News Archives: September, 2021

The September issue of our Bond Fund Intelligence, which was sent to subscribers Wednesday morning, features the lead story, "BlackRock, IHS Markit on Bond ETFs for Portfolio Managers," which reviews a recent webinar discussing ETFs in portfolio construction; and "TCW's Rivelle Stepping Down Says WSJ, MetWest Filing," which quotes from a recent WSJ story and filing on changes at TCW. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that bond fund returns inched lower in August while yields rose. We excerpt from the new issue below. (Contact us if you'd like to see our latest Bond Fund Intelligence and BFI XLS spreadsheet, or our Bond Fund Portfolio Holdings data. Also, watch for plenty of Ultra-Short Bond Fund content at next week's Money Fund Symposium, which takes place live Sept. 21-23 in Philadelphia.)

BFI's "ETF" piece reads, "A webinar entitled, 'Shifting the Course on Bond Portfolios: The Growth and Role of ETFs in Portfolio Construction,' sponsored by iShares and IHS Markit, explains in its overview, 'The global bond market is both massive in size and yet highly fragmented. According to SIFMA, the size of the global bond market was nearly $120 trillion as of Q1 2021 with hundreds of thousands of individual securities. Historically, fixed income portfolio construction involves creating strategies at the security level, buying and selling potentially hundreds or even thousands of individual bonds."

It says, "Bond ETFs are transforming the way fixed income portfolio managers construct bond portfolios and manage risk. Increasingly, these investors -- whether asset managers, asset owners, or insurers -- are using ETFs for a range of uses to complement individual bonds. Hear from IHS Markit and BlackRock experts on how fixed income ETFs are increasingly becoming an effective tool for portfolio managers." The webinar features Salman Zaidi, Fixed Income Product Strategist at BlackRock, and Nick Godec, Indices Product Management for IHS Markit."

The TCW article discusses The Wall Street Journal piece, 'TCW's Investment Chief and CEO Set Departures After Employees Threaten to Quit.' It comments, "Bond giant TCW Group Inc. is parting ways with two of its top executives after key employees threatened to quit the firm earlier this year. TCW said Wednesday that Tad Rivelle, who ran the firm's bond-investing business, would retire at the end of the year. TCW's chief executive, David Lippman, is expected to leave after his current contract expires in Dec. 2022, people familiar with the matter said."

The Journal explains, "Steve Kane and Bryan Whalen will succeed Mr. Rivelle as investment chiefs for the firm's fixed-income division, TCW wrote Wednesday in a note to clients. Messrs. Kane and Whalen, along with Laird Landmann, will remain portfolio managers, the firm said. Patrick Moore, who runs TCW's client-services group, and Mr. Kane told colleagues earlier this year they planned to resign in part over longstanding squabbles between the firm's senior leaders, including Messrs. Rivelle, Lippman and Landmann. They rescinded their resignations after the firm assured them they would soon act on a succession plan that had been in the works for some time."

A News brief, "Returns Dip, Yields Up in August," explains, "Bond fund returns fell slightly and yields inched higher last month. Our BFI Total Index fell -0.01% for 1-month but rose 3.17% for 12 months. The BFI 100 rose 0.00% in August and 3.09% over 1 year. Our BFI Conservative Ultra-Short Index was up 0.03% for 1-mo and 0.36% for 1-yr; Ultra-Shorts averaged 0.00% and 1.07%, respectively. Short-Term increased 0.04% and rose 2.12%, and Intm-Term fell -0.10% in August but rose 2.05% over 1-year. BFI's Long-Term Index fell -0.01% in August but gained 2.11% over 1-year. Our High Yield Index rose 0.43% in Aug. and 8.81% over 1-year."

Another News brief, "Fitch Ratings on European Bond Funds," says, "Their latest 'European Short-Term Bond Fund Dashboard: September 2021,' explains, "European short-term bond funds (STBFs) have diverse risk profiles in terms of portfolio credit quality and sector allocation, says Fitch Ratings. Fitch primarily defines STBFs as funds with a target duration of one to three years. Fitch counted 628 such funds in Europe as of end-1H21 with combined assets under management (AUM) of EUR337 billion. Traditional money market fund (MMF) investors increasingly have been considering STBFs as part of cash segmentation strategies in response to prolonged low or negative rates."

A sidebar "Barron's on Pax High Yield," explains, "Barron's recently featured an article entitled, 'A High-Yield Bond Fund Says Goodbye to Fossil Fuels,' which profiles Pax High Yield Bond Fund. They write, 'It might be a surprise to some investors that not all environmentally oriented mutual funds are free of traditional fossil-fuel companies. But the Pax High Yield Bond fund is living up to its ESG -- environmental, social, and governance -- mandate when it comes to energy."

Finally, a sidebar entitled, "Bonds & ETFs Approach $7T," tells readers, "Bond funds and ETFs continue to see strong inflows, and they show no signs of slowing or stopping. Combined, they should break the $7 trillion asset level in coming months. Last month they totaled $6.742 trillion. ICI's 'Combined Estimated Long-Term Fund Flows and ETF Net Issuance,' says, 'Bond funds had estimated inflows of $14.20 billion for the week, compared to estimated inflows of $12.38 billion during the previous week.' ... Over the past 5 weeks, bond funds and bond ETFs have seen inflows of $59.8 billion."

Two recent press releases reflect the growing interest by fund managers and investors in ESG, Social and/or D&I money market mutual funds and trading. The first is, "BlackRock Partners with the Thurgood Marshall College Fund to Benefit Students at Historically Black Colleges and Universities, while the second is "CastleOak Securities Expands Money Fund Solutions Team." BlackRock's release, subtitled, "Global leaders in technology, financial services and consumer goods will pioneer growth of socially aware money market fund," explains, "BlackRock announced it will partner with the Thurgood Marshall College Fund ('TMCF') to support students of Historically Black Colleges and Universities ('HBCUs') and Predominantly Black Institutions ('PBIs') in their journey to college and into upwardly-mobile careers. TMCF ... will receive an annual contribution from BlackRock, which will represent a portion of net revenue from BlackRock's management fee for the BlackRock Liquid Federal Trust Fund ('BLFT'). BLFT is a government money market fund designed for investors seeking to further positive social outcomes through their cash management. Several notable firms have committed as investors or distributors of BLFT, including Bank of America, BNY Mellon, Capital One, The Coca-Cola Company, Google, Jefferies, Lyft, and Verizon."

Dr. Harry L. Williams, President and CEO of TMCF, says, "We are proud to partner with an industry leader like BlackRock and applaud them for this initiative. The funding from this partnership will enable more talented minority students to gain access to life-changing opportunities: from financial support for a premier college education, to unparalleled leadership guidance and career development." The release tells us, "BlackRock's annual contribution to TMCF is one of a series of initiatives planned for the partnership."

