News Archives: April, 2021

Crane Data's April Money Fund Portfolio Holdings, with data as of March 31, 2021, shows huge jumps in Treasuries and Repo, and drops in Agencies and Other/Time Deposits. Money market securities held by Taxable U.S. money funds (tracked by Crane Data) leapt by $187.5 billion to $4.888 trillion in March, after increasing $34.3 billion in February and $42.9 billion in January. Treasury securities remained the largest portfolio segment, followed by Repo, then Agencies. CP remained fourth, ahead of CD , Other/Time Deposits and VRDNs. Below, we review our latest Money Fund Portfolio Holdings statistics. (Note: See also the press release, "ICI Responds to the President's Working Group Report on Potential Options for Money Market Fund Reforms," which we'll cover in detail in tomorrow's News.)

Among taxable money funds, Treasury securities rose $142.8 billion (5.9%) to $2.571 trillion, or 52.6% of holdings, after decreasing $42.6 billion in February and increasing $22.1 billion in January. Repurchase Agreements (repo) increased by $108.3 billion (10.1%) to $1.184 billion, or 24.2% of holdings, after increasing $79.7 billion in February and decreasing $67.7 billion in January. Government Agency Debt decreased by $35.1 billion (-5.5%) to $601.9 billion, or 12.3% of holdings, after decreasing $13.4 billion in February and $32.3 billion in January. Repo, Treasuries and Agencies totaled $4.356 trillion, representing a massive 89.1% of all taxable holdings.

Money funds' holdings of CP and CD saw increases in March while Other (mainly Time Deposits) and VRDNs saw assets decrease. Commercial Paper (CP) increased $3.1 billion (1.2%) to $265.6 billion, or 5.4% of holdings, after increasing $3.8 billion in February and $36.2 billion in January. Certificates of Deposit (CDs) rose by $4.1 billion (3.1%) to $135.9 billion, or 2.8% of taxable assets, after decreasing $9.6 billion in February and increasing $15.8 billion in January. Other holdings, primarily Time Deposits, decreased $35.3 billion (-23.5%) to $114.6 billion, or 2.3% of holdings, after increasing $16.5 billion in February and $57.8 billion in January. VRDNs decreased to $15.4 billion, or 0.3% of assets. (Note: This total is VRDNs for taxable funds only. We will post our Tax Exempt MMF holdings separately late Tuesday.)

Prime money fund assets tracked by Crane Data were flat at $909.0 billion, or 18.6% of taxable money funds' $4.888 trillion total. Among Prime money funds, CDs represent 14.9% (up from 14.5% a month ago), while Commercial Paper accounted for 29.2% (up from 28.9%). The CP totals are comprised of: Financial Company CP, which makes up 20.5% of total holdings, Asset-Backed CP, which accounts for 4.5%, and Non-Financial Company CP, which makes up 4.2%. Prime funds also hold 4.2% in US Govt Agency Debt, 21.4% in US Treasury Debt, 8.0% in US Treasury Repo, 0.5% in Other Instruments, 8.8% in Non-Negotiable Time Deposits, 5.8% in Other Repo, 3.7% in US Government Agency Repo and 0.7% in VRDNs.

Government money fund portfolios totaled $2.706 trillion (55.4% of all MMF assets), up $105 billion from $2.601 trillion in February, while Treasury money fund assets totaled another $1.273 trillion (26.0%), up from $1.191 trillion the prior month. Government money fund portfolios were made up of 20.8% US Govt Agency Debt, 14.7% US Government Agency Repo, 48.1% US Treasury Debt, 15.9% 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 84.5% US Treasury Debt, 15.4% in US Treasury Repo, and 0.1% in Other Instrument. Government and Treasury funds combined now total $3.979 trillion, or 81.4% of all taxable money fund assets.

European-affiliated holdings (including repo) decreased by $68.4 billion in March to $633.4 billion; their share of holdings fell to 13.5% from last month's 14.9%. Eurozone-affiliated holdings fell to $444.1 billion from last month's $479.8 billion; they account for 9.5% of overall taxable money fund holdings. Asia & Pacific related holdings decreased to $230.5 billion (4.9% of the total) from last month's $238.2 billion. Americas related holdings increased $26 billion to $4.018 trillion and now represent 85.5% of holdings.

The overall taxable fund Repo totals were made up of: US Treasury Repurchase Agreements (up $120.9 billion, or 20.9%, to $699.0 billion, or 14.3% of assets); US Government Agency Repurchase Agreements (down $7.4 billion, or -1.7%, to $432.1 billion, or 8.8% of total holdings), and Other Repurchase Agreements (down $5.2 billion, or -8.9%, from last month to $52.8 billion, or 1.1% of holdings). The Commercial Paper totals were comprised of Financial Company Commercial Paper (up $6.9 billion to $186.6 billion, or 3.8% of assets), Asset Backed Commercial Paper (down $2.8 billion to $40.9 billion, or 0.8%), and Non-Financial Company Commercial Paper (down $0.9 billion to $38.1 billion, or 0.8%).

The 20 largest Issuers to taxable money market funds as of March 31, 2021, include: the US Treasury ($2,570.4 billion, or 52.6%), Federal Home Loan Bank ($337.5B, 6.9%), Federal Reserve Bank of New York ($125.3B, 2.6%), BNP Paribas ($121.8B, 2.5%), Fixed Income Clearing Co ($121.3B, 2.5%), RBC ($116.1B, 2.4%), Federal Farm Credit Bank ($97.7B, 2.0%), JP Morgan ($92.6B, 1.9%), Federal National Mortgage Association ($92.3B, 1.9%), Federal Home Loan Mortgage Co ($70.5B, 1.4%), Credit Agricole ($60.3B, 1.2%), Bank of America ($60.0B, 1.2%), Mitsubishi UFJ Financial Group Inc ($59.2B, 1.2%), Barclays ($58.7B, 1.2%), Citi ($50.8B, 1.0%), Sumitomo Mitsui Banking Co ($47.5B, 1.0%), Societe Generale ($43.6B, 0.9%), Canadian Imperial Bank of Commerce ($40.6B, 0.8%), Nomura ($39.2B, 0.8%) and Bank of Montreal ($38.5B, 0.8%).

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: Federal Reserve Bank of New York ($125.3B, 10.6%), Fixed Income Clearing Corp ($121.0B, 10.2%), BNP Paribas ($104.3B, 8.8%), RBC ($91.4B, 7.7%), JP Morgan ($83.0B, 7.0%), Bank of America ($56.4B, 4.8%), Mitsubishi UFJ Financial Group Inc ($46.1B, 3.9%), Citi ($45.2B, 3.8%), Credit Agricole ($44.4B, 3.7%) and Barclays ($43.0B, 3.6%).

The 10 largest issuers of "credit" -- CDs, CP and Other securities (including Time Deposits and Notes) combined -- include: RBC ($24.7B, 5.5%), Toronto-Dominion Bank ($18.1B, 4.0%), BNP Paribas ($17.6B, 3.9%), Bank of Montreal ($17.5B, 3.9%), Mizuho Corporate Bank Ltd ($17.4B, 3.9%), Credit Agricole ($15.9B, 3.5%), Barclays ($15.6B, 3.5%), Canadian Imperial Bank of Commerce ($15.2B, 3.4%), Svenska Handelsbanken ($14.8B, 3.3%) and Mitsubishi UFJ Financial Group Inc ($13.1B, 2.9%).

