6% in Other Instruments, 4.3% in Non-Negotiable Time Deposits, 6.3% in Other Repo, 6.9% in US Government Agency Repo and 1.0% in VRDNs.

Government money fund portfolios totaled $2.558 trillion (55.3% of all MMF assets), down $34.0 billion from $2.592 trillion in November, while Treasury money fund assets totaled another $1.168 trillion (25.3%), down from $1.169 trillion the prior month. Government money fund portfolios were made up of 24.2% US Govt Agency Debt, 12.6% US Government Agency Repo, 48.7% US Treasury Debt, 14.0% in US Treasury Repo, 0.2% in VRDNs, 0.1% in Other Instruments and 0.2% in Investment Company . Treasury money funds were comprised of 83.5% US Treasury Debt and 16.4% in US Treasury Repo. Government and Treasury funds combined now total $3.726 trillion, or 80.6% of all taxable money fund assets.

European-affiliated holdings (including repo) dropped by $138.2 billion in December to $512.3 billion; their share of holdings fell to 11.1% from last month's 13.8%. Eurozone-affiliated holdings fell to $355.9 billion from last month's $463.8 billion; they account for 7.7% of overall taxable money fund holdings. Asia & Pacific related holdings decreased $8.3 billion to $225.8 billion (4.9% of the total). Americas related holdings rose $61.0 billion to $3.883 trillion and now represent 84.0% of holdings.

The overall taxable fund Repo totals were made up of: US Treasury Repurchase Agreements (down $400 million, or -0.1%, to $619.2 billion, or 13.4% of assets); US Government Agency Repurchase Agreements (down $20.6 billion, or -5.1%, to $384.6 billion, or 8.3% of total holdings), and Other Repurchase Agreements (up $5.2 billion, or 10.2%, from last month to $56.5 billion, or 1.2% of holdings). The Commercial Paper totals were comprised of Financial Company Commercial Paper (up $2.4 billion to $150.6 billion, or 3.3% of assets), Asset Backed Commercial Paper (down $400 million to $45.4 billion, or 1.0%), and Non-Financial Company Commercial Paper (down $10.4 billion to $26.4 billion, or 0.6%).

The 20 largest Issuers to taxable money market funds as of Dec. 31, 2020, include: the US Treasury ($2,448.3 billion, or 53.0%), Federal Home Loan Bank ($401.6B, 8.7%), Fixed Income Clearing Co ($173.4B, 3.7%), BNP Paribas ($123.5B, 2.7%), RBC ($118.0B, 2.6%), Federal National Mortgage Association ($100.8B, 2.2%), Federal Farm Credit Bank ($99.5B, 2.2%), JP Morgan ($82.4B, 1.8%), Federal Home Loan Mortgage Co ($66.4B, 1.4%), Mitsubishi UFJ Financial Group Inc ($66.4B, 1.4%), Barclays ($56.9B, 1.2%), Citi ($48.8B, 1.1%), Sumitomo Mitsui Banking Co ($46.8B, 1.0%), Credit Agricole ($42.1B, 0.9%), Bank of America ($42.0B, 0.9%), Societe Generale ($41.2B, 0.9%), Bank of Montreal ($40.7B, 0.9%), Toronto-Dominion Bank ($39.1B, 0.8%), Canadian Imperial Bank of Commerce ($36.2B, 0.8%) and Nomura ($32.3B, 0.7%).

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 Corp ($173.4B, 16.4%), BNP Paribas ($114.3B, 10.8%), RBC ($88.2B, 8.3%), JP Morgan ($71.7B, 6.8%), Barclays ($52.1B, 4.9%), Mitsubishi UFJ Financial Group Inc ($50.3B, 4.7%), Citi ($41.1B, 3.9%), Bank of America ($39.6B, 3.7%), Credit Agricole ($35.9B, 3.4%) and Nomura ($32.3B, 3.0%).

The 10 largest issuers of "credit" -- CDs, CP and Other securities (including Time Deposits and Notes) combined -- include: RBC ($29.8B, 7.8%), Toronto-Dominion Bank ($23.9B, 6.2%), Mizuho Corporate Bank Ltd ($18.3B, 4.8%), Bank of Montreal ($16.5B, 4.3%), Sumitomo Mitsui Banking Corp ($16.3B, 4.2%), Mitsubishi UFJ Financial Group Inc ($16.2B, 4.2%), Canadian Imperial Bank of Commerce ($14.5B, 3.8%), Societe Generale ($13.2B, 3.4%), Credit Suisse ($12.4B, 3.2%) and Australia & New Zealand Banking Group Ltd ($10.8B, 2.8%).

The 10 largest CD issuers include: Sumitomo Mitsui Banking Corp ($13.4B, 10.7%), Bank of Montreal ($12.9B, 10.3%), Toronto-Dominion Bank ($10.6B, 8.5%), Mitsubishi UFJ Financial Group Inc ($9.1B, 7.3%), Canadian Imperial Bank of Commerce ($7.8B, 6.2%), Mizuho Corporate Bank Ltd ($6.6B, 5.2%), RBC ($6.4B, 5.1%), Credit Suisse ($5.8B, 4.7%), Bank of Nova Scotia ($4.5B, 3.6%) and Svenska Handelsbanken ($4.1B, 3.3%).

The 10 largest CP issuers (we include affiliated ABCP programs) include: RBC ($13.2B, 6.5%), Toronto-Dominion Bank ($13.1B, 6.5%), Societe Generale ($11.6B, 5.7%), JP Morgan $10.6B, 5.2%), Sumitomo Mitsui Trust Bank ($6.8B, 3.4%), Citi ($6.8B, 3.4%), BPCE SA ($6.6B, 3.3%), Credit Suisse ($6.5B, 3.2%), NRW.Bank ($6.5B, 3.2%) and BNP Paribas ($6.1B, 3.0%).

The largest increases among Issuers include: Fixed Income Clearing Corp (up $25.2B to $173.4B), RBC (up $19.1B to $118.0B), JP Morgan (up $7.7B to $82.4B), US Treasury (up $6.8B to $2,448.3B), Mitsubishi UFJ Financial Group Inc (up $6.4B to $66.4B), Bank of Nova Scotia (up $6.2B to $24.1B), Goldman Sachs (up $4.6B to $32.1B), Bank of Montreal (up $2.4B to $40.7B), Australia & New Zealand Banking Group Ltd (up $2.1B to $14.7B) and Canadian Imperial Bank of Commerce (up $1.9B to $36.2B).