The release states, "As previously announced, BLFT is now seeking to place a portion of the aggregate dollar volume of purchase orders for its portfolio securities with diverse broker-dealers, subject to best execution requirements, and is seeking to establish dedicated share classes for certain minority-owned firms."

Eion D'Anjou, Portfolio Manager in BlackRock's Cash Management Group for BLFT, comments, "BlackRock's support of TMCF will help break down structural barriers to high-potential careers for students of HBCUs and PBIs, while BLFT's partnerships with minority, women, and/or disabled veteran owned broker-dealers will help strengthen those businesses. We are pleased to play a part in helping transform the futures of diverse students, business owners, and our community."

The press release also tells us, "BlackRock believes BLFT's commitment to diverse broker-dealers will help accelerate the growth of this segment. Mischler Financial Group, the securities industry's first minority-certified broker-dealer owned and operated by Service-Disabled Veterans (SDVs), is among the dealers for whom BLFT is seeking to establish dedicated share classes, and will also be a participant in the fund's diverse broker-dealer program."

La-Yona Rauls says, "Mischler Financial is proud to partner with BlackRock on this socially-aware initiative that seeks to bring together the institutional relationships of Mischler and the investment experience of BlackRock Cash Management.... Through BlackRock's targeted support for HBCU and PBI students, this partnership has the potential to transform lives through education and career development opportunities."

BlackRock explains, "BLFT's AUM has grown by over 25% since the announcement of its socially aware goals, thanks to the strong engagement of prestigious investors and partners." The fund is available to Bank of America institutional clients through their Global Liquidity Investment Solutions portal and Global Custody platform. It also is available on BNY Mellon's LiquidityDirect online money fund trading portal.

Tom Callahan, Global Head of BlackRock's Cash Management Business, adds, "BLFT represents an opportunity for our clients to do more with their cash by advancing positive social outcomes. We're honored that some of the world's largest cash investors have entrusted BlackRock Cash Management as their partner -- not only to manage their liquidity needs, but also to share in our commitment to support our nation's diverse youth." (Note: Callahan will co-keynote next week's Money Fund Symposium in Philadelphia. He speaks on Sept. 21.)

The "CastleOak Securities Expands" release explains, "CastleOak Securities, L.P., a leading New York-based boutique investment banking firm, announced the hiring of Kevin Ronan and Daniel Deighan to its Money Fund Solutions team. Ronan joins the team as Managing Director and Head of the Group after a 30-year career at Bank of New York Mellon, where he helped found, grow and lead their money market team. Deighan joins as a Vice President and brings 5 years of front-end product experience at BNY Mellon and Citibank."

David R. Jones, President and CEO of CastleOak Securities, comments, "Kevin is an industry veteran whose reputation precedes him. We are excited about having a leader of his caliber and know our clients will benefit from his experience and advice.... Adding Kevin and Dan to our team signals our strong commitment to building this business and how much we believe in our value-added Money Fund Solutions products."

CastleOak's Money Fund Solutions team currently has two signature products: its Money Fund Access portal product and its Share Class offering. Both products are designed to provide cash management solutions that are designed to help clients meet their cash investment goals while supporting their D&I efforts in a transparent and meaningful way."

Ronan adds, "The chance to build a business on the strength of this platform is exciting.... CastleOak can offer its clients the best of both worlds -- strong institutional relationships and marquis investment solutions from industry leading firms."

Wells Fargo Money Market Funds' most recent "Portfolio Manager Commentary" discusses money fund yields, the Fed's repo program, and the Treasury debt ceiling. It tells us, "With the FOMC firmly on hold and the market awash in excess cash from monetary and fiscal stimulus, prime money market yields continued to tread water in August. The one-month versus three-month LIBOR spread entered the month of August +3.41 basis points ... and ended the month at +3.71 bps. This backdrop is favorable for risk assets as front-end rates continue to be predictable and maintained at an advantageous level for economic growth."

Wells explains, "Government yields across the curve have been near zero, or now 0.05%, for quite some time (see government sector commentary below). Except for the maturities around the debt ceiling time frame that have seen yields spike a couple of basis points, in general, prime assets continue to marginally out-yield government assets.... The current pickup from extending maturities from one month to three months is roughly 4 bps and yields about 7 bps more than the government floor. In addition, the pickup from extending maturities from one month to six months has narrowed to 7 bps this month and yields approximately 10 bps more than the government floor."

Authors Jeff Weaver, Laurie White, et. al., write, "While we are keeping excess liquidity over the stated regulatory requirements and running shorter weighted average maturities, we are actively seeking opportunities to extend if the opportunity offers a favorable risk/reward proposition. In addition to allowing us to selectively add securities to lock in higher yields when the opportunity arises, this higher liquidity buffer also enhances our ability to meet the liquidity needs of our investors and helps stabilize net asset value (NAV) volatility."

Wells piece continues, "With the recent resolution of some structural uncertainties, the rough outlines of the government money markets are now in place for this current zero-interest-rate-policy episode. Wrinkles may pop up from time to time, such as the debt ceiling (more on that below), but generally speaking, the Fed's reverse repo program (RRP) rate of 0.05% exerts an immense gravitational pull on all short-term government rates, keeping them from straying too far in either direction. The RRP is a giant sponge sopping up the excess of cash over investable assets in the short-term space, and it has recently rather routinely taken in more than $1 trillion per day, a huge change from six or even three months ago."

It adds, "The structural clarity mentioned above concerned three main developments. First, the Fed adjusted its RRP rate from 0.00% to 0.05% in June, buying itself a little breathing room above its interest rate floor at zero. Second, the extra cash the Treasury carried throughout the pandemic has been wound down, with the Treasury's General Account (TGA) completing a round trip from $400 billion to $1.8 trillion and back. The Treasury has necessarily overshot the drawdown and intends to eventually, once the debt ceiling has been addressed, carry a cash balance closer to $800 billion. And third, Treasury bill (T-bill) supply has declined by $901 billion this year, which has helped bring the TGA down and also shifted the government's funding burden from T-bills to Treasury coupons further out the curve."

On the debt ceiling, Wells comments, "Every few years, the front end of the yield curve gets to do the debt ceiling dance, and the band is currently warming up. For details on the debt ceiling's history and potential impacts on the money markets, please see our Debt Ceiling FAQs.... Markets have begun to show a bit of unease, as T-bills maturing near the area of the calendar where the Treasury may run out of money -- the perceived drop-dead date -- have backed up in yield slightly.... One way or another, whether it is raised or suspended again, the debt ceiling issue is likely to be resolved in the next few months, and the market can settle back into its 0.05% straightjacket. There may be a brief period of indigestion while the Treasury ramps its cash balance back up via T-bill issuance, but it seems like nothing the extra trillion dollars sitting in the RRP can't handle."