The 10 largest CD issuers include: Bank of Montreal ($13.1B, 9.6%), Toronto-Dominion Bank ($10.1B, 7.5%), Sumitomo Mitsui Banking Corp ($9.5B, 7.0%), Mitsubishi UFJ Financial Group Inc ($8.4B, 6.2%), Canadian Imperial Bank of Commerce ($8.1B, 6.0%), Mizuho Corporate Bank Ltd ($7.8B, 5.7%), Sumitomo Mitsui Trust Bank ($7.0B, 5.1%), Landesbank Baden-Wurttemberg ($5.5B, 4.1%), RBC ($5.3B, 3.9%) and Skandinaviska Enskilda Banken ($4.9B, 3.6%).

The 10 largest CP issuers (we include affiliated ABCP programs) include: BNP Paribas ($13.8B, 6.1%), RBC ($11.9B, 5.2%), JP Morgan ($9.6B, 4.2%), Societe Generale ($9.0B, 4.0%), Barclays ($8.5B, 3.8%), NRW.Bank ($7.7B, 3.4%), BPCE SA ($7.5B, 3.3%), Toronto-Dominion Bank ($6.9B, 3.1%), Credit Agricole ($6.9B, 3.0%) and DNB ASA ($6.6B, 2.9%).

The largest increases among Issuers include: US Treasury (up $142.6B to $2,570.4B), Federal Reserve Bank of New York (up $125.3B to $125.3B), Fixed Income Clearing Corp (up $20.5B to $121.3B), Federal Home Loan Mortgage Corp (up $7.9B to $70.5B), Citi (up $7.1B to $50.8B), Bank of Montreal (up $6.4B to $38.5B), Canadian Imperial Bank of Commerce (up $4.7B to $40.6B), Bank of America (up $4.7B to $60.0B), Banco Santander ( up $3.8B to $12.6B) and National Australia Bank Ltd (up $2.7B to $10.9B).

The largest decreases among Issuers of money market securities (including Repo) in March were shown by: Federal Home Loan Bank (down $36.1B to $337.5B), Barclays PLC (down $18.8B to $58.7B), BNP Paribas (down $9.7B) to $121.8B), Deutsche Bank AG (down $8.2B to $11.1B), Credit Agricole (down $6.9B to $60.3B), DNB ASA (down $6.6B to $13.3B), Credit Suisse (down $6.1B to $11.7B), Federal National Mortgage Association (down $6.1B to $92.3B), Mitsubishi UFJ Financial Group Inc (down $5.5B to $59.2B) and RBC (down $5.3B to $116.1B).

The United States remained the largest segment of country-affiliations; it represents 76.8% of holdings, or $3.753 trillion. France (5.6%, $275.0B) was number two, and Canada (5.4%, $264.3B) was third. Japan (4.4%, $216.7B) occupied fourth place. The United Kingdom (2.3%, $111.2B) remained in fifth place. The Netherlands (1.3%, $63.4B) was in sixth place, followed by Germany (1.1%, $54.9B), Sweden (0.9%, $42.0B), Australia (0.7%, $34.7B) and Switzerland (0.4%, $20.2B). (Note: Crane Data attributes Treasury and Government repo to the dealer's parent country of origin, though money funds themselves "look-through" and consider these U.S. government securities. All money market securities must be U.S. dollar-denominated.)

As of March 31, 2021, Taxable money funds held 34.0% (up from 31.3%) of their assets in securities maturing Overnight, and another 9.4% maturing in 2-7 days (down from 11.9%). Thus, 43.4% in total matures in 1-7 days. Another 14.1% matures in 8-30 days, while 14.7% matures in 31-60 days. Note that close to three-quarters, or 72.2% of securities, mature in 60 days or less (up slightly from last month), the dividing line for use of amortized cost accounting under SEC regulations. The next bucket, 61-90 days, holds 11.5% of taxable securities, while 12.7% matures in 91-180 days, and just 3.7% matures beyond 181 days. (Visit our Content center to download, or contact us to request our latest Portfolio Holdings reports.)

Crane Data's latest monthly Money Fund Portfolio Holdings statistics will be sent out Monday, and we'll be writing our normal monthly update on the March 31 data for Tuesday's News. But we also published a separate and broader Portfolio Holdings data set based on the SEC's Form N-MFP filings on Friday. (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 March 31, 2021 includes holdings information from 1,047 money funds (down 20 from last month), representing assets of $5.046 trillion (up from $4.862 trillion). Prime MMFs now total $921.4 billion, or 18.3% of the total. We review the new N-MFP data below, and we also look at our revised MMF expense data.

Our latest Form N-MFP Summary for All Funds (taxable and tax-exempt) shows Treasury holdings totaled $2.587 trillion (up from $2.450 trillion), or a massive 51.3% of all holdings. Repurchase Agreement (Repo) holdings in money market funds totaled $1.195 trillion (up from $1.084 trillion), or 23.7% of all assets, and Government Agency securities totaled $616.8 billion (down from $651.9 billion), or 12.2%. Holdings of Treasuries, Government agencies and Repo (almost all of which is backed by Treasuries and agencies) combined total $4.399 trillion, or a stunning 87.2% of all holdings.

Commercial paper (CP) totals $275.1 billion (up from $271.7 billion), or 5.5% of all holdings, and the Other category (primarily Time Deposits) totals $156.7 billion (down from $192.0 billion), or 3.1%. Certificates of Deposit (CDs) total $136.3 billion (up from $132.2 billion), 2.7%, and VRDNs account for $79.1 billion (down from $80.2 billion last month), or 1.6% of money fund securities.

Broken out into the SEC's more detailed categories, the CP totals were comprised of: $189.0 billion, or 3.7%, in Financial Company Commercial Paper; $41.1 billion or 0.8%, in Asset Backed Commercial Paper; and, $45.0 billion, or 0.9%, in Non-Financial Company Commercial Paper. The Repo totals were made up of: U.S. Treasury Repo ($719.3B, or 14.3%), U.S. Govt Agency Repo ($422.7B, or 8.4%) and Other Repo ($52.9B, or 1.0%).

The N-MFP Holdings summary for the Prime Money Market Funds shows: CP holdings of $269.9 billion (up from $266.3 billion), or 29.3%; Treasury holdings of $200.1 billion (down from $210.2 billion), or 21.7%; Repo holdings of $159.7 billion (up from $119.8 billion), or 17.3%; CD holdings of $136.3 billion (down from $132.2 billion), or 14.8%; Other (primarily Time Deposits) holdings of $107.9 billion (down from $145.4 billion), or 11.7%; Government Agency holdings of $39.2 billion (up from $28.8 billion), or 4.2% and VRDN holdings of $8.2 billion (down from $8.9 billion), or 0.9%.