The largest decreases among Issuers of money market securities (including Repo) in December were shown by: Credit Agricole (down $23.4B to $42.1B), BNP Paribas (down $16.6B to $123.5B), Federal Home Loan Bank (down $12.1B to $401.6B), Societe Generale (down $11.0B to $41.2B), Barclays (down $9.2B to $56.9B), Mizuho Corporate Bank Ltd (down $8.2B to $24.3B), ABN Amro Bank (down $7.9B to $11.1B), Citi (down $7.5B to $48.8B), ING Bank (down $7.1B to $16.2B) and Sumitomo Mitsui Banking Corp (down $4.5B to $46.8B).

The United States remained the largest segment of country-affiliations; it represents 78.2% of holdings, or $3.614 trillion. Canada (5.8%, $269.5B) was number two, and France (5.5%, $252.1B) was third. Japan (4.6%, $214.5B) occupied fourth place. The United Kingdom (2.3%, $106.4B) remained in fifth place. Germany (0.8%, $36.5B) was in sixth place, followed by the Netherlands (0.7%, $32.5B), Australia (0.7%, $30.4B), Switzerland (0.5%, $24.9B) and Sweden (0.5%, $20.6B). (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, 2020, Taxable money funds held 35.2% (down from 37.9%) of their assets in securities maturing Overnight, and another 9.9% maturing in 2-7 days (up from 8.6% last month). Thus, 45.1% in total matures in 1-7 days. Another 11.6% matures in 8-30 days, while 13.9% matures in 31-60 days. Note that close to three-quarters, or 70.6% 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 11.2% of taxable securities, while 15.2% matures in 91-180 days, and just 3.0% matures beyond 181 days.

Crane Data's latest monthly Money Fund Portfolio Holdings statistics will be sent out Tuesday, and we'll be writing our normal monthly update on the December 31 data for Wednesday's News. But we also published a separate and broader Portfolio Holdings data set based on the SEC's Form N-MFP filings on Monday. (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, 2020, includes holdings information from 1,071 money funds (down two from last month), representing assets of $4.786 trillion (down $92 billion). Prime MMFs now total $910.2 billion, or 19.0% of the total, down from $963.0 billion a month ago. We review the new N-MFP data below.

Our latest Form N-MFP Summary for All Funds (taxable and tax-exempt) shows Treasury holdings totaled $2.470 trillion (up from $2.459 trillion), or a massive 51.6% of all holdings. Repurchase Agreement (Repo) holdings in money market funds totaled $1.069 trillion (down from $1.080 trillion), or 22.3% of all assets, and Government Agency securities totaled $688.1 billion (down from $706.4 billion), or 14.4%. Holdings of Treasuries, Government agencies and Repo (almost all of which is backed by Treasuries and agencies) combined total $4.227 trillion, or a stunning 88.3% of all holdings.

Commercial paper (CP) totals $231.6 billion (down from $239.9 billion), or 4.8% of all holdings, and Certificates of Deposit (CDs) total $126.0 billion (down from $136.9 billion), 2.6%. The Other category (primarily Time Deposits) totals $116.2 billion (down from $168.5 billion), or 2.4%, and VRDNs account for $85.3 billion (down from $88.5 billion last month), or 1.8% of money fund securities.

Broken out into the SEC's more detailed categories, the CP totals were comprised of: $153.1 billion, or 3.2%, in Financial Company Commercial Paper; $45.4 billion or 0.9%, in Asset Backed Commercial Paper; and, $33.1 billion, or 0.7%, in Non-Financial Company Commercial Paper. The Repo totals were made up of: U.S. Treasury Repo ($632.6B, or 13.2%), U.S. Govt Agency Repo ($379.6B, or 7.9%) and Other Repo ($56.5B, or 1.2%).

The N-MFP Holdings summary for the 207 Prime Money Market Funds shows: Treasury holdings of $232.0 billion (down from $259.4 billion), or 25.5%; CP holdings of $226.2 billion (down from $234.6 billion), or 24.9%; Repo holdings of $188.0 billion (up from $147.8 billion), or 20.7%; CD holdings of $126.0 billion (down from $136.9 billion), or 13.8%; Other (primarily Time Deposits) holdings of $72.1 billion (down from $118.3 billion), or 7.9%; Government Agency holdings of $55.3 billion (up from $55.1 billion), or 6.1% and VRDN holdings of $10.5 billion (down from $10.9 billion), or 1.2%.

The SEC's more detailed categories show CP in Prime MMFs made up of: $153.1 billion (up from $150.0 billion), or 16.8%, in Financial Company Commercial Paper; $45.4 billion (down from $45.9 billion), or 5.0%, in Asset Backed Commercial Paper; and $27.6 billion (down from $38.8 billion), or 3.0%, in Non-Financial Company Commercial Paper. The Repo totals include: U.S. Treasury Repo ($69.7 billion, or 7.7%), U.S. Govt Agency Repo ($61.8 billion, or 6.8%), and Other Repo ($56.5 billion, or 6.2%).

In other news, ICI released its "2020 Annual Report" on Monday, which recaps many of the major challenges of 2020. They tell us, "In June, the Executive Committee of ICI's Board of Governors established the COVID-19 Market Impact Working Group, a group of senior industry executives charged with examining the causes of the 2020 market turmoil and the experiences of regulated funds. Their goal was to help provide a sound, empirical basis for any future regulatory discussions or other responses that could affect regulated funds and their investors. A second group, the Money Market Working Group, was formed to bring in a wider range of perspectives from sponsors of money market funds."

ICI explains, "The working group's examination of money market funds finds that, contrary to statements by some commentators, these funds did not cause the COVID-19 market turmoil. Data demonstrate that there were serious and widespread dislocations in short-term credit and other fixed-income markets before institutional prime money market funds experienced redemption pressure. Evidence shows that the 2010 Securities and Exchange Commission (SEC) reforms improved the resiliency of prime money market funds. The paper also finds, however, that one of the SEC's principal 2014 reforms -- giving fund boards the option to impose liquidity fees and gates if a fund dipped below the 30 percent weekly liquid assets threshold -- may have intensified flows from institutional prime money market funds instead of moderating them."

In a section on "Financial markets," they write, "Fixed-income markets first showed signs of dislocation in early March, followed by turmoil in other markets as businesses and investors reacted, racing to bolster their cash to protect themselves from the uncertainty that the pandemic and the economy's swift contraction engendered. As a result of this sudden demand for liquidity, short-term markets froze in mid-March, and some money market funds came under intense pressure."