In other news, the Federal Deposit Insurance Corporation released its latest "FDIC Quarterly Banking Profile," which says, "The average net interest margin contracted 31 basis points from a year ago to 2.50 percent -- the lowest level on record. The contraction is due to the year-over-year reduction in earning asset yields (down 53 basis points to 2.68 percent) outpacing the decline in average funding costs (down 22 basis points to 0.18 percent). Both ratios declined from first quarter 2021 to record lows. Aggregate net interest income declined $2.2 billion (1.7 percent) from second quarter 2020. Reductions in net interest income at the largest institutions drove the aggregate decline in net interest income, as more than three fifths of all banks (64.1 percent) reported higher net interest income compared with a year ago."

The update continues, "Deposits grew $271.9 billion (1.5 percent) in second quarter, down from the growth rate of 3.6 percent reported in first quarter 2021. The deposit growth rate in second quarter is near the long-run average growth rate of 1.2 percent. Deposits above $250,000 continued to drive the quarterly increase (up $297.8 billion, or 3.1 percent) and offset a decline in deposits below $250,000 (down $53.6 billion, or 0.7 percent). Noninterest-bearing deposit growth (up $175 billion, or 3.5 percent) continued to outpace that of interest-bearing deposits (up $53.3 billion, or 0.4 percent), with more than half of banks (57.3 percent) reporting higher noninterest-bearing deposit balances compared with the previous quarter."

A press release entitled, "FDIC-Insured Institutions Reported Net Income of $70.4 Billion in Second Quarter 2021" explains, "Reports from the 4,951 commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reflect aggregate net income of $70.4 billion in second quarter 2021, an increase of $51.9 billion (281 percent) from a year ago. This increase was driven by further economic growth and improved credit conditions, which led to a second consecutive quarter of aggregate negative provision expense. These and other financial results for second quarter 2021 are included in the FDIC's latest Quarterly Banking Profile released today."

It quotes FDIC Chairman, Jelena McWilliams, "Overall, the banking industry remains strong. Revenue has increased along with stronger economic growth and improved credit conditions. The banking industry remains well positioned to support the country's lending needs as the economy continues to recover from the pandemic, with record deposits, favorable credit quality, and strong capital levels. However, low interest rates and modest loan demand will likely continue to present challenges for the banking industry in the near term. Further, the banking industry may face additional challenges as pandemic support programs for borrowers wind down and loan forbearance periods end."

Crane Data's September Money Fund Portfolio Holdings, with data as of August 31, 2021, show yet another jump in Repo and plunge in Treasury holdings. Money market securities held by Taxable U.S. money funds (tracked by Crane Data) increased by $47.4 billion to $4.879 trillion in July, after falling $89.1 billion in July, but rising $1.5 billion in June, $30.2 billion in May and $29.1 billion in April. Treasury securities remained the largest portfolio segment (barely), but Repo is now almost tied for the No. 1 spot. MMF holdings of Fed repo rose to over $1.0 trillion. Agencies were the third largest segment, CP remained fourth, ahead of CDs, Other/Time Deposits and VRDNs. Below, we review our latest Money Fund Portfolio Holdings statistics. (Note: We're still a go for next week's Money Fund Symposium in Philadelphia, Sept. 21-23! Registrations are still being taken if you're vaccinated and not afraid of meeting in person. We look forward to seeing many of you next week!)

Among taxable money funds, Treasury securities plummeted $113.8 billion (-5.5%) to $1.943 trillion, or 39.8% of holdings, after falling $200.6 billion in July, $134.5 billion in June and $135.0 billion in May. Repurchase Agreements (repo) jumped $169.6 billion (9.8%) to $1.908 billion, or 39.1% of holdings, after rising $62.9 billion in July, $251.0 billion in June and $200.9 billion in May. Government Agency Debt was flat again (down $8.1 billion, or -1.5%) to $532.4 billion, or 10.9% of holdings, after rising $3.8 billion in July, but decreasing $26.7 billion in June and $22.7 billion in May. Repo, Treasuries and Agency holdings totaled $4.384 trillion, representing a massive 89.9% of all taxable holdings.

Money funds' holdings of CP, CDs and Other (mainly Time Deposits) were flat in August as Prime MMFs decreased TDs slightly, but increased CDs and CP a bit. Commercial Paper (CP) increased $3.2 billion (1.4%) to $238.4 billion, or 4.9% of holdings, after increasing $8.2 billion in July but decreasing $36.1 billion in June and $5.0 billion in May. Other holdings, primarily Time Deposits, declined by $4.7 billion (-3.8%) to $120.0 billion, or 2.5% of holdings (dipping below CDs), after jumping $39.9 billion in July, dropping $35.9 billion in June and dipping $5.4 billion in May. Certificates of Deposit (CDs) rose by $1.9 billion (1.5%) to $124.1 billion, or 2.5% of taxable assets, after dropping $1.5 billion in July, $14.9 billion in June and $3.7 billion in May. VRDNs decreased to $12.6 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 Monday.)

Prime money fund assets tracked by Crane Data fell to $851 billion, or 17.4% of taxable money funds' $4.879 trillion total. Among Prime money funds, CDs represent 14.6% (up from 14.2% a month ago), while Commercial Paper accounted for 27.7% (up from 27.4% in June). The CP totals are comprised of: Financial Company CP, which makes up 19.3% of total holdings, Asset-Backed CP, which accounts for 4.1%, and Non-Financial Company CP, which makes up 4.3%. Prime funds also hold 2.6% in US Govt Agency Debt, 11.5% in US Treasury Debt, 20.6% in US Treasury Repo, 2.6% in Other Instruments, 10.4% in Non-Negotiable Time Deposits, 5.8% in Other Repo, 2.6% in US Government Agency Repo and 0.7% in VRDNs.

Government money fund portfolios totaled $2.805 trillion (57.5% of all MMF assets), up from $2.742 trillion in July, while Treasury money fund assets totaled another $1.222 trillion (25.0%), down from $1.259 trillion the prior month. Government money fund portfolios were made up of 18.1% US Govt Agency Debt, 12.0% US Government Agency Repo, 34.2% US Treasury Debt, 35.2% in US Treasury Repo, 0.3% in Other Instruments. Treasury money funds were comprised of 72.5% US Treasury Debt and 27.5% in US Treasury Repo. Government and Treasury funds combined now total $4.027 trillion, or 82.5% of all taxable money fund assets.