The SEC's more detailed categories show CP in Prime MMFs made up of: $189.0 billion (up from $182.3 billion), or 20.5%, in Financial Company Commercial Paper; $41.1 billion (down from $43.4 billion), or 4.5%, in Asset Backed Commercial Paper; and $39.8 billion (down from $40.6 billion), or 4.3%, in Non-Financial Company Commercial Paper. The Repo totals include: U.S. Treasury Repo ($73.3 billion, or 8.0%), U.S. Govt Agency Repo ($33.5 billion, or 3.6%), and Other Repo ($52.9 billion, or 5.7%).

Money fund expense ratios again hit their lowest level ever, falling 2 more bps to an average of 0.08%, as measured by our Crane 100 Money Fund Index and Crane Money Fund Average, as of March 31, 2021. The previous record low for monthly annualized charged expense ratios was 0.10% last month (and 0.11% in November 2014 prior to that). Crane Data revises its monthly expense data and gross yield information after the SEC updates its latest Form N-MFP data the morning of the 6th business day of the new month. (They posted this info Friday morning, so we revised our monthly MFI XLS spreadsheet and historical craneindexes.xlsx averages file to reflect the latest expenses, gross yields, portfolio composition and maturity breakout late yesterday.) Visit our "Content" page for the latest files, and see below for the review of the latest N-MFP Portfolio Holdings data.

Our Crane 100 Money Fund Index, a simple average of the 100 largest taxable money funds, shows an average charged expense ratio (Exp%) of 0.08%, down from 0.10% last month. The average is down from 0.27% on Dec. 31, 2019, so we estimate that funds are waived approximately 17 bps, or almost two-thirds of full charged expenses. The Crane Money Fund Average, a simple average of all taxable MMFs, also shows a charged expense ratio of 0.08% as of Mar. 31, 2021, down 2 basis points from the month prior and down from 0.40% at year-end 2019.

Prime Inst MFs expense ratios (annualized) now average 0.13% (down 0.01% from last month), Government Inst MFs expenses average 0.06% (down 0.02% from the month prior), Treasury Inst MFs expenses also average 0.06% (down 0.02% from last month). Treasury Retail MFs expenses currently sit at 0.06%, (down 0.02% from the month prior), Government Retail MFs expenses yield 0.05% (down 0.02% over the month). Prime Retail MF expenses are 0.15% (down 0.02% from the month prior). Tax-exempt expenses were higher, now averaging to 0.12% (up 0.01% from last month).

Gross 7-day yields were also lower, falling to 0.10% on average in the month ended Mar. 31 2021. The Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 736), shows a 7-day gross yield of 0.10%, down 2 basis points from the previous month. The Crane Money Fund Average is down 1.62% from 1.72% at the end of 2019. The Crane 100's 7-day gross yield also fell 2 basis points in March, ending the month at 0.10%, down 1.63% from year-end 2019.

According to our revised MFI XLS and Crane Index numbers, we now estimate that annualized revenue for all money funds is approximately $3.869 billion (as of 3/31/21). Our estimated annualized revenue totals have fallen from $4.587 billion last month, from $6.028 trillion at the start of 2020 and from $10.642 trillion at the start of 2019. Thus, we'd estimate that fee waivers are currently costing fund managers, and their distribution partners, over $6.0 trillion annually. (That's at these levels.) Of course, charged expenses and gross yields are driven by a number of variables, and increasing Treasury supply should alleviate some of the pressures from this past month. Nonetheless, severe fee waivers and heavy fee pressure should continue as long as the Fed keeps yields pinned to almost zero.

Crane Data's latest Money Fund Market Share rankings show assets were mostly higher among the largest U.S. money fund complexes in March. Money market fund assets jumped $151.0 billion, or 3.2%, last month to $4.932 trillion. Assets have increased by $209.7 billion, or 4.4%, over the past 3 months, and they've increased by $123.0 billion, or 2.4%, over the past 12 months through March 31, 2021. The biggest increases among the 25 largest managers last month were seen by BlackRock, Goldman Sachs, Federated Hermes, JP Morgan and First American, which grew assets by $61.7 billion, $32.3B, $14.4B, $12.4B and $12.3B, respectively. The largest declines in assets in March were seen by Fidelity, Wells Fargo, Invesco, Schwab and DWS, which decreased by $8.6 billion, $6.1B, $5.1B, $4.0B and $802M, 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 March.

Over the past year through March 31, 2021, BlackRock (up $56.3B, or 12.3%), Vanguard (up $43.2B, or 9.1%), Morgan Stanley (up $40.7B, or 17.9%), Wells Fargo (up $32.6B, or 17.4%), Dreyfus (up $30.7B, or 14.9%), JP Morgan (up $29.7B, or 6.2%) and First American (up $24.9B, or 23.1%) were the largest gainers. These complexes were followed by T Rowe Price (up $12.6B, or 31.8%), Northern (up $11.7B, or 6.7%) and HSBC (up $6.1B, or 15.4%). BlackRock, JP Morgan, Goldman Sachs, Dreyfus and Morgan Stanley had the largest asset increases over the past 3 months, rising by $84.7B, $46.0B, $30.6B, $22.2B and $20.6B, respectively. The largest decliners over 3 months included: Schwab (down $12.5B, or -7.2%), Fidelity (down $8.8B, or -1.0%), Wells Fargo (down $5.4B, or -2.7%), DWS (down $3.9B, or -11.5%) and Federated Hermes (down $2.6B, or -0.8%).

Our latest domestic U.S. Money Fund Family Rankings show that Fidelity Investments remains the largest money fund manager with $897.1 billion, or 18.2% of all assets. Fidelity was down $8.6 billion in March, down $8.8 billion over 3 mos., and down $56.0B over 12 months. BlackRock ranked second with $522.1 billion, or 10.6% market share (up $61.7B, up $84.7B and up $56.3B for the past 1-month, 3-mos. and 12-mos., respectively). Vanguard dropped to third with $494.0 billion, or 10.0% market share (up $9.7B, up $1.3B and up $43.2B). JP Morgan ranked fourth with $459.4 billion, or 9.3% of assets (up $12.4B, up $46.0B and up $29.7B for the past 1-month, 3-mos. and 12-mos.), while Goldman Sachs took fifth place with $345.5 billion, or 7.0% of assets (up $32.3B, up $30.6B and down $6.6B).

Federated Hermes was in sixth place with $337.4 billion, or 6.8% of assets (up $14.4 billion, down $2.6B and down $46.1B), while Morgan Stanley was in seventh place with $244.4 billion, or 5.0% (up $638M, up $20.6B and up $40.7B). Dreyfus ($217.6B, or 4.4%) was in eighth place (down $433M, up $22.2B and up $30.7B), followed by Wells Fargo ($193.3B, or 3.9%, down $6.1B, down $5.4B and up $32.6B). Northern was in 10th place ($167.5B, or 3.4%; up $5.7B, up $3.1B and up $11.7B).

The 11th through 20th-largest U.S. money fund managers (in order) include: Schwab ($160.9B, or 3.3%), SSGA ($149.4B, or 3.0%), American Funds ($145.3B, or 2.9%), First American ($129.4B, or 2.6%), Invesco ($71.6B, or 1.5%), UBS ($55.0B, or 1.1%), T Rowe Price ($48.2B, or 1.0%), HSBC ($44.5B, or 0.9%), Western ($32.7B, or 0.7%) and DWS ($29.8B, or 0.6%). Crane Data currently tracks 65 U.S. MMF managers, unchanged from last month.