The report continues, "During this time, ICI worked closely with members to understand what was happening in the markets. The Institute conveyed these market insights to policymakers and advocated for swift action to help restore market liquidity. When the Federal Reserve established a number of liquidity facilities, including the Money Market Mutual Fund Liquidity Facility (MMLF), ICI advocated for expanding the MMLF to include a wider range of securities."

It adds, "To help policymakers and government officials better understand how the markets and funds and their investors behaved during the onset of the pandemic, ICI published The Report of the COVID-19 Market Impact Working Group. It includes data-based, in-depth analysis of US markets and the experience of money market funds, exchange-traded funds, bond funds, and Undertakings for Collective Investment in Transferable Securities (UCITS)." (For more, see Crane Data News articles: "ICI Says UCITS Weathered Covid Crisis, Assets Plunge, Retirement MMFs" (12/18/20); "ICI: Prime Didn't Cause Crisis; N-MFP Holdings: Treasuries Still Half" (11/10/20); "ICI's Impact of Covid on Fin. Markets Report Examines Crisis, Support" (10/19/20); and "ICI Releases MMF Covid Report.")

Crane Data's latest Money Fund Market Share rankings show assets were flat overall and mixed among the largest U.S. money fund complexes in December. Money market fund assets decreased $6.1 billion, or -0.1%, last month to $4.730 trillion. Assets have fallen by $62.0 billion, or -1.3%, over the past 3 months, but they've increased by $779.1 billion, or 19.7%, over the past 12 months through Dec. 31, 2020. The biggest increases among the 25 largest managers last month were seen by Morgan Stanley, SSGA, Dreyfus, Goldman Sachs and JP Morgan, which grew assets by $15.7 billion, $14.6B, $11.2B, $5.2B and $3.7B, respectively. The largest declines in assets in December were seen by BlackRock, Wells Fargo, Vanguard, Federated Hermes and UBS, which decreased by $25.2 billion, $11.1B, $6.5B, $6.3B and $6.3B, respectively. 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 2020, Fidelity (up $109.9B, or 13.8%), Morgan Stanley (up $95.2B, or 74.0%), BlackRock (up $89.8B, or 25.8%), Vanguard (up $76.2B, or 18.6%), Goldman Sachs (up $73.5B, or 30.0%), Wells Fargo (up $68.4B, or 52.5%) and JP Morgan (up $61.1B, or 17.3%) were the largest gainers. These complexes were followed by First American (up $48.7B, or 68.1%), Dreyfus (up $37.0B, or 23.1%) and American Funds (up $32.3B, or 26.4%). SSGA, Morgan Stanley, First American, Fidelity and Goldman Sachs had the largest asset increases over the past 3 months, rising by $24.5B, $23.2B, $9.7B, $7.5B and $6.7B, respectively. The largest decliners over 3 months included: Wells Fargo (down $23.7B, or -10.6%), JP Morgan (down $22.3B, or -5.1%), Federated Hermes (down $22.1B, or -6.1%), Northern (down $17.2B, or -9.5%) and UBS (down $16.5B, or -23.5%).

Our latest domestic U.S. Money Fund Family Rankings show that Fidelity Investments remains the largest money fund manager with $904.4 billion, or 19.1% of all assets. Fidelity was down $1.4 billion in December, up $7.5 billion over 3 mos., and up $109.9B over 12 months. Vanguard ranked second with $486.8 billion, or 10.3% market share (down $6.5B, down $2.8B and up $76.2B for the past 1-month, 3-mos. and 12-mos., respectively). BlackRock was third with $437.5 billion, or 9.2% market share (down $25.2B, up $5.1B and up $89.8B). JP Morgan ranked fourth with $413.4 billion, or 8.7% of assets (up $3.7B, down $22.3B and up $61.1B for the past 1-month, 3-mos. and 12-mos.), while Federated Hermes took fifth place with $340.0 billion, or 7.2% of assets (down $6.3B, down $22.1B and up $25.4B).

Goldman Sachs was in sixth place with $318.6 billion, or 6.7% of assets (up $5.2 billion, up $6.7B and up $73.5B), while Morgan Stanley was in seventh place with $223.8 billion, or 4.7% (up $15.7B, up $23.2B and up $95.2B). Wells Fargo ($198.7B, or 4.2%) was in eighth place (down $11.1B, down $23.7B and up $68.4B), followed by Dreyfus/BNY Mellon ($197.4B, or 4.2%, up $11.2B, down $283M and up $37.0B). Schwab was in 10th place ($173.4B, or 3.7%; down $6.2B, down $14.3B and down $27.6B).

The 11th through 20th-largest U.S. money fund managers (in order) include: Northern ($164.4B, or 3.5%), American Funds ($154.6B, or 3.3%), SSGA ($143.9B, or 3.0%), First American ($120.3B, or 2.5%), Invesco ($69.9B, or 1.5%), UBS ($53.7B, or 1.1%), HSBC ($40.1B, or 0.8%), T. Rowe Price ($34.0B, or 0.7%), DWS ($33.6B, or 0.7%) and Western ($33.3B, or 0.7%). Crane Data currently tracks 65 U.S. MMF managers, down from 67 last month. (Delaware and Milestone money funds were liquidated.)

When European and "offshore" money fund assets -- those domiciled in places like Ireland, Luxembourg and the Cayman Islands -- are included, the top 10 managers appear as Fidelity, BlackRock, JP Morgan, Vanguard, Goldman Sachs, Federated Hermes, Morgan Stanley, Wells Fargo, Dreyfus/BNY Mellon and Northern. 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 ($916.8 billion), BlackRock ($643.5B), JP Morgan ($621.2B), Vanguard ($486.8B) and Goldman Sachs ($451.1B). Federated Hermes ($350.5B) was sixth, Morgan Stanley ($248.2B) was in seventh, followed by Wells Fargo ($224.8B), Dreyfus/BNY Mellon ($223.4B) and Northern ($190.1B) 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 January issue of our Money Fund Intelligence and MFI XLS, with data as of 12/31/20, shows that yields were largely unchanged in December for almost all of our Crane Money Fund Indexes. The Crane Money Fund Average, which includes all taxable funds covered by Crane Data (currently 749), was flat at 0.02% for the 7-Day Yield (annualized, net) Average, the 30-Day Yield was also unchanged at 0.02%. The MFA's Gross 7-Day Yield was unchanged at 0.16%, the Gross 30-Day Yield was also unchanged at 0.16%.