European-affiliated holdings (including repo) decreased by $2.5 billion in August to $580.9 billion; their share of holdings fell to 11.9% from last month's 12.0%. Eurozone-affiliated holdings increased to $413.0 billion from last month's $409.6 billion; they account for 8.5% of overall taxable money fund holdings. Asia & Pacific related holdings decreased to $223.9 billion (4.6% of the total) from last month's $226.3 billion. Americas related holdings decreased to $4.070 trillion from last month’s $4.045 trillion, and now represent 83.4% of holdings.

The overall taxable fund Repo totals were made up of: US Treasury Repurchase Agreements (up $195.0 billion, or 15.0%, to $1.499 trillion, or 30.7% of assets); US Government Agency Repurchase Agreements (down $21.5 billion, or -5.6%, to $359.1 billion, or 7.4% of total holdings), and Other Repurchase Agreements (down $4.0 billion, or -7.4%, from last month to $49.6 billion, or 1.0% of holdings). The Commercial Paper totals were comprised of Financial Company Commercial Paper (up $1.1 billion to $166.4 billion, or 3.4% of assets), Asset Backed Commercial Paper (up $1.6 billion to $35.0 billion, or 0.7%), and Non-Financial Company Commercial Paper (up $0.6 billion to $37.0 billion, or 0.8%).

The 20 largest Issuers to taxable money market funds as of August 31, 2021, include: the US Treasury ($1.943 trillion, or 39.8%), Federal Reserve Bank of New York (1.047T, 21.5%), Federal Home Loan Bank ($268.0B, 5.5%), BNP Paribas ($107.2B, 2.2%), Fixed Income Clearing Corp ($104.3B, 2.1%), RBC ($95.3B, 2.0%), Federal Farm Credit Bank ($90.0B, 1.8%), Federal National Mortgage Association ($79.5B, 1.6%), JP Morgan ($66.2B, 1.4%), Sumitomo Mitsui Banking Co ($60.0B, 1.2%), Credit Agricole ($53.2B, 1.1%), Barclays PLC ($53.2B, 1.1%), Federal Home Loan Mortgage Corp ($51.4B, 1.1%), Bank of America ($45.8B, 0.9%), Mitsubishi UFJ Financial Group Inc ($44.5B, 0.9%), Societe Generale ($41.8B, 0.9%), Citi ($41.1B, 0.8%), Bank of Montreal ($34.7B, 0.7%), Canadian Imperial Bank of Commerce ($33.7B, 0.7%) and Toronto-Dominion Bank ($33.3B, 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: Federal Reserve Bank of New York ($1.006T, 52.8%), Fixed Income Clearing Corp ($104.3B, or 5.5%), BNP Paribas ($92.7B, or 4.9%), RBC ($76.1B, or 4.0%), JP Morgan ($61.0B, or 3.2%), Sumitomo Mitsui Banking Corp ($46.2B, or 2.4%), Bank of America ($42.9B, or 2.2%), Barclays ($39.0B, or 2.0%), Mitsubishi UFJ Financial Group Inc ($36.3B, or 1.9%) and Credit Agricole ($35.5B, or 1.9%). The largest users of the $1.006 trillion in Fed RRP included: Morgan Stanley Inst Liq Govt ($65.9B), JPMorgan US Govt MM ($60.0B), Fidelity Govt Money Market ($50.7B), Fidelity Govt Cash Reserves ($50.5B), Fidelity Cash Central Fund ($50.4B), Federated Hermes Govt ObI ($49.7B), BlackRock Lq FedFund ($48.5B), Fidelity Inv MM: Govt Port ($43.9B), Dreyfus Govt Cash Mgmt ($40.1B) and BlackRock Lq T-Fund ($36.0).

The 10 largest issuers of "credit" -- CDs, CP and Other securities (including Time Deposits and Notes) combined -- include: RBC ($19.3B or 4.7%), Mizuho Corporate Bank Ltd ($17.9B or 4.3%), Credit Agricole ($17.8B or 4.3%), Toronto-Dominion Bank ($17.4B or 4.2%), Bank of Montreal ($15.8B or 3.8%), BNP Paribas ($14.5B or 3.5%), Canadian Imperial Bank of Commerce ($14.3B or 3.5%), Barclays PLC ($14.2B or 3.4%), DNB ASA ($13.9B or 3.4%) and Sumitomo Mitsui Banking Corp ($13.7B or 3.3%).

The 10 largest CD issuers include: Bank of Montreal ($12.5B or 10.1%), Sumitomo Mitsui Banking Corp ($9.7B or 7.8%), Canadian Imperial Bank of Commerce ($8.5B or 6.8%), Sumitomo Mitsui Trust Bank ($6.6B or 5.3%), Toronto-Dominion Bank ($5.5B or 4.4%), Mizuho Corporate Bank Ltd ($5.5B or 4.4%), Rabobank ($5.4B or 4.4%), Landesbank Baden-Wurttemberg ($4.9B or 3.9%), Natixis ($4.6B or 3.7%) and Mitsubishi UFJ Financial Group Inc ($4.5B or 3.7%).

The 10 largest CP issuers (we include affiliated ABCP programs) include: RBC ($12.8B or 6.3%), Toronto-Dominion Bank ($11.9B or 5.9%), BNP Paribas ($9.6B or 4.7%), Barclays PLC ($7.1B or 3.5%), DNB ASA ($6.2B or 3.1%), Societe Generale ($6.0B or 3.0%), National Australia Bank Ltd ($5.7B or 2.8%), Sumitomo Mitsui Trust Bank ($5.3B or 2.6%), JP Morgan ($5.1B or 2.5%) and Rabobank ($5.0B or 2.5%).

The largest increases among Issuers include: Federal Reserve Bank of New York (up $163.8B to $1,046.6B), Fixed Income Clearing Corp (up $27.2B to $104.3B), Societe Generale (up $5.4B to $41.8B), Banco Santander (up $4.6B to $12.0B), Sumitomo Mitsui Banking Corp (up $4.2B to $60.0B), Goldman Sachs (up $3.9B to $25.8B), Landesbank Baden-Wurttemberg (up $3.0B to $9.6B), Bank of Montreal (up $2.6B to $34.7B), DNB ASA (up $2.1B to $15.1B) and Swedbank AB (up $2.0B to $8.5B).

The largest decreases among Issuers of money market securities (including Repo) in August were shown by: the US Treasury (down $113.8B to $1,943.4), Federal Home Loan Bank (down $18.3B to $268.0B), BNP Paribas (down $7.1B to $107.2B), Citi (down $6.5B to $41.1B), JP Morgan (down $4.7B to $66.2B), Bank of America (down $2.6B to $45.8B), Credit Agricole (down $2.2B to $53.2B), Nordea Bank (down $2.1B to $9.3B), Barclays PLC (down $2.0B to $53.2) and Sumitomo Mitsui Trust Bank (down $1.7B to $15.7B).