When European and "offshore" money fund assets -- those domiciled in places like Ireland, Luxembourg and the Cayman Islands -- are included, the top 10 managers appear as Fidelity, BlackRock, JP Morgan, Vanguard, Goldman Sachs, Federated Hermes, Morgan Stanley, Dreyfus/BNY Mellon, Wells Fargo 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 ($909.4 billion), BlackRock ($707.2B), JP Morgan ($668.0B), Vanguard ($494.0B) and Goldman Sachs ($466.1B). Federated Hermes ($348.0B) was sixth, Morgan Stanley ($295.3B) was in seventh, followed by Dreyfus ($241.4B), Wells Fargo ($194.3B) and Northern ($192.3B) which round out the top 10. These totals include "offshore" U.S. Dollar money funds, as well as Euro and Pound Sterling (GBP) funds converted into U.S. dollar totals.

The April issue of our Money Fund Intelligence and MFI XLS, with data as of 3/31/21, shows that yields were flat in March for almost all of our Crane Money Fund Indexes. The Crane Money Fund Average, which includes all taxable funds covered by Crane Data (currently 736), 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 0.12%, the Gross 30-Day Yield was also unchanged at 0.12%.

Our Crane 100 Money Fund Index shows an average 7-Day (Net) Yield of 0.02% (unch) and an average 30-Day Yield also unchanged at 0.02%. The Crane 100 shows a Gross 7-Day Yield of 0.12% (unch), and a Gross 30-Day Yield of 0.12% (unch). Our Prime Institutional MF Index (7-day) yielded 0.04% (up a basis point) as of March 31, while the Crane Govt Inst Index was unchanged at 0.02, and the Treasury Inst Index was also unchanged at 0.02%. Thus, the spread between Prime funds and Treasury funds is 2 basis points, and the spread between Prime funds and Govt funds is 2 basis points. The Crane Prime Retail Index yielded 0.02% (unch), while the Govt Retail Index was 0.01% (unch), the Treasury Retail Index was also 0.01% (unchanged from the month prior). The Crane Tax Exempt MF Index yielded 0.01% (unch) in March.

Gross 7-Day Yields for these indexes in February were: Prime Inst 0.18% (up a basis point), Govt Inst 0.09% (unch), Treasury Inst 0.09% (unch), Prime Retail 0.19% (unch), Govt Retail 0.08% (unch) and Treasury Retail 0.08% (unch). The Crane Tax Exempt Index was unchanged at 0.12%. The Crane 100 MF Index returned on average 0.00% over 1-month, 0.00% over 3-months, 0.00% YTD, 0.09% over the past 1-year, 1.26% over 3-years (annualized), 1.00% over 5-years, and 0.52% over 10-years.

The total number of funds, including taxable and tax-exempt, was down 9 at 902. There are currently 736 taxable funds, down 7 from the previous month, and 166 tax-exempt money funds (down 2 from last month). (Contact us if you'd like to see our latest MFI XLS, Crane Indexes or Market Share report.

The April issue of our flagship Money Fund Intelligence newsletter, which was sent to subscribers Thursday morning, features the articles: "Ultra-Short Buckets Ready: Bond Fund Symposium '21," which highlights comments from our recent online event; "BNY Mellon Liquidity Direct's George Maganas on Portals," which profiles one of the largest and oldest online money fund trading portals; and, "Worldwide MFs Rise in Q4'20 Led by China, Ireland, France," which reviews global MMF asset flows. We also sent out our MFI XLS spreadsheet Thursday a.m. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our April Money Fund Portfolio Holdings are scheduled to ship on Monday, April 12, and our April Bond Fund Intelligence is scheduled to go out Thursday, April 15.

MFI's lead article says, "We recently hosted Crane's Bond Fund Symposium, an online event focusing on the ultra-short bond fund space. Given the zero rate environment and the potential for more regulations in cash, interest in the sector remains high as ultra-shorts are once again seen as a possible alternative to Prime MMFs. We quote from some of the highlights below. (Attendees and Subscribers may access the recordings and materials via our Bond Fund Symposium 2021 Download Center.)"

It explains, "Our Bond Fund Intelligence shows Ultra-Short Bond Funds up 20.3% (vs. 7.4% for all bond funds) in the year through 2/28/21, the fastest growth of any bond fund category. While Ultra-Short and our tighter Conservative Ultra-Short Bond Fund group together still only account for $201.4 billion of the $3.22 trillion of assets tracked by Crane Data, they should continue to grow briskly. (Short-Term is another $359.0 billion.)"

Our latest "Profile" reads, "This month, MFI interviews BNY Mellon Managing Director and Head of Liquidity Services, George Maganas, who is in charge of the firm's money market fund trading 'portal,' Liquidity Direct. Maganas reviews the history of one of the industry's largest and oldest portals, and BNY's main priorities and biggest challenges going forward. He also discusses the current portal marketplace and how they're working to make 'clients' workflow more efficient.' Our Q&A follows."

MFI says, "Give us a little history about the platform and about yourself." Maganas tells us, "Liquidity Direct was established as an innovator in the money market fund space over 20 years ago. From the start, our focus was on providing efficiencies for our clients, and for their liquidity management and investment processes. We continue to innovate and provide superior performance for our clients globally."

He continues, "Beyond Liquidity Direct, BNY Mellon's affiliate Dreyfus has been in the money fund manufacturing and distribution business for over 50 years, and we really believe that depth and breadth of experience is evident in our product offering. When you combine the manufacturing, asset servicing and distribution capabilities across our investment management business, the Bank platform and Pershing, you can really see that BNYM is a significant participant that plays a critical role in the money fund industry."

Maganus adds, "Personally, I've been involved with Liquidity Direct for the past three years, leading our business development activities. Prior to that, I've been in global markets for over 25 years in various roles, from running electronic trading to operating other platform businesses, such as leading an FCM. Prior to this role, my experience with money market funds has been primarily as an end user at an FCM."

The "Worldwide" article tells readers, "The Investment Company Institute published, 'Worldwide Regulated Open-Fund Assets and Flows, Fourth Quarter 2020,' which shows that money fund assets globally rose by $246.3 billion, or 3.1%, in Q4'20 to $8.314 trillion. The increase was driven by big jumps in Chinese, Irish and French money market fund assets, though U.S. MMFs declined. MMF assets worldwide increased by $1.689 trillion, or 25.5%, in the 12 months through 12/31/20, and money funds in the U.S. now represent 52.1% of worldwide assets."

ICI explains, "The growth rate … in US dollars was increased by US dollar depreciation over the fourth quarter of 2020.... Bond fund assets increased by 6.8% to $13.05 trillion in the fourth quarter.... Money market fund assets increased by 3.1% globally to $8.31 trillion.... Money market fund assets represented 13% of the worldwide total."