Our Crane 100 Money Fund Index shows an average 7-Day (Net) Yield of 0.02% (unch.) and an average 30-Day Yield that was unchanged at 0.03%. The Crane 100 shows a Gross 7-Day Yield of 0.16% (unch.), and a Gross 30-Day Yield of 0.16% (unch.). Our Prime Institutional MF Index (7-day) yielded 0.05% (unch.) as of December 31, while the Crane Govt Inst Index and Treasury Inst Index were both unchanged at 0.02%. Thus, the spread between Prime funds and Treasury funds is 3 basis points, and the spread between Prime funds and Govt funds is 3 basis point. The Crane Prime Retail Index yielded 0.03% (unch.), while the Govt Retail Index was 0.02% (unch.), the Treasury Retail Index was 0.01% (unchanged from the month prior). The Crane Tax Exempt MF Index yielded 0.01% (unch.) in December.

Gross 7-Day Yields for these indexes in December were: Prime Inst 0.21% (unch.), Govt Inst 0.14% (unch.) Treasury Inst 0.14% (unch.), Prime Retail 0.22% (unch.), Govt Retail 0.13% (unch.) and Treasury Retail 0.13% (down a basis point from the previous month). The Crane Tax Exempt Index was unchanged at 0.19%. The Crane 100 MF Index returned on average 0.00% over 1-month, 0.00% over 3-months, 0.38% YTD, 0.38% over the past 1-year, 1.36% over 3-years (annualized), 1.00% over 5-years, and 0.51% over 10-years.

The total number of funds, including taxable and tax-exempt, was up 3 at 930. There are currently 749 taxable funds, up 3 from the previous month, and 181 tax-exempt money funds (unchanged from the previous 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 Friday morning, features the articles: "Highlights of '20: March Madness, Asset Surge, Rate Crash," which reviews one of the craziest years in money funds' 50-year history; "ICD Portal's Tory Hazard Keeps Focus on Clients, Tech," which profiles the leader of the largest independent MMF "portal"; and, "Top Money Funds of 2020; 12th Annual MFI Awards," which reviews the No. 1‐ranked funds based on 1‐year, 5‐year and 10‐year returns. We've also updated our Money Fund Wisdom database with December 31 statistics, and send out our MFI XLS spreadsheet Friday a.m. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our January Money Fund Portfolio Holdings are scheduled to ship on Tuesday, January 12, and our January Bond Fund Intelligence is scheduled to go out Friday, January 15.

MFI's lead article says, "Money fund assets jumped by 20% in 2020, the second year in a row, as yields plunged and businesses scrambled for cash in response to the coronavirus lockdown. Prime MMFs came under pressure and frozen money markets triggered Fed and Treasury assistance, while Government MMFs jumped by an eye-popping $1.1 trillion. Fee waivers and talk of further regulatory change became major topics, and trends toward social and ESG MMFs, and technology, continued from the prior year. Below, we take a look at the highlights of 2020, and also provide a brief outlook for 2021."

It continues, "Crane Data's numbers showed assets rose by $775.4 billion, or 19.6%, to end just over $4.7 trillion ($4.733T) in 2020. ICI's narrower asset collection settled at $4.297 trillion, up by $665 billion, or 18.3%.... After inching lower in 2019, yields plunged to zero in 2020. Our Crane 100 MF Index fell from 1.46% to 0.02%, while our broader Crane Money Fund Average fell from 1.32% to 0.02%.... Yields are expected to be flat in the New Year, though they could inch higher late in '21 if expectations for rising rates in 2022 or 2023 grow."

Our latest "Profile" piece reads, "This month, MFI interviews ICD CEO Tory Hazard. We ask him about San Francisco-based ICD's history in cash and discuss Prime funds, fee waiver pressures, current priorities, and ICD's outlook for the coming year. Hazard reminds us why money market funds are 'a valuable part of institutional investment portfolios in all yield environments,' and tells us that investors are 'looking for products that earn at least some yield.' Our Q&A follows."

MFI says, "Give us a little history. Hazard explains, "ICD has been solely focused on the treasury marketplace from day one. As an agnostic provider of money market funds and short-term investments for institutional investors, we bring institutional investors together with hundreds of investment products. ICD was founded by three money market fund sales executives over 17 years ago, in 2003. Prior to forming ICD, the founders were working for big banks and were relegated to offering only their respective banks’ funds, using primitive technology. They recognized the opportunity to create an independent marketplace of investment products that could be accessed through an investment portal. Their vision was to provide clients with the best products and services in the industry, and that remains our mission today."

Hazard continues, "I joined the company in 2009 and served as CFO, COO and President before becoming CEO in 2017. Coming in, my key focus was to continue scaling the business while extending the value of the firm's service and technology. We were the first portal company with operations in Europe. We were the first portal company to release a robust exposure analytics application. We led the portal industry in integrating treasury technologies, and we introduced the industry's first multi counterparty secure automated settlement solution. We'll be announcing more industry innovations in 2021. Today, we serve over 400 companies across 65 industries in 43 countries around the world."

The "12th Annual MFI Awards" article tells readers, "This issue recognizes the top performing money funds, ranked by total returns, for calendar year 2020, 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, 2020, in each of our major fund categories -- Prime Institutional, Government Institutional, Treasury Institutional, Prime Retail, Government Retail, Treasury Retail and Tax‐Exempt."

The rankings begin, "The Top-Performing Prime Institutional fund (and fund overall) was BlackRock Cash Inst MMF SL (BRC01), which returned 0.94%, but Western Asset Prem Inst Liquid Res Capital (WAAXX) was first if restricted funds are excluded with a return of 0.69%. For Prime Retail funds, Wells Fargo MMF Prm (WMPXX) had the best return in 2020 (0.68%)."

The latest MFI also includes the News piece, "Assets Up Big in '20, But Flat in Dec.," which says, "Crane Data's MFI shows money fund assets down just $6.3 billion in December, but up by a huge $775.4 billion, or 19.6%, in 2020. ICI's weekly data series shows money fund assets up $665 billion, or 18.3%, in 2020, with Inst MMFs up $510 billion (22.5%) and Retail MMFs up $156 billion (11.4%). The gains in '20 almost match those of 2019, and are the biggest in dollar terms since 2008."

A second news brief entitled, "Northern Drops Other Prime Shoe, Exits Muni Too," explains, "Northern Funds, which exited the Prime Institutional money fund space earlier this year, filed to exit the Prime Retail and Municipal segments as well. The 11th largest money fund manager ($168.3 billion) holds 99.7% in Government assets. See the press release, 'Northern Trust Asset Management Announces Changes to Money Market Mutual Fund Suite.' Wells Fargo Funds also filed to merge its two Prime portfolios into one."