The United States remained the largest segment of country-affiliations; it represents 78.8% of holdings, or $3.846 trillion. France (5.0%, $245.5B) was number two, and Canada (4.6%, $223.2B) was third. Japan (4.3%, $211.9B) occupied fourth place. The United Kingdom (2.0%, $97.7B) remained in fifth place. Germany (1.3%, $62.4B) was in sixth place, followed by The Netherlands (1.1%, $54.0B), Sweden (0.8%, $37.0B), Australia (0.6%, $28.4B) and Switzerland (0.3%, $16.7B). (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 August 31, 2021, Taxable money funds held 48.4% (up from 44.5%) of their assets in securities maturing Overnight, and another 8.7% maturing in 2-7 days (down from 10.9%). Thus, 57.1% in total matures in 1-7 days. Another 11.1% matures in 8-30 days, while 8.5% matures in 31-60 days. Note that over three-quarters, or 76.7% of securities, mature in 60 days or less, the dividing line for use of amortized cost accounting under SEC regulations. The next bucket, 61-90 days, holds 7.1% of taxable securities, while 13.1% matures in 91-180 days, and just 3.1% 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 Friday, and we'll be writing our regular monthly update on the August 31 data for Monday's News. But we also uploaded a separate and broader Portfolio Holdings data set based on the SEC's Form N-MFP filings on Thursday. (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 August 31, 2021 includes holdings information from 1,010 money funds (down 17 from last month), representing assets of $5.027 trillion (up from $4.977 trillion). Prime MMFs now total $863.4 billion, or 17.2% 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 $1.962 trillion (down from $2.072 trillion), or a massive 39.0% of all holdings. Repurchase Agreement (Repo) holdings in money market funds rose again to $1.960 trillion (up from $1.782 trillion), or 39.0% of all assets, and Government Agency securities totaled $504.8 billion (down from $524.2 billion), or 10.0%. Holdings of Treasuries, Government agencies and Repo (almost all of which is backed by Treasuries and agencies) combined total $4.427 trillion, or a stunning 88.1% of all holdings.

Commercial paper (CP) totals $246.1 billion (up from $243.0 billion), or 4.9% of all holdings, and the Other category (primarily Time Deposits) totals $159.6 billion (down from $163.6 billion), or 3.2%. Certificates of Deposit (CDs) total $124.1 billion (up from $122.3 billion), 2.5%, and VRDNs account for $70.0 billion (down from $70.6 billion last month), or 1.4% of money fund securities.

Broken out into the SEC's more detailed categories, the CP totals were comprised of: $168.2 billion, or 3.3%, in Financial Company Commercial Paper; $35.0 billion or 0.7%, in Asset Backed Commercial Paper; and, $43.0 billion, or 0.9%, in Non-Financial Company Commercial Paper. The Repo totals were made up of: U.S. Treasury Repo ($1.551 trillion, or 30.9%), U.S. Govt Agency Repo ($359.0B, or 7.1%) and Other Repo ($49.6B, or 1.0%).

The N-MFP Holdings summary for the Prime Money Market Funds shows: CP holdings of $241.7 billion (up from $238.3 billion), or 28.0%; Repo holdings of $247.9 billion (up from $231.4 billion), or 28.7%; Treasury holdings of $104.1 billion (down from $119.0 billion), or 12.1%; CD holdings of $124.1 billion (up from $122.3 billion), or 14.4%; Other (primarily Time Deposits) holdings of $112.5 billion (down from $121.7 billion), or 13.0%; Government Agency holdings of $26.5 billion (down from $31.3 billion), or 3.1% and VRDN holdings of $6.5 billion (down from $6.7 billion), or 0.8%.

The SEC's more detailed categories show CP in Prime MMFs made up of: $168.2 billion (up from $167.0 billion), or 19.5%, in Financial Company Commercial Paper; $35.0 billion (up from $33.5 billion), or 4.0%, in Asset Backed Commercial Paper; and $38.5 billion (up from $37.9 billion), or 4.5%, in Non-Financial Company Commercial Paper. The Repo totals include: U.S. Treasury Repo ($177.3 billion, or 20.5%), U.S. Govt Agency Repo ($21.1 billion, or 2.4%), and Other Repo ($49.5 billion, or 5.7%).

In other news, money fund charged expense ratios were flat again in August after hitting a record low of 0.06% in May and inching higher in June. Our Crane 100 Money Fund Index and Crane Money Fund Average both were 0.07% as of August 31, 2021. 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 Thursday 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 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 0.07%, the same as last month's level (and one bps higher than May's record low 0.06%). The average is down from 0.27% on Dec. 31, 2019, so we estimate that funds are waiving 20 bps, or 74% of normally charged expenses. The Crane Money Fund Average, a simple average of all taxable MMFs, also showed a charged expense ratio of 0.07% as of July 31, 2021, the same as the month prior but down from 0.40% at year-end 2019.

Prime Inst MFs expense ratios (annualized) now average 0.10% (down one basis point from last month), Government Inst MFs expenses average 0.05% (the same as the month prior), Treasury Inst MFs expenses average 0.05% (down one basis point from last month). Treasury Retail MFs expenses currently sit at 0.05%, (unchanged), Government Retail MFs expenses yield 0.05% (the same as in July). Prime Retail MF expenses are 0.12% (down one bps from the month prior). Tax-exempt expenses were up one basis point over the month to 0.06% on average.

Gross 7-day yields were unchanged on average for the month ended August 31, 2021. The Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 732), shows a 7-day gross yield of 0.08%, down one bps from the prior month. The Crane Money Fund Average is down 1.64% from 1.72% at the end of 2019. Our Crane 100's 7-day gross yield also was flat, ending the month at 0.09%, but down 1.66% 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 $3.501 billion (as of 8/31/21). Our estimated annualized revenue totals decreased from $3.616 last month but are up from a record low of $2.927 in May. MMF revenues fell from $6.028 trillion at the start of 2020 and $10.642 trillion at the start of 2019. Charged expenses and gross yields are driven by a number of variables, and the Fed's 0.05% floor on its RRP repo appears to have helped stabilize rates above zero. Nonetheless, severe fee waivers and heavy fee pressure should continue as long as the Fed keeps yields pinned close to the zero floor.

Crane Data's latest Money Fund Market Share rankings show assets increased across a majority of the largest U.S. money fund complexes in August. Money market fund assets increased $27.9 billion, or 0.6%, last month to $4.966 trillion. Assets have decreased by $94.7 billion, or -1.9%, over the past 3 months, and they've decreased by $25.2 billion, or -0.5%, over the past 12 months through August 31, 2021. The largest increases among the 25 largest managers last month were seen by Goldman Sachs, J.P. Morgan, Fidelity, Morgan Stanley and Dreyfus, which grew assets by $17.4 billion, $12.4B, $7.8B, $6.0B and $5.0B, respectively. The largest declines in August were seen by BlackRock, Federated Hermes, Wells Fargo and UBS, which decreased by $13.0 billion, $7.6B, $3.4B and $1.6B, 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 August.