MFI also includes the News piece, "MMF Assets Surge Break $4.9T." It says, "Crane Data's MFI XLS shows MMFs up $151.0 billion to $4.934 trillion in March. ICI's latest weekly 'Money Market Fund Assets' series shows MMFs up in 7 of the past 8 weeks. (They fell hard on April 2 though.) MMFs are up $200 billion, or 4.7%, year-to-date in 2021."

An additional News brief, "Comments Hit SEC; Due April 14," tells us, "Comments continue to appear in response to the Securities & Exchange Commission's announcement, 'SEC Requests Comment on Potential Money Market Funds Reform Options Highlighted in President's Working Group Report.'"

Our April MFI XLS, with March 31 data, shows total assets jumped $151.0 billion in March to $4.934 trillion, after rising $30.8 billion in February and $5.6 billion in January. Assets decreased $6.7 billion in December, $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 and $417.9 billion in April. 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 remained flat at 0.02%.

On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA and the Crane 100 both stand at 0.12%. Charged Expenses averaged 0.10% for the Crane MFA and 0.10% for the Crane 100. (We'll revise expenses on Friday once we upload the SEC's Form N-MFP data for 3/31.) The average WAM (weighted average maturity) for the Crane MFA and Crane 100 was 42 (down one day from the previous month) and 44 days (down two days) respectively. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)

Investment Company Institute President & CEO Eric Pan spoke earlier this week on "Observations About the March 2020 Turmoil and Regulated Funds" at The Harvard Law School Forum on Corporate Governance. Pan says, "I would like to speak with you today about the discussions US and international policymakers are having about the March 2020 market turmoil and their work to make the financial markets more resilient in the face of a similar liquidity shock. Such work is taking place in international bodies like the Financial Stability Board (FSB) and International Organization of Securities Commissions with the active participation of US financial regulators. For those familiar with the regulatory debates following the 2007-09 global financial crisis, these discussions should give you a sense of déjà vu. Regulated funds, including money market funds and long-term open-end funds, such as bond funds, are being closely scrutinized for systemic vulnerabilities. Indeed, some commentators have gone as far as to argue that the market events of March 2020 indicate that the business models of these funds should fundamentally change because they contend that these funds are unsafe for the global financial system in the absence of a central bank liquidity backstop."

He explains, "As the association representing the regulated fund industry, ICI wholeheartedly supports smart regulatory reforms to make our funds and, more broadly, the financial system more resilient. We endorse reforms developed by assessing accurate data and information to fix identified problems. This approach should produce targeted reforms that respect the critical role regulated funds play in market-based financing, which supports economic growth. We always will question, however, any proposals that seek significant changes to regulated funds if those proposals are not based on accurate data or seek to improperly equate market-wide problems with shortcomings in fund regulation. I do have concerns that this may be happening in the current debate."

Pan comments, "Money market funds and bond mutual funds are, of course, inextricable components of the financial system. However, they did not trigger the stresses in the financial markets. This observation is important because, as regulators consider what reforms may be needed, they should prioritize examining the factors that created the stresses and, only after identifying and addressing those factors, consider necessary policy reforms for regulated funds."

Discussing "Money Market Funds," he tells us, "Last fall, the FSB began the important process of reviewing and assessing the market events of March 2020, with specific focus on money market funds as significant participants in the short-term funding markets. In December, the President's Working Group on Financial Markets issued a report discussing ten reform measures that policymakers could consider to improve the resilience of money market funds and the broader short-term funding markets. In recognition of the importance of money market funds to investors and the economy, ICI and its members have devoted significant time and effort over the years to considering how to make these funds more robust under even the most adverse market conditions -- goals we share with the SEC and other policymakers."

Pan continues, "Three principles have always guided our analysis of money market fund reform proposals: First, given the tremendous benefits that money market funds provide to investors and the economy, it is imperative to preserve this product's essential characteristics. Second, in devising a solution, we need to stay focused on the objective that policymakers are seeking to achieve. This objective is to strengthen money market funds even further against adverse market conditions and to enable them to meet extraordinarily high levels of redemption requests. Finally, any solution must be designed to promote this important policy goal while minimizing the potential for unintended negative consequences."

He elaborates, "For example, one proposal would be to introduce swing pricing to money market funds. To make swing pricing work, however, funds would have to eliminate popular features such as same-day settlement and multiple NAV strikes, reducing the utility of the product to investors without necessarily reducing the incentives for investors to redeem during times of stress. Another example is the use of capital buffers. Capital buffers would negatively impact money market fund yields, making such funds not commercially viable, while unlikely offering any substantial protection during a liquidity crisis, such as we had last March."

Pan adds, "For those who remember the debate about money market funds between 2012 and 2014, the potential policy options should evoke some strong memories. Many were considered back then and, in several cases, rejected by the SEC itself. Therefore, it should not surprise regulators that some of these options remain problematic even today."

He also comments, "On the other hand, at least one option could prove useful. Removing the tie between money market fund liquidity and fee and gate thresholds could address policymakers' concerns with the least negative impact. The run risk that regulators appropriately worry about is exacerbated by these bright lines in regulation where market participants find themselves trying to stay on one side of the line."

Finally, he tells the Forum, "ICI's analysis indicates that, as the weekly liquid assets of particular prime money market funds fell toward 30 percent, investors were increasingly likely to redeem. Investors apparently reacted to the mere possibility that funds had the legal authority to impose fees and gates rather than the probability that they would do so. Thus, the 30 percent weekly liquid asset requirement, combined with the possibility of fees and gates, created a bright line that investors sought to avoid despite the fact that these funds still had plentiful weekly liquidity."

In other news, 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 April 2, 2021) includes Holdings information from 49 money funds (down 20 funds from a week ago), which represent $1.605 trillion (down from $2.084 trillion) of the $4.701 trillion (34.1%) 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 $837.6 billion (down from $1.102 trillion a week ago), or 52.2%, Repurchase Agreements (Repo) totaling $391.9 billion (down from $537.4 billion a week ago), or 24.4% and Government Agency securities totaling $196.8 billion (down from $239.5 billion), or 12.3%. Commercial Paper (CP) totaled $63.3 billion (down from $71.5 billion), or 3.9%. Certificates of Deposit (CDs) totaled $48.6 billion (down from $51.7 billion), or 3.0%. The Other category accounted for $48.0 billion or 3.0%, while VRDNs accounted for $18.9 billion, or 1.2%.

The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $837.6 trillion (52.2% of total holdings), Federal Home Loan Bank with $104.3B (6.5%), Fixed Income Clearing Corp with $46.3B (2.9%), BNP Paribas with $42.8B (2.7%), RBC with $39.9B (2.5%), Federal Farm Credit Bank with $36.2B (2.3%), JP Morgan with $35.3B (2.2%), Federal National Mortgage Association with $34.1B (2.1%), Credit Agricole with $25.4B (1.6%) and Mitsubishi UFJ Financial Group Inc with $23.2B (1.4%).

The Ten Largest Funds tracked in our latest Weekly include: JPMorgan US Govt MM ($217.8 billion), Wells Fargo Govt MM ($136.5B), Fidelity Inv MM: Govt Port ($130.9B), Morgan Stanley Inst Liq Govt ($118.9B), JPMorgan 100% US Treas MMkt ($106.0B), Dreyfus Govt Cash Mgmt ($95.5B), First American Govt Oblg ($87.3B), State Street Inst US Govt ($84.7B), JPMorgan Prime MM ($73.6B) and Morgan Stanley Inst Liq Treas Sec ($65.2B). (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.)