A third news brief, "Invesco Files for Cavu Securities Class" explains, "Invesco's Form N1-A registration for its Short-Term Investment Trust (STIT) says it will launch new 'CAVU Securities Classes' for Invesco Liquid Assets Portfolio, Invesco Treasury Portfolio and Invesco Government & Agency Portfolio. The filing says, 'This prospectus is to be used only by clients of CAVU Securities, LLC (CAVU). CAVU is a veteran and minority owned firm.'"

Our January MFI XLS, with December 31 data, shows total assets fell by $6.3 billion in December to $4.733 trillion, after decreasing $11.7 billion in November, $46.8 billion in October, $121.2 billion in September, $42.3 billion in August, $44.2 billion in July and $113.0 billion in June. Assets increased $31.6 billion in May, $417.9 billion in April and $688.1 billion in March. Our broad Crane Money Fund Average 7-Day Yield was unchanged at 0.02%, our Crane 100 Money Fund Index (the 100 largest taxable funds) also sits at 0.02%.

On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA was down a basis point at 0.16% while the Crane 100 was down 2 basis points, also at 0.16%. Charged Expenses averaged 0.14% for both the Crane MFA and Crane 100. (We'll revise expenses on Monday once we upload the SEC's Form N-MFP data for 12/31.) The average WAM (weighted average maturity) for the Crane MFA and Crane 100 was 41 (unch.) and 46 days (up 2 days) respectively. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)

In January 2016, money market mutual funds were in the midst of a series of dramatic changes ahead of October 2016's Money Fund Reforms, the biggest changes to money fund regulations since their introduction in October 1970. Five years ago, we ran the story, "Rolling w/Reform Changes II: Recap of '15 Announcements, '16 Plans," which reviewed a number of major changes among the largest managers that took place during 2015. As in the past year, exits from Prime MMFs and fund repositioning were notable trends. Today, we examine the Covid-19 driven changes and general fund actions over the past year, as we prepare for potential regulatory changes and more fund lineup shifts in the New Year. (See also our Dec. 17 News, "Top 10 Stories of 2020: Assets Skyrocket; Yields Plunge; Regs Coming?" Note: Readers may also review "Crane Data's News," "Link of the Day" and "Money Fund Intelligence Archives" for more stories from the past year, 5 years and decade-plus.)

On May 20, we wrote "Northern Liquidating Prime Obligs," which says, "Northern Institutional Funds filed to liquidate its $1.7 billion Northern Prime Obligations Portfolio earlier this week, we learned from Bloomberg. The filing says, 'The Board of Trustees of Northern Institutional Funds has determined, after consideration of a number of factors, that it is in the best interests of the Prime Obligations Portfolio and its shareholders that the Portfolio be liquidated and terminated on or about July 10, 2020 pursuant to a plan of liquidation approved by the Board." On December 15, we also wrote, "Northern Drops Other Prime Shoe, Exits Muni Too; MFI Intl Holdings.

In our June 22 News, we reported, "Fidelity to Liquidate Prime Instit Money Funds; Cites Investor Behavior." It states, "Fidelity Investments, the largest manager of money market funds, sent an e-mail to clients ... with the Subject, 'Fidelity Institutional Prime Money Market Funds Liquidation.' They write, 'We have decided to liquidate our two institutional prime money market funds: Fidelity Investments Money Market (FIMM) Prime Money Market Portfolio and Fidelity Investments Money Market (FIMM) Prime Reserves Portfolio.'" (See too our Feb. 2, 2015 News, "Fidelity Announces Major Changes to MMFs; Staying Stable, Going Govt.")

On August 28, we wrote "Vanguard Prime Money Market Fund Going Government," which tells us, "Vanguard Group, the second largest manager of money market mutual funds with $482.3 billion, announced that it is converting its $125.3 billion Vanguard Prime Money Market Fund into a Government MMF, the third major exit from the Prime space since the coronavirus shutdown froze the commercial paper market in March and the first Prime Retail fund to convert since Money Market Fund Reforms went into effect in 2016." See their release, "Vanguard Announces Changes to Money Market Fund Lineup." Vanguard also filed changes for their remaining two Prime MMFs at the end of August. These funds, Vanguard Market Liquidity Fund and Vanguard Variable Insurance Money Market Fund, would remain Prime MMFs but would increase their holdings in Government securities.

In November, BMO announced the liquidation of their BMO Institutional Prime Money Market Fund. The Fund closed to new investors on November 13 and liquidated on December 23. We also saw a series of Municipal MMF liquidations. (See our stories: "Northern Drops Other Prime Shoe, Exits Muni Too; MFI Intl Holdings" (12/15/20), "Morgan Stanley NY Muni MM Gone" (10/5/20) and "Federated to Liquidate State Muni MFs (9/4/20).)

In addition to Prime and Muni exits and shifts, we saw continued jockeying in the ESG and Social space. Federated Hermes also filed to enter the 'Social' or 'Impact' money fund space in 2020. In late August, the firm converted its Federated Hermes Government Obligations Tax-Managed Fund into a social money market fund. The fund, which had $7.5 billion in assets shifted to seek "direct trades to women-, minority- and veteran-owned broker-dealers starting on Oct. 1."

In late September, we reported on BlackRock and Mischler Financial's partnership, creating a share class for Mischler clients. Goldman Sachs and Drexel Hamilton announced the launch of the Drexel Hamilton share classes of the Goldman Sachs Financial Square Government Market Fund (VETXX) and GS Financial Square Prime Obligations Money Market Fund (VTNXX).

Invesco filed to launch new "CAVU Securities Classes" for its Invesco Liquid Assets Portfolio, Invesco Treasury Portfolio  and Invesco Government & Agency Portfolio. HSBC also entered the ESG space, filing to launch HSBC ESG Prime Money Market Fund. Also, DWS filed to liquidate its $212 million DWS Government Cash Reserves Fund Institutional (BIRXX).

Despite the rocky year, Dreyfus, the ninth largest manager of money market funds, opted to stick with Prime funds. In mid-November, we covered the firm's money market fund consolidations, a series of changes to the Dreyfus Cash Investment Strategies product lineup. Their press released announced "a streamlined product offering of 19 funds across three fund families … a uniform pricing structure within each fund family ... as well as reduced management fees in four retail funds and one institutional fund ... and broader investor eligibility."

Consolidation of financial firms continued in 2020 too. In February, we covered the announcement that Morgan Stanley would buy E*Trade. Around the same time, we also covered a Franklin Templeton announcement regarding their acquisition of Legg Mason. According to the statement, the acquisition "establish[ed] Franklin Templeton as one of the world's largest independent, specialized global investment managers with a combined $1.5 trillion in assets."