Over the past year through August 31, 2021, BlackRock (up $117.1B, or 28.0%), Morgan Stanley (up $75.3B, or 38.0%), First American (up $31.3B, or 30.7%), Dreyfus (up $28.4B, or 14.1%) and T. Rowe Price (up $12.1B, or 29.5%) were the largest gainers. Morgan Stanley, Goldman, Fidelity, Invesco and T. Rowe Price had the largest asset increases over the past 3 months, rising by $17.5B, $9.4B, $5.1B, $3.5B and $3.1B, respectively. The largest decliners over 12 months were seen by: Goldman Sachs (down $66.4B), Charles Schwab (down $53.0B), Federated Hermes (down $45.1B), Vanguard (down $31.5B) and American Funds (down $27.7B). The largest decliners over 3 months included: BlackRock (down $34.3B), Vanguard (down $24.8B), Federated (down $12.8B), American Funds (down $12.7B) and First American (down $10.2B).

Our latest domestic U.S. Money Fund Family Rankings show that Fidelity Investments remains the largest money fund manager with $895.9 billion, or 18.0% of all assets. Fidelity was up $7.8B in August, up $5.1 billion over 3 mos., and down $24.4B over 12 months. BlackRock ranked second with $516.4 billion, or 10.4% market share (down $13.0B, down $34.3B and up $117.1B for the past 1-month, 3-mos. and 12-mos., respectively). JPMorgan moved up to third with $472.6 billion, or 9.5% market share (up $12.4B, down $1.2B and up $6.8B). Vanguard fell to fourth with $457.7 billion, or 9.2% of assets (up $384M, down $24.8B and down $31.5B for the past 1-month, 3-mos. and 12-mos.), while Goldman Sachs remained in fifth place with $366.4 billion, or 7.4% of assets (up $17.4B, up $9.4B and down $66.4B).

Federated Hermes was in sixth place with $323.7 billion, or 6.5% of assets (down $7.6B, down $12.8B and down $45.1B), while Morgan Stanley was in seventh place with $281.3 billion, or 5.7% (up $6.0B, up $17.5B and up $75.3B). Dreyfus ($238.9B, or 4.8%) was in eighth place (up $5.0B, up $3.0B and up $28.4B), followed by Wells Fargo ($197.7B, or 4.0%, down $3.4B, down $10.2B and down $6.9B). Northern was in 10th place ($179.6B, or 3.6%; up $711M, down $420M and down $10.3B).

The 11th through 20th-largest U.S. money fund managers (in order) include: Schwab ($146.0B, or 2.9%), SSGA ($143.0B, or 2.9%), American Funds ($133.9B, or 2.7%), First American ($125.4B, or 2.5%), Invesco ($88.6B, or 1.8%), T. Rowe Price ($52.3B, or 1.1%), UBS ($48.2B, or 1.0%), HSBC ($37.1B, or 0.7%), DWS ($35.2B, or 0.7%) and Western ($33.3B, or 0.7%). Crane Data currently tracks 64 U.S. MMF managers, the same number as last month.

When European and "offshore" money fund assets -- those domiciled in places like Ireland, Luxembourg and the Cayman Islands -- are included, the top 10 managers are the same as the domestic list, except Goldman moves ahead of Vanguard to the No. 4 spot, Morgan Stanley moves ahead of Federated to the No. 6 spot, and Northern moves ahead of Wells for the No. 9 spot. 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 ($908.6 billion), BlackRock ($712.9B), JP Morgan ($685.0B), Goldman Sachs ($483.6B) and Vanguard ($457.7B). Morgan Stanley ($339.6B) was sixth, Federated Hermes ($332.7B) was in seventh, followed by Dreyfus/BNY Mellon ($263.4B), Northern ($208.1B) and Wells Fargo ($198.1B), 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 August issue of our Money Fund Intelligence and MFI XLS, with data as of 8/31/21, shows that yields were flat in August for our Crane Money Fund Indexes. The Crane Money Fund Average, which includes all taxable funds covered by Crane Data (currently 732), remained at 0.02% for the 7-Day Yield (annualized, net) Average, the 30-Day Yield also was flat at 0.02%. The MFA's Gross 7-Day Yield was flat at 0.09%, and the Gross 30-Day Yield was also flat at 0.09%.

Our Crane 100 Money Fund Index shows an average 7-Day (Net) Yield of 0.02% (unchanged) and an average 30-Day Yield (also unchanged) at 0.02%. The Crane 100 shows a Gross 7-Day Yield of 0.09% (unch.), and a Gross 30-Day Yield of 0.09% (unch.). Our Prime Institutional MF Index (7-day) yielded 0.03% (unch.) as of August 31. The Crane Govt Inst Index remained at 0.02% and the Treasury Inst Index was unchanged at 0.01%. Thus, the spread between Prime funds and Treasury funds remains at two basis points, and the spread between Prime funds and Govt funds is one basis point. The Crane Prime Retail Index yielded 0.01% (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 0.02% (down one bps) in August.

Gross 7-Day Yields for these indexes to end August were: Prime Inst 0.14% (unch.), Govt Inst 0.07% (unch.), Treasury Inst 0.07% (unch.), Prime Retail 0.14% (down one bp), Govt Retail 0.06% (unch.) and Treasury Retail 0.06% (unch.). The Crane Tax Exempt Index remained at 0.09%. The Crane 100 MF Index returned on average 0.00% over 1-month, 0.00% over 3-months, 0.01% YTD, 0.02% over the past 1-year, 1.00% over 3-years (annualized), 0.95% over 5-years, and 0.51% over 10-years.

The total number of funds, including taxable and tax-exempt, was down by 9 funds to 884. There are currently 732 taxable funds, down one from the previous month, and 152 tax-exempt money funds (down 8 from last month). (Contact us if you'd like to see our latest MFI XLS, Crane Indexes or Market Share report.

The September issue of our flagship Money Fund Intelligence newsletter, which was sent to subscribers Wednesday morning, features the articles: "FSB Comment Letters Show Consensus on Reforms Close," which discusses the latest feedback on reforms; "BlackRock's Beccy Milchem Talks European MMF Issues," which profiles the new Head of EMEA Cash; and, "More D&I Share Classes on the Way, But ESG Takes Hit," which recaps the latest news on diversity MMFs. We also sent out our MFI XLS spreadsheet Wednesday a.m., and have updated our Money Fund Wisdom database query system with 8/31/21 data. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our September Money Fund Portfolio Holdings are scheduled to ship on Friday, Sept. 10, and our September Bond Fund Intelligence is scheduled to go out next Wednesday, Sept. 15.