We continue to write up the highlights from our recent Bond Fund Symposium (Online), which took place a week and a half ago. Today, we excerpt from the session, "Short & Shorter: Ultra-Shorts vs. SMAs," which features Dave Martucci of JP Morgan Asset Management and Jerome Schneider of PIMCO. This annual BFS "Godzilla vs. Kong" segment contrasts two of the biggest names in the ultra-short and short-term space. Martucci tells us, "I manage the Managed Reserves Strategy for J.P. Morgan, which is the ultra-short duration. We have 11 PMs across New York and London, and we manage money across ETFs, SMAs, as well as mutual funds.... We are part of the Global Liquidity Group ... under John Donohue.... [This group has] $839 billion in AUM, which is part of the larger J.P. Morgan Asset Management's $2.3 trillion." (Attendees and Crane Data subscribers may access the Powerpoints, recordings and conference materials at the bottom of our "Content" page or our via our Bond Fund Symposium 2021 Download Center.)

He explains, "If you look at ... ultra-short duration, [the] Managed Reserves book is at $101 billion. That is at an all-time high, and that's really growth across all three segments that I talked about. I think last time we talk two years ago out in L.A., we had just started on the ETF story.... We've seen significant growth and have made a great effort to grow that product. We're currently at $16.4 billion, so that's been a great story for us.... [But] we've seen growth across all areas [mutual funds and SMAs too]."

Martucci says, "There really are three [reasons] we've seen this growth, and why we will continue to see growth, in this ultra-short area.... While I do agree ... that all asset classes did come under stress in March, and we all suffered from the ability to get liquidity, prime funds [in particular] faced a significant amount of pressure because of ... the fear of being the last person left if there was a gate and fee drop. That caused a lot of pressure and withdrawals in that space. So, I think that pressure of gates and fees did lead a lot of investors to do a post-mortem and kind of consider the ultra-short space whether it be through SMAs, or mutual funds, or ETFs, or what have you. I do think that that's something that will continue to weigh on that sector and drive money into our space, unless that is addressed in the new regulation."

He states, "Second, it's ... really the extremely low interest rates. We have to deal with that, but also in the prime and government space. It makes sense, if you don't need the daily liquidity of that space to really take a step out into the ultra-short space. Then the third piece of the puzzle [and] why we're going to see money come into our space [is the] potential for inflation and rising rates. We're starting to see people come down the curve now.... They'll look at money market funds, and they'll see either zero, or 5-10 basis points in a credit prime fund.... The next obvious step is ultra-short, so we are seeing that play out in our space as well."

Martucci adds, "At the end of the day, our definition of ultra-short is really restricted from an interest rate risk [standpoint to] one year and in -- interest rate risk is not really what's going get you here. It's going be credit risk, so you have got to make sure you're doing your due diligence and you have the resources backing you. And for sure we have that. I think that's an important attraction for our clients when considering J.P. Morgan ultra-short duration. For clients that don't necessarily need that daily liquidity, and maybe have a six month plus time horizon on their cash, we really want them to consider the Managed Reserves product. If they have a longer time horizon, out past a year, are willing to take a little more risk, then we want them to consider short duration products."

Next, Schneider says, "I think there are a lot of things that Dave and I agree on quite honestly. I think we would agree that there's a lot of lessons that came out of March. I think that there's a lot of experience that we both share in terms of how to think about this zero rate or near zero rate environment. [It's] beneficial in some ways ... we can provide value to clients looking for defense. But yet, I think it's really more about education. And I think what we have done inordinately over the past nine months is really educate clients about how to think about cash from a variety of perspectives. It's a very idiosyncratic process in that regard. Some investors are playing defense, coming down the curve, [and] some investors are simply too scared to come out of the cave of cash."

He comments, "For PIMCO as a whole, we think that this is a very dedicated set of instruments. We've been doing ultra-short and short-term strategies for almost 45 years.... At this point in time, what we've done is realize and rationalize over the past 20 years that it's a platform that requires a significant amount of resources on the portfolio management team, but also a credit research team for corporate credit, as well as structured products and asset-backeds. And so, that's exactly what we've done.... [T]his is a dedicated set of products, that really needs to have the full set of attention and not just be viewed as a reduced risk core bond, or reduced risk type of fixed income portfolio, and that everything is money good, because we've all experienced that those assumptions go south very quickly in this regard."

Schneider tells the BFS, "The big picture for 2021 is to be mindful of a few things: one, obviously, credit risk and credit risk management. Although, we would generally view that this is a pretty benign credit risk environment at this point in time, we do think that there will be undulations in growth. And there will still be some potential for volatility along the way. So simply buying the beta of credit, if you will, even in the short-term sectors, is probably a little bit foolhardy at this point in time."

He explains, "We have structural changes. One structural change is clearly LIBOR. It got pushed out to 2023, so maybe a topic for us for the next two years. But the reality is is that it's still going to have impacts, and we're starting to see it have an impact in terms of issuances of short-dated silver floaters that come into the market."

Schneider adds, "The third element is, quite honestly, liquidity management and structure. We've had a trillion dollars come into the money market space over the past year, and at the same time people have become more defensive. And so, the experiences ... in those prime money market funds are at the top of mind for us.... [P]eople should be thinking about structure, proper vehicles to actually manage this liquidity, and more importantly, how to be opportunistic to redeploy cash from that very short end right now, which is basically being subdued by the variety of pressures, both regulatory from the SLR, to obviously, the supply and demand mismatches in bills and everything else."

He also says, "Here at Pimco, across our $300 billion in assets, we think that there's true value add to being in that ultra-short space, in that short term space, which we call low duration. [We] try to minimize that cash element, not because it's bad. But being in that cash element is truly for same day liquidity, that's like government money market funds, Treasury Bills, things like that. Our expertise really lies outside that space, so our assets under management are reflective of that. Our money market fund size is pretty small, not because we can't trade repo. We trade tens of billions of repo every day. But simply because we think that the resources and acumen and the ability to provide value to clients is further out the curve."

Finally, Schneider adds, "This has been sort of the focal point of PIMCO, well before 2016 when we had money market fund reform.... The impact ... of really understanding what you own. Fundamentally, we've seen time and time again, where people are taking credit risk or structural risk which is really misunderstood in a lot of ways. And ultimately, we saw it culminate in some ultra-short strategies in 2008 that couldn't meet redemptions. And now we're sort of seeing it percolate again. Fundamentally, it's a story which we need to think about.... Right now, it's on the forefront of regulators' minds. There's a big difference between owning assets which are short-dated and might mature, versus owning good assets, which are good assets and money good, but not necessarily liquidity good at this point in time. We've witnessed that there very much can be a disconnect between this maturity transformation process, which probably should be addressed in a variety of ways."