Finally, the impact of the Covid-19 pandemic on money funds and the likely future reforms that will come from it were studied and reported on throughout the year. The Centre for Economic Policy Research published a paper on the runs in the Prime market during the Covid-19 pandemic in mid-July. The SEC covered the frozen CP market, MMFs and short-term funding in its paper "U.S. Credit Markets: Interconnectedness and the Effects of the COVID-19 Economic Shock."

Also in October, we covered the ICI paper paper, "The Impact of COVID-19 on Economies and Financial Markets." In November, the FSB and IOSCO wrote about the March and April mayhem, while the ICI also published the white paper, "Prime Money Market Funds Didn't Trigger Financial Turmoil in March." Finally, in late December, the President's Working Group discussed potential reform options for money market funds. Happy New Year, and good luck to all in 2021!

Crane Data published its latest Weekly Money Fund Portfolio Holdings statistics Tuesday, which track a shifting subset of our monthly Portfolio Holdings collection. The most recent cut (with data as of Dec. 31, 2020) includes Holdings information from 92 money funds (up 23 funds from two weeks ago), which represent $2.593 trillion (up from $1.913 trillion) of the $4.711 trillion (55.0%) in total money fund assets tracked by Crane Data. (Our Weekly MFPH are e-mail only and aren't available on the website. We didn't publish last week due to the Holidays.)

Our latest Weekly MFPH Composition summary again shows Government assets dominating the holdings list with Treasury totaling $1.387 trillion (up from $1.040 trillion two weeks ago), or 53.5%, Repurchase Agreements (Repo) totaling $630.2 billion (up from $450.9 billion two weeks ago), or 24.3% and Government Agency securities totaling $326.4 billion (up from $258.3 billion), or 12.6%. Commercial Paper (CP) totaled $99.1 billion (up from $60.1 billion), or 3.8%, and Certificates of Deposit (CDs) totaled $60.3 billion (up from $49.1 billion), or 2.3%. The Other category accounted for $52.8 billion or 2.0%, while VRDNs accounted for $37.6 billion, or 1.4%.

The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $1.391 trillion (53.6% of total holdings), Federal Home Loan Bank with $164.9B (6.4%), Fixed Income Clearing Corp with $91.9B (3.5%), BNP Paribas with $83.3B (3.2%), Federal Farm Credit Bank with $65.9B (2.5%), RBC with $56.3B (2.2%), Federal National Mortgage Association with $56.3B (2.2%), JP Morgan with $41.5B (1.6%), Federal Home Loan Mortgage Corp with $36.9B (1.4%) and Mitsubishi UFJ Financial Group Inc with $33.6B (1.3%).

The Ten Largest Funds tracked in our latest Weekly include: JPMorgan US Govt MM ($192.5 billion), Goldman Sachs FS Govt ($163.9B), Fidelity Inv MM: Govt Port ($142.9B), BlackRock Lq FedFund ($142.2B), Wells Fargo Govt MM ($139.0B), BlackRock Lq T-Fund ($117.3B), Federated Hermes Govt ObI ($110.9B), Morgan Stanley Inst Liq Govt ($103.2B), JPMorgan 100% US Treas MMkt ($92.4B) and Dreyfus Govt Cash Mgmt ($82.3B). (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, the latest Independent Adviser for Vanguard Investors newsletter features a piece entitled, "Looking Back: 2020 Year in Review," which reviews major Vanguard news over the past year, much of which involved money market funds. Editor Dan Wiener writes, "2020 was a year for the history books.... In the bond market, the Fed cut interest rates to the near-zero-bound, and the yield on the 10-year Treasury hit a new low. Here are the events in Malvern and beyond that caught our attention."

In March, he explains, "The Fed cuts rates to 0.00% to 0.25% and launches credit facilities to keep the bond markets functioning." In April, "Vanguard closes Treasury Money Market to new investors," and in July, "Pennsylvania Municipal Money Market's yield falls to 0.01%." In August, the publication says, "Vanguard reopens Treasury Money Market and announces that Prime Money Market will become Cash Reserves Federal Money Market in September."

He adds that in September "Prime Money Market's yield hits 0.01%. Shortly after, Vanguard recasts the fund as Cash Reserves Federal Money Market, closes the Investor shares and lowers the minimum on the Admiral shares from $5 million to $3,000.... Vanguard also announces plans to close New Jersey and Pennsylvania Municipal Money Market."

In December, Wiener writes, "Vanguard begins waiving fees on Municipal Money Market and New York Municipal Money Market while lowering the minimum on Treasury Money Market to $3,000." For more, see Crane Data's News stories: MF Assets Inch Lower, But Prime Plunges on Vanguard Shift; Confluence (10/2/20); Barron's on Vanguard Muni Retreat (9/30/20); SEC's Blass on Push for More MMF Reforms; Vanguard Liquidating PA, NJ (9/29/20); Vanguard Market Liquidity Changes (8/31/20); and, Vanguard Prime Money Market Fund Going Government; ICI's July Trends (8/28/20).

Finally, Marketwatch published the Opinion piece, "Investors are waiting for 'cash on the sidelines' to juice the stock market - this is why that idea is hogwash." It tells us, "Lance Roberts explains why money won't soon pour into the stock market from bank and money market accounts.... In the later stages of a bull market, the financial media and Wall Street analysts seek out rationalizations to support their views. A common refrain: 'There are trillions of dollars in cash sitting on the sidelines just waiting to come into the market.'"

The article explains, "Except ... there isn't. The reality is that, if investors haven't drained their bank accounts after four rounds of quantitative easing (QE) led by the U.S. Federal Reserve, a 400% advance in the markets and ongoing global QE, precisely what is it going to take? ... With professional investors leveraging their bets, there isn't much excess cash sitting around."

It adds, "Mutual fund managers are also holding record low levels of cash.... There are a few things we need to consider concerning money market funds.... [Y]ou will notice that the bulk of the money is in government money market funds. Those particular types of money market funds generally have much higher account minimums (from $100,000 to $1 million), suggesting the funds are not retail investors. (Those would be the smaller balances of prime retail funds.)"

Marketwatch writes, "As noted, much of the 'cash on the sidelines' is held by corporations. As we said in 'A major support for assets has reversed,' that isn't a surprise: 'CEOs make decisions on how they use their cash. If concerns of a recession persist, companies will become more conservative on the use of their cash, rather than continuing to repurchase shares.'"