MFI's lead article says, "Discussions continue to heat up and evolve over changing regulations governing money market funds, both in the U.S. and globally. The latest chapter in the saga is the posting of comment letters in response to the Financial Stability Board's 'Policy proposals to enhance money market fund resilience: Consultation Report.' Forty letters were posted in response and we've been quoting and summarizing from them since the August 12 deadline for comments passed. We review the latest highlights below."

It continues, "The Wall Street Journal discusses the pending money fund reforms in its article, 'Firms Wary as Money-Market Rule Changes Studied After Covid-19 Run.' They tell us, 'Investment managers are fighting for the future of money-market funds.... [F]inancial regulators are weighing rule changes designed to ensure that these funds fare better in the next crisis."

Our "BlackRock's Milchem" piece reads, "This month, MFI interviews Rebecca Milchem, BlackRock's new Head of Cash for EMEA. BlackRock is the 2nd largest manager of money funds worldwide and the largest manager of Euro and Sterling MMFs. We discuss the latest regulatory discussions, European vs. U.S. issues, and a number of other topics below in our Q&A."

MFI asks, "Give us a little bit of history. Milchem tells us, "Looking back at the BGI (Barclays) and BlackRock [merger] ... BGI always had the bigger Sterling book [and] BlackRock had a much bigger Dollar footprint when we put the businesses together back in 2009.... They were very complementary. I joined the business in 2008 ... so I had a bit of a baptism of fire.... I think we feel like we've been repeating history the last in the last year in terms of the experience from 2008.... But nothing brings a business together like going through some volatile market conditions and learning through and working with clients through those times."

The "D&I" article tells readers, "While it's been relatively quiet in the Social and ESG money fund space, there were a couple of developments over the past month. The good news was that BlackRock filed to launch several more D&I dealer affiliated share classes, while the bad news was that The Wall Street Journal took a shot at DWS and Deutsche Bank for overstating and struggling to define its ESG efforts."

It adds, "BlackRock's new Form N-1A Registration Statement filings include: Bancroft Capital Shares for BlackRock Liquid Federal Trust Fund, Cabrera Capital Markets Shares for TempFund and BlackRock Liquid Federal Trust Fund, Mischler Financial Group Shares for BlackRock Liquid Federal Trust Fund and Bancroft Capital Shares for the BlackRock Liquid Environmentally Aware Fund (LEAF). BlackRock already offers ESG MMFs BlackRock LEAF Direct (LEDXX) and LEAF Inst (LEFXX); BlackRock Wealth LEAF Inv (PINXX) and Inst (PNIXX); and BlackRock Liquidity FedFund Mischler (HUAXX)."

MFI also includes the News brief, "MFs Higher in August, Dip on Week," which says, "Money fund assets increased by $27.9 billion in August to $4.968 trillion, according to our MFI XLS. This follows declines of $38.5 billion in July and $84.8 billion in June. ICI's latest 'Money Market Fund Assets' report shows MMFs down $17.2 billion to $4.509 trillion in the latest week. Year-to-date, ICI shows MMFs up $212 billion, or 4.9%."

Another News brief, "August Portfolio Holdings: Treasuries Plunge Again; Repo, TDs Jump," comments, "Crane Data's latest Money Fund Portfolio Holdings, with data as of July 31, 2021, show another increase in Repo holdings, a jump in Other (​Time Deposits) and another plunge in Treasuries. Treasury securities remained the largest portfolio segment, though Repo is closing in on the No. 1 spot. ​Agencies were the third largest segment, CP remained fourth, ahead of Other/Time Deposits, CDs and VRDNs."

Our September MFI XLS, with August 31 data, shows total assets increased $27.9 billion to $4.968 trillion, after decreasing $12.4 billion in July and $73.0 billion in June. They increased $74.0 billion in May and $62.2 billion in April. Assets rose $151.0 billion in March, $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 and $121.2 billion in September. Our broad Crane Money Fund Average 7-Day Yield was flat at 0.02%, and 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 remained at 0.09%. Charged Expenses averaged 0.07% for the Crane MFA and the Crane 100. (We'll revise expenses Thursday once we upload the SEC's Form N-MFP data for 8/31.) The average WAM (weighted average maturity) for the Crane MFA was 37 days (unchanged) while the Crane 100 WAM fell one day to 36 days). (See our Crane Index or craneindexes.xlsx history file for more on our averages.)

Over the past several weeks, we've quoted from a number of comment letters to the Financial Stability Board in response to the FSB's "Policy proposals to enhance money market fund resilience: Consultation Report". These include statements from J.P. Morgan Asset Management, BlackRock, Fidelity, Federated Hermes, Charles Schwab, BNY Mellon, Vanguard and SSGA, as well as letters from the ICI, ABA and others. Today, we quote from a few more, including comments from U.K. and France-based asset managers HSBC Asset Management, BNP Paribas, Amundi and Aviva Investors. Jonathan Curry, who will speak on "European, ESG and Corporate Issues" at our upcoming Money Fund Symposium in Philadelphia (Sept. 21-23), writes in, "HSBC Asset Management Response to FSB Policy Proposals to Enhance Money Market Fund Resilience," "HSBC Asset Management is HSBC's core investment business dedicated to managing assets for institutions and individuals worldwide, with USD612.4 billion in total assets under management."

Curry continues, "As part of the HSBC group, we have local liquidity expertise across both core and emerging markets, with Liquidity assets accounting for USD 133.0 billion (or 21.7% of HSBC Asset Management's total assets under management). We have more than 25 year's experience in management money market assets, and operate global and local funds across 10 currencies with investment professionals located around the world. This includes funds domiciled and regulated in Europe, the Americas and Asia. We operate LVNAV (in Europe), CNAV and VNAV funds, in both credit and public debt strategies."

He explains, "HSBC Management treats Liquidity management as a separate discipline and has allocated dedicated resources accordingly. There are teams of portfolio managers, credit analysts, risk managers and client service teams focused on our Liquidity business. This focus, and deep experience managing a wider range of fund types, across a number of different markets, means we are well positioned to understand the needs of our investors and the markets in which we operate."

Currey says, "We are pleased to have the opportunity to respond to this important consultation. We are supportive of any and all efforts to consider potential policy measures to improve the resilience of MMFs and short term funding markets. We have carefully considered the presentation of vulnerabilities and each of policy proposals set forth in your report and provided responses below. We are happy to support continued engagement with you on this report."