The Investment Company Institute released its latest weekly "Money Market Fund Assets" report Thursday, which shows MMFs surging again in the latest week, the 7th increase in the past 8 weeks. Money fund assets are up $200 billion, or 4.7%, year-to-date in 2021. Inst MMFs are up $233 billion (8.4%), while Retail MMFs are down $33 billion (-2.2%). Over the past 52 weeks, money fund assets have increased by $100 billion, or 2.7%, with Retail MMFs falling by $32 billion (-2.2%) and Inst MMFs rising by $132 billion (5.6%). We review the latest asset totals, and we also excerpt more highlights from our recent Bond Fund Symposium (Online), below.

ICI's "Assets" release says, "Total money market fund assets increased by $49.17 billion to $4.50 trillion for the week ended Wednesday, March 31.... Among taxable money market funds, government funds increased by $52.95 billion and prime funds decreased by $3.07 billion. Tax-exempt money market funds decreased by $720 million." ICI's stats show Institutional MMFs increasing $55.0 billion and Retail MMFs decreasing $5.9 billion. Total Government MMF assets, including Treasury funds, were $3.887 trillion (86.4% of all money funds), while Total Prime MMFs were $511.1 billion (11.4%). Tax Exempt MMFs totaled $99.3 billion (2.2%). (Note that ICI's asset totals don't include a number of funds tracked by the SEC and Crane Data, so they're almost $400 billion lower than our asset series.)

It explains, "Assets of retail money market funds decreased by $5.86 billion to $1.49 trillion. Among retail funds, government money market fund assets decreased by $3.40 billion to $1.15 trillion, prime money market fund assets decreased by $1.91 billion to $251.96 billion, and tax-exempt fund assets decreased by $548 million to $88.26 billion." Retail assets account for just over a third of total assets, or 33.2%, and Government Retail assets make up 77.2% of all Retail MMFs.

ICI adds, "Assets of institutional money market funds increased by $55.02 billion to $3.00 trillion. Among institutional funds, government money market fund assets increased by $56.35 billion to $2.73 trillion, prime money market fund assets decreased by $1.16 billion to $259.16 billion, and tax-exempt fund assets decreased by $171 million to $11.05 billion." Institutional assets accounted for 66.8% of all MMF assets, with Government Institutional assets making up 91.0% of all Institutional MMF totals.

In other news, we wrote last week about our recent Bond Fund Symposium virtual conference. (See our April 1 News, "Bond Fund Symposium Highlights: Davis, Driscoll, Rothweiler Comment and see our Bond Fund Symposium 2021 Download Center.) Today, we quote from the session, "Regulatory Update: Latest Bond Fund Issues," which featured Jamie Gershkow from Stradley Ronon Stevens & Young and Aaron Withrow from Dechert LLP. Gershkow gave a "Money Market Fund Update" and recapped recent discussions surrounding potential future regulations.

She explains, "Money market funds have been in the news a fair amount recently. This past December, the President's Working Group issued a report on how money market funds fared during the liquidity stresses in the market in March 2020. The report essentially concluded that more work is needed to be done to reduce some of the risks posed by prime and tax exempt money market funds that may lead to or exacerbate stresses in the short-term funding markets. The report sets forth 10 different policy measures that could be considered for prime and tax exempt money market funds, which I'll discuss on the next slide. The report does not endorse any one specific policy measure in particular, and recognizes also that some of these may be used in combination and [as part of] a larger reform package.... The reports really intended to start the discussion of what rulemaking may be appropriate for money market funds, given the events that happened last March. The report leaves government money market funds out of the discussion of potential policy measures."

Gershkow tells us, "The SEC then subsequently requested comment on this report -- comments are due in a few weeks on April 12th. The SEC Request for Comment is a little bit broader than the report itself, and asks for comment on these 10 specific policy measures. [It] also asks for comment generally on other types of reform options that may be useful for money funds [and on] just improving the overall short-term funding markets and the effectiveness of the previously enacted reforms that had been implemented for 2a-7 after the last global financial crisis."

She continues, "The Financial Stability Board also has indicated that they expect to deliver policy proposals in July to enhance the resilience of money market funds. And just this morning, ESMA [the European Securities and Markets Athority] issued a consultation paper in the context of reviewing their regulations on money market funds and have asked for feedback. So lots is going on from kind of all over the place on money market funds."

Gershkow comments, "So this slide lists the 10 different policy measures that are in the President's Working Group Report. Taking a step back, also, this report identifies three overarching goals of money market funds reform to be considered as these are being evaluated. The first one is improving vulnerabilities in money market funds that may contribute stresses in the market. The second is improving the overall resilience and functioning of the short-term funding market. And a third is reducing the likelihood that [government] or taxpayer support may be needed in the future to support money market funds."

She states, "So, I don't know that we have time to go through in detail all of these, but some things I will highlight here. The first option here [is the] removal of the tie between liquidity and fee and gate thresholds. So currently, under rule 2a-7, the board is permitted to impose a liquidity fee or a redemption fee for certain types of money market funds, once weekly liquid assets drop below 30%. And what was observed this past March was that, that bright lines has kind of created this dynamic that exacerbated redemptions in a time of stress as investors saw liquidity dropping close to 30%, because this is publicly posted on websites every day. Investors got kind of scared that their money may be tied up in a redemption gate if it dropped below 30% and they increased redemption behavior to avoid the prospect of that happening.... [T]his policy proposal recognizes some of those events from this past March and suggests removing that that fees engage be tied to 30% liquidity and would, instead, generally be based on the best interest finding by the board."

Gershkow continues, "The next reform here, reforms of conditions for imposing redemption gates, sets forth various options that could be reforms with respect to how redemption gates are currently implemented.... Also, ... imposing a higher with weekly liquid asset requirement. Then we also have counter-cyclical weekly liquid asset requirements. So this would be upon certain events on the 30% weekly liquid asset thresholds could actually move maybe down to 20, 25% and other requirements related to that such as fees engage and move in tandem. A lot of these policy proposals are more conceptual in nature without full details built out yet. So, I think the comment letters on this will be really insightful to see what potential issues, you know, are out there."

She adds, "Another policy proposal would be floating NAVs for all prime and tax exempt money market funds. Right now, retail funds are permitted to use the amortized cost method of valuation. Swing pricing requirements are another option here. This is something we've seen in the mutual fund side, and here at suggested that it could perhaps apply to money market funds. I think there [are] operational issues with same day settlement matters related to money market funds, that may make this not quite so feasible."

Finally, Gershkow tells the BFS, "Then the other requirements are more ... bank-like regulatory requirements -- minimum balance at risk, capital buffers, a private liquidity facility. These are some repeats from after the last global financial crisis; things that were proposed or discussed, but not ultimately adopted. They've made their way back into this report, and [may be] considered in future rulemaking.... So a lot more [remains] to be seen. If we're following the playbook from last global financial crisis, you know, comments [are] due to the SEC on this, then last time there was a roundtable, and then policy proposals to amend 2a-7. So, an interesting area for us I'll fall on for sure."