A press release entitled, "John Tobin Appointed Chief Investment Officer of Dreyfus Cash Investment Strategies," tells us that, "Dreyfus Cash Investment Strategies (Dreyfus CIS), a BNY Mellon Investment Management firm with $248.8bn in assets under management, announced the appointment of John Tobin as Chief Investment Officer (CIO). John brings to this role deep and broad money market industry expertise, including first-hand knowledge of Dreyfus CIS, where he began his career 30 years ago. John joins from J.P. Morgan, where he was most recently Managing Director, Global Head of Liquidity Portfolio Management, a position he held since 2001."

Stephanie Pierce, CEO of ETF, Index, and Cash Investment Strategies at BNY Mellon Investment Management, comments, "This appointment marks a homecoming for John who, in addition to being steeped in CIS' strong heritage and investment philosophy, brings valuable experience managing clients' evolving needs through shifting market and regulatory environments on a global scale.... We believe John will continue to build upon on our nearly 50-year history and BNY Mellon's leadership across the entire cash ecosystem to position our business for long-term growth."

Tobin tells us, "I am thrilled to return to the firm that provided me with my foundation in this industry.... Dreyfus CIS is a storied brand and its money market offerings are a core component of BNY Mellon's suite of liquidity solutions."

The release explains, "As CIO, John is responsible for investment management and distribution of Dreyfus CIS' affiliated money market mutual funds and UCITS, as well as the management of the firm's collective investment trusts. John will work closely with Stephanie, the firm's client base, and cash business partners across the BNY Mellon enterprise to continue to create innovative solutions and build upon the firm's established heritage as one of the leading providers of managed liquidity solutions."

It adds, "Patricia Larkin, current CIO, will work closely with John to ensure a smooth transition and will leave the firm at the end of March 2021. BNY Mellon Investment Management thanks her for her significant contributions to the business and partnership with Dreyfus CIS' clients during her 40-year career with the firm."

In other news, 2020 was a good year for assets and a bad year for yields. Our Crane 100 Money Fund Index, the average of the 100 largest Taxable MMFs, which yielded 1.46% on Dec. 31, 2019 (and 2.23% at the beginning of 2019), fell 1.44% to a record low of 0.02% over the course of the year. The Crane 100 fell below the 1.0% level in mid-March and below the 0.5% level in late March. Just under three-quarters of all money funds and over half of MMF assets have since landed on the zero yield floor, though many continue to show some yield.

Our broader Crane Money Fund Average fell from 1.29% on Dec. 31, 2019 to 0.02%. Prime Inst MFs were down 1.52% (from 1.57%) in the last year and Government Inst MFs were down 1.39% (from 1.41%). Treasury Inst MFs dropped 1.33% (from 1.35%). Treasury Retail MFs decreased 1.08% (from 1.09%), Government Retail MFs yield 1.10% (down 1.11%), and Prime Retail MFs fell 1.36% (down from 1.39%), Tax-exempt MF 7-day yields dropped 1.09% (from 1.10%).

According to our Money Fund Intelligence Daily, as of Thursday, 12/31, 632 funds (out of 856 total, representing 73.8% of funds) yield 0.00% or 0.01% with assets of $2.506 trillion, or 52.6% of the total $4.733 trillion. There are 190 funds yielding between 0.02% and 0.10%, totaling $1.727 trillion, or 36.5% of assets; 33 funds yielded between 0.11% and 0.22% with $499.1 billion, or 10.5% of assets. No funds yield over 0.22%.

According to our latest Money Fund Intelligence Daily, money fund assets jumped by $773.3 billion to $4.620 trillion over the course of 2020 (up from $3.811 trillion on Dec. 31, 2019). Prime Inst MF assets increased $7.7 billion in the last year to $640.4 billion (up from $617.6 billion) while Government Inst MF assets jumped $326.8 billion to $1.575 trillion (up from $1.241 trillion). Treasury Inst MF assets increased $271.5 billion (up from $766.5B). Treasury Retail MF assets rose $15.0 billion (from $92.5 billion), Government Retail MF assets jumped $207.3 billion (up from $761.3 billion), while Prime Retail MF assets fell $55.0 billion (down from $331.8B), Tax-exempt MF assets decreased $25.3 billion (from $138.5 billion). (See also our Dec. 31 News, "ICI Assets & Trends: MMFs Up $665 Billion in 2020, But Down in Nov, Dec.")

Our Brokerage Sweep Intelligence, with data as of December 31, showed no changes in the latest week. All major brokerages, with the exception of RW Baird, offer rates of 0.01% for balances of $100K. No brokerage sweep rates or money fund yields have gone negative to date, but this could become a distinct possibility in coming weeks or months. Crane's Brokerage Sweep Index has been flat for the last 37 weeks at 0.01% (for balances of $100K). Ameriprise, E*Trade, Fidelity, Merrill Lynch, Morgan Stanley, Raymond James, Schwab, TD Ameritrade, UBS and Wells Fargo all currently have rates of 0.01% for balances at the $100K tier level (and almost every other tier too). RW Baird offers a rate of 0.02% for its balances of $100K.

In other brokerage sweeps news, SIFMA published a "US Negative Interest Rates Policy Checklist." The paper, developed by SIFMA's "US Negative Interest Rates Readiness Working Group," tells us, "The potential impact of a negative interest rate (NIR) policy in the US continues to be discussed by market participants. Federal Reserve Chairman Jerome H. Powell has previously stated that the US does not see negative interest rates as an appropriate policy response to economic disruption caused by the pandemic. However, the uncertainty of US economic recovery and the current 0% to 0.25% monetary policy target range for the federal funds rate continues to lead market participants to consider the future possibility of an NIR policy in the US."

A section on "Brokerage Sweep Accounts," explains, "In a negative rate environment, clients could experience a negative yield on sweep balances, while additional management fees or expenses would further reduce incentives for investors to hold excess cash in such sweep products. Customers may chase yield and avoid sweep products with negative interest rates by moving funds to free credit balances, other sweep vehicles or products with a higher risk profile. To lessen the aggregate impacts to customers, some firms providing sweep products may consider strategies such as reducing or waiving fees. Operationally, sweep platform providers may have to develop processes to pass through negative interest rates, such as daily principal reduction, reverse distribution mechanisms (in which canceled shares are split among the remaining ones to keep the value per share constant under negative rates) or deposit service fees, to process the payments associated with negative yields."

Wells Fargo Asset Management, the 7th largest MMF manager with $210 billion, will merge its two "Prime" money market funds, we learned from a new Prospectus Supplement for the $1.5 billion Wells Fargo Cash Investment Money Market Fund. The filing tells us, "In November 2020, the Board of Trustees of Wells Fargo Funds Trust approved the merger of Wells Fargo Cash Investment Money Market Fund into [the $10.8 billion] Wells Fargo Heritage Money Market Fund, two funds within the same fund family.... The Board of the Target Fund believes that this merger will benefit current Target Fund shareholders. In the merger, the Target Fund will transfer all of its assets and liabilities to the Acquiring Fund in exchange for the same class of shares of the Acquiring Fund. The merger is expected to be a tax-free reorganization for U.S. federal income tax purposes. Immediately following the merger of your fund into the Acquiring Fund, you will hold shares of the Acquiring Fund with a dollar value equal to the dollar value of the Target Fund shares you previously held."

It continues, "What do we believe are some key benefits of the fund merger? Among the factors that Wells Fargo Funds Management, LLC considered in recommending the merger were the following: Acquiring fund has a larger asset base and the combined fund will have greater long-term product viability. Factoring in the waivers to which Wells Fargo Funds Management, LLC has contractually committed through May 31, 2022, the annual fund operating expenses after fee waivers of the Acquiring Fund are the same or lower compared to the Target Fund. Wells Fargo Funds Management, LLC serves as the investment manager of the Target Fund and the Acquiring Fund. Wells Capital Management Incorporated is the investment sub-advisor for the Target Fund and the Acquiring Fund."

Wells also asks, "Why has the Board of Trustees approved the merger? In addition to the key benefits described above, among the factors the Board considered in approving the merger were the following: The investment objective and principal investment strategy of the Target Fund is comparable to that of the Acquiring Fund. Shareholders will not bear the Merger-related expenses (other than brokerage and transaction costs associated with the sale or purchase of portfolio securities in connection with the Merger). The merger is expected to be a tax-free reorganization for U.S. federal income tax purposes."

In related news, a new filing for Dreyfus Liquid Assets also involves the merger of Prime MMFs. (See our Nov. 19 News, "Dreyfus Consolidates Money Funds, Sticks w/Prime; OFR Annual Report.") It explains, "As a shareholder of Dreyfus Liquid Assets, Inc., you are being asked to vote on an Agreement and Plan of Reorganization to allow the Fund to transfer all of its assets in a tax-free reorganization to General Money Market Fund, Inc. (to be restructured and named, on or about February 1, 2021, Dreyfus Money Market Fund), in exchange solely for Class A shares and Dreyfus Class shares (to be renamed, on or about February 1, 2021, Wealth shares and Premier shares, respectively) of the Acquiring Fund and the assumption by the Acquiring Fund of the Fund's stated liabilities. The Acquiring Fund, like the Fund, is a money market fund that seeks to maintain a stable share price of $1.00. The Fund and the Acquiring Fund are managed by Dreyfus Cash Investment Strategies, a division of BNY Mellon Investment Adviser, Inc., the investment adviser to the Fund and the Acquiring Fund."

It adds, "Management of BNYM Investment Adviser has reviewed the lineup of Dreyfus money market funds and has concluded that it would be appropriate to consolidate certain funds having similar investment objectives and strategies and that would otherwise benefit fund shareholders. As a result of the review, management recommended to the Fund's Board of Directors that the Fund be consolidated with the Acquiring Fund. The reorganization of the Fund would occur on or about May 13, 2021 if approved by shareholders."

For more, see our previous Crane Data News stories: "Northern Drops Other Prime Shoe, Exits Muni Too; MFI Intl Holdings" (12/15/20), "BMO Liquidating Inst Prime MMF" (11/17/20), "SEC's Blass on Push for More MMF Reforms; Vanguard Liquidating PA, NJ" (9/28/20), "Fidelity to Liquidate Prime Instit Money Funds; Cites Investor Behavior" (6/22/20) and "Northern Liquidating Prime Obligs; NY Fed on PDCF; Weekly Port Holds" (5/20/20).

In other news, LGIP (local government investment pool) manager PFM published a white paper entitled, "Understanding Bank Deposits The Rate You See versus the Rate You Earn." It says, "Public and nonprofit officials are expected to seek the best available returns while maintaining the safety and liquidity of funds when investing stakeholder dollars. However, that task can be challenging when comparing returns on cash on deposit with a bank against investment alternatives for those balances."

It continues, "Many banks offer compensation to their institutional depositors through an earnings credit rate (ECR). This rate is typically set by the bank and determines the dollar value of credits earned on available or 'compensating' balances. In most cases, earnings credits can only be used to pay the bank for services utilized. When evaluating options for cash balances, it is important to understand the mechanics of the ECR offered. Due to bank fees and adjustments to the way ECRs are calculated, the actual return on deposits may not match the rate published on statements."

The PFM piece explains, "In order to accurately compare the ECR relative to other alternatives, it is important to look not only at the stated rate but also at associated fees on deposit balances. Most banks assess a monthly fee on the value of deposits maintained. This deposit-based fee is identified on the monthly invoice or account analysis statement provided by the bank, with each bank using a unique name for the charge. Examples of deposit-based fees include: Deposit Administration Fee; Recoupment Monthly Fee; Deposit Bank Assessment."

It states, "Banks may also impose a reserve requirement, which can effectively reduce the balance available to generate earnings credits by as much as 10%. Deposit-based fees and reserve requirements should be considered because each can considerably decrease the effective earnings on bank deposits. In a low-interest-rate environment, fees on deposited balances may exceed the bank's compensation, resulting in a negative effective rate on balances despite the stated rate being positive. Consequently, it is important to compute the 'net' ECR and compare the 'net' rate to alternative investment options."

On the "potential risks of an exceptionally high ECR," PFM comments, "Some banks will offer above-market ECRs to incentivize customers to maintain large balances. This has the appearance of providing depositors a return that cannot be matched by alternative investments with similar safety and liquidity characteristics. However, in many cases, these exceptional rates are not fully realized by the depositor."

Finally, they write, "One notable risk related to an above-market ECR relates to the way banks set the rate in conjunction with pricing for cash management and treasury services. Because earnings credits can only be used to pay back the bank for services used, the bank can recover the 'cost' of offering an exceptionally high ECR by raising the price charged for cash management and treasury services – effectively devaluing the earnings credit."

PFM's paper adds, "A second risk related to above-market ECRs is that the credits earned by depositors typically expire. While a depositor may accrue a large nominal value in credits, if the credits cannot be used to pay the bank for service charges before they expire, some portion will be lost – again devaluing the exceptional earnings credit. Depositors should monitor their monthly earnings credits against the cost of services utilized and be aware of how quickly any excess credits will expire."