Late last week, we hosted Crane's Bond Fund Symposium (Online), which took place virtually after being cancelled last year due to the pandemic. Today, we quote from the session, "Senior Portfolio Manager Perspectives," which featured BlackRock's Brett Davis, Putnam Investments' Joanne Driscoll and UBS Asset Management's Dave Rothweiler. Thanks again to those who attended and supported BFS, and attendees and Crane Data subscribers may access the Powerpoints, recordings and conference materials at the bottom of our "Content" page or our via our Bond Fund Symposium 2021 Download Center. (Mark your calendars for our return to live events with Crane's Money Fund Symposium, which is now scheduled for Sept. 21-23, 2021 at The Loews Philadelphia, in Philadelphia, Pa, and for next year's Bond Fund Symposium, March 28-29, 2022, in Newport Beach, Calif.)

Moderator Pete Crane asked panelists to give a little background first. Driscoll tells us, "I'm head of the Short-Term Liquid Markets Group, and a member of Putnam's Fixed Income Management Committee. My team is responsible for Putnam's short end products, including the short-term bond mandates, money market funds, cash management, [and] securities lending. In terms of the Ultra-Short Duration Fund, I'm the lead PM, and in that space, we manage about $18 billion."

Rothweiler comments, "I've been in the business over 25 years as a credit analyst, trader and PM. I spent most of my career as a PM for UBS Asset Management. I've managed 2a-7 funds, short duration portfolios, [and] intermediate strategies. Globally, we have about $300 billion in fixed income assets with about $88 billion in global money markets, of which $74 billion is U.S. In terms the ultra-short space, I co-manage the $3 billion UBS Ultra-Short Income Fund, with additional separate account assets."

Davis says, "I am one of the portfolio managers on the cash and liquidity platform ... responsible for managing several short-term, fixed income separately managed accounts. Most of our client bases are corporations, financials, and insurance companies. In addition, I'm one of the portfolio managers responsible for managing our active ultra-short mutual fund, which we call Short Obligations, as well as our active ultra-short ETF, which is ticker iCash."

When asked, "What are you buying?" Rothweiler answers, "I would say we see the most value in Tier 2 commercial paper.... If you think about the amount of spread you can get in Tier 2 CP relative to longer dated corporates, we view that as the place to be. Let's face it, in terms of the credit markets, things have become notably richer since the March crisis. If you want to favor somewhat of an upper quality type bias, asset-backeds are a nice way to play that as well. I'd say from that standpoint, that's probably one of our more favored trades."

Driscoll adds, "I agree with Dave. We also favor Tier 2 commercial paper. A lot of the issuers that have been out of the market since March of last year have come back, so Tier 2 CP outstanding is up almost 50% year-to-date. So that's been a nice move. We're also really active in the investment grade new issue market, because that's a place that allows us to get decent sized positions.... [With] front end issuance, in the IG space last year, there was $425 billion taken out of the market with calls and tenders ... that, combined with inflows into short-term bond funds, really exacerbated that supply-demand imbalance. Luckily, we've been seeing, at least this month, a pickup.... But ... with yields and spread so compressed, it's a time where you have to take a more conservative approach, and we're very selective on credit in this market."

Davis responds, "Similarly, to what Dave and Joanne said, we are a big participant in the Tier 2 commercial paper market. We buy Tier 1 and Tier 2. We look at the relative value between those two. For example, at the end of last year, you did have some supply-demand dynamics, where you actually had fairly cheap Tier 1 commercial paper a little bit further out the curve that maybe the money market funds weren't as big participants in. The ultra-short and SMA spaces were very active because we knew that rates were probably going to go tighter as we entered the New Year, and we wanted to hold onto that excess yield for as long as we possibly could.... We really stay away from that bottom rung of the investment grade universe, so anything that's really rated BBB- or anything that we think will get downgraded to triple B-minus during the duration of our holding periods. So, we're a little bit more conservative from a credit standpoint."

When asked about the importance of cash flows, Rothweiler comments, "Touching on what Joanne just said in terms of the amount of tendering and calls that have been going on in the corporate market, it always seems like you get the cash when you least want it.... One thing we look at is also shareholder concentration risk. What's the risk of shareholders needing their cash at various points in time? For us, with a separate account there's probably less risk of that. But in a commingled fund, like the UBS Ultra-Short Income Fund, thanks to our Client Services team we have a lot of contact, oftentimes with FA's, with larger shareholders. We try to forecast that as well on the other side in terms of any kind of outsized risk."

Driscoll says, "Our model is probably a little different from others. Putnam is an advisor sold firm, so ours is really driven by external and internal advisor consultants, and they have the relationships with the financial advisors. We think about what our clients are looking for. Some are looking for more income than a money market fund with a little more risk, and others are trying to shorten their duration.... When we launched the Ultra-Short Duration Income Fund in 2011, we limited any one client to about 10 percent of the fund, just to limit that volatility. Now that the funds are more like $17 billion, individual clients aren't as much of an issue. But ... we have to be really cognizant of the fact of who's recommending our fund, what the biggest concentrations are, and ... the profile of our shareholders."

She adds, "I think financial advisors are really driving a lot of the growth, because their model, they don't get compensated, for the most part, to sell the money market fund. But you do if you get into an ultra-short fund, so it's in their best interest. [A] fund like ours, it sits just outside of the money market space. We're more conservative than a typical, ultra-short ... so, they've been very comfortable with how we position our product."

Discussing last March, Rothweiler states, "If you cut your teeth in 2008, if you got through that, you could probably see this coming to some extent by beginning of March.... There's a life lesson that I learned in '08 -- there's no liquidity like a maturity.... So, when the bid on the Street dries up or becomes more challenged, having a properly structured portfolio where you have maturities, where you have liquidity that you can get to [is key]. That was just another example that reinforces our process at UBS. That to manage risk, liquidity is a big part of it, whether it's a 2a-7 fund or an ultra-short."

Davis says, "Another source of liquidity is diversity of asset classes, because certain debts from the dealer community will act in different ways during different points of crisis. We saw certain debts freeze up a little bit earlier than others, where we still had liquidity in corporate bonds maybe a little bit further out the curve, or ABS securities, or municipal bonds. So, that is another way to have diversity and liquidity in a portfolio. We think by having the natural liquidity ... by having a maturity is most beneficial during that period of time.... The different asset classes that we had within the portfolio, and the different pieces of paper that we had really helped with the liquidity profile."

She adds, "That being said, also on the SMA side, a lot of it is driven by the Client Investment Guidelines. We make sure we take the time to educate them, because the front end of the market is a little bit different than other parts of the market. What is the majority of the issuance that we are buying? If it's commercial paper, nearly 80% of it is in financials or asset backed commercial paper. So, if you have diversification limits on financials, just making sure that you have other available asset classes and other available security types to make sure that by being too restrictive you're not actually creating more risks for the portfolio."

Finally, when asked about ESG, Davis answers, "Across all of our SMAs, our Cash and Liquidity platform, we have PM integration within ESG, meaning that, regardless of what the underlying mandate is ... our credit analysts are doing environmental, social, and governance analysis, along with their typical financial analysis. We believe we are improving, even though these are short-term funds, the long-term performance by bringing forward what we think are future risks to today. It also allows us to identify possible new opportunities for our funds even if they are not ESG focused." Watch for more excerpts in coming days and in the April issues of our Money Fund Intelligence and Bond Fund Intelligence.