He states, "Our experience with our client base was that investors were solely focused on our funds WLA levels. The 'bright line' of 30% weekly liquid assets ('WLA') that was created by US regulation and the linkage of the level of WLA to the need for a Fund's Board to consider the implementation of a liquidity fee or gate was the major driver of investor focus on this level.... The fund construct (Public Debt Constant Net Asset Value PDCNAV, Low Volatility Net Asset Value LVNAV, Variable Net Asset Value VNAV) was not a factor in whether a MMF faced challenges due to redemptions. In some cases, both VNAV and LVNAV MMFs faced heightened redemptions. It is worth noting that where heightened redemption activity did occur it tended to be currency specific. For example, in the case of LVNAV funds it was focused in some USD funds and in the case of VNAV funds it was focused in some EUR funds."

The letter from BNP Paribas tells the FSB, "BNP Paribas welcomes the opportunity to comment the FSB's consultation on Policy Proposals to Enhance Money Market Fund Resilience. We will mainly focus in our response to this consultation from a Euro-denominated VNAV MMF perspective, as almost all our funds are French MMFs of VNAV type. BNP Paribas Asset Management (the asset management division of the BNP Paribas Group) has €72bn of MMFs under management as of 31 December 2020 with the following breakdown: 46bn in French MMFs all of VNAV type, €26bn in Luxembourg MMFs of which GBP2.2bn and USD1.5bn for the LVNAV MMF type."

They explain, "During the COVID crisis, French Euro-denominated VNAV MMFs managed the outflows and proved resilient despite important redemptions, especially in March 2020 (-52.4bn euros). This is clearly explained in the French regulator AMF's 2020 Markets and Risk Outlook. This report also indicates that despite the significant net outflows in March 2020, inflows resumed as soon as May 2020. Overall, over the first 8 months of 2020, inflows amounted to +48.6bn euros. Another important fact is that, unlike the 2008 episode, no complaint was expressed with regard to the composition of the portfolios of French MMFs, especially in terms of the quality of assets. Indeed, French VNAV MMFs have demonstrated that they are safe and resilient in their construction and composition."

BNP adds, "As complementary information, French VNAV MMFs are subscribed mainly by institutional investors. They are used by investors as short-term investment vehicles that offer returns in line with money market rates by placing monies in short-term assets. They constitute an appreciated alternative for cash management allowing investors to diversify their counterparty risk. They are also easy to use and offer same day liquidity. At quarter end for instance, their outflows are generally important and are dealt in anticipation in a business-as-usual manner by asset managers. Indeed, MMFs have cyclical and anticipated redemptions (which might amount to as much as 20%) that are managed without difficulty. An efficient KYC permits discussion with the investors so as to anticipate redemptions for which the manager is preparing the necessary liquidity in advance. During the crisis, the need for cash expressed by some of them, especially corporates, amounted to high levels of redemptions from MMFs. As they are most liquid investment funds, they were naturally used in priority compared with other types of assets, even if the redemption was high almost in all asset classes."

A comment from Amundi says, "Amundi is the European largest asset manager by assets under management and ranks in the top 10 globally. It manages 1,729 billion euros of assets, as of end of 2020, across six main investment hubs in Boston, Dublin, London, Milan, Paris and Tokyo.... Amundi is also a leading and longstanding actor in managing liquidity funds, with 222 billion euros of assets as of end of 2020, out of which 180 billion euros of money market funds (MMFs) domiciled in the European Union, thus following the European Money Market Fund Regulation (MMFR). Amundi is notably the world largest manager of euro-denominated MMFs, with 175.4 billion euros of assets as of end of 2020. Most MMFs under its management belong to the VNAV (Variable Net Asset Value) type category and are domiciled in France. It also operates in the LVNAV (Low Volatility NAV) MMF market by offering two Luxembourg-domiciled funds, AAA-rated and denominated in euro and USD respectively."

It states, "[T]here is, in our view, a considerable risk in assessing that MMFs were the trigger of this liquidity crisis while they only revealed it. Accordingly, considering that the recently-applied MMF regulations need to be deeply reformed will contribute to missing the target. In this respect, while the report provides i) a useful and detailed description of MMF market and regulatory environment and ii) a fair analysis of interactions between MMFs and STFMs, we would like to share some concerns over the tonality of the report. Indeed, the report refers to MMF vulnerabilities that would have emerged from the Covi19 crisis, while we do consider that the difficulties MMFs encountered in March 2020 mainly stemmed from a disruption in the functioning of STFMs. Our perception is that the report underestimates the potential options that could be explored to improve the liquidity of STFMs, especially under stressed conditions. On this respect, we think that a lot can be achieved, on both player and instrument areas. Similarly, the report devotes a disproportionate share to the different options that are supposed to address MMF vulnerabilities: some of these options are unrealistic or potentially dangerous for MMFs' very existence."

Finally, outlier Aviva Investors writes, "We consider that moving away from the concept of constant and low volatility NAV and making funds free floating would be the most effective policy option. From our experience during the crisis, there were still some bids for commercial paper, but the prices were very unattractive. A variable NAV fund would be better placed to be able to accept those prices, sell the stock and move on. The real concern here is the treatment of such a fund with regards to cash and cash equivalence."

ICI's latest "Money Market Fund Assets" report shows assets falling at month-end after several weeks of minor gains. The release says, "Total money market fund assets decreased by $17.18 billion to $4.51 trillion for the week ended Wednesday, September 1, the Investment Company Institute reported today. Among taxable money market funds, government funds decreased by $16.70 billion and prime funds decreased by $634 million. Tax-exempt money market funds increased by $153 million." Money fund assets are up by $212 billion, or 4.9%, year-to-date in 2021. Inst MMFs are up $310 billion (11.2%), while Retail MMFs are down $98 billion (-6.4%). (For the month of August, money fund assets were flat, declining by a miniscule $1.1 billion to $4.945 trillion, according to Crane Data's MFI Daily collection.)

ICI's stats show Institutional MMFs decreasing $19.1 billion and Retail MMFs increasing $1.9 billion in the latest week. Total Government MMF assets, including Treasury funds, were $3.944 trillion (87.5% of all money funds), while Total Prime MMFs were $474.3 billion (10.5%). Tax Exempt MMFs totaled $91.1 billion (2.0%). Over the past 52 weeks, money fund assets have increased by $15 billion, or 0.3%, with Retail MMFs falling by $99 billion (-6.5%) and Inst MMFs rising by $114 billion (3.8%). (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.)

They explain, "Assets of retail money market funds increased by $1.89 billion to $1.43 trillion. Among retail funds, government money market fund assets increased by $3.08 billion to $1.13 trillion, prime money market fund assets decreased by $1.26 billion to $217.89 billion, and tax-exempt fund assets increased by $67 million to $79.50 billion." Retail assets account for just under a third of total assets, or 31.7%, and Government Retail assets make up 79.2% of all Retail MMFs.

ICI adds, "Assets of institutional money market funds decreased by $19.07 billion to $3.08 trillion. Among institutional funds, government money market fund assets decreased by $19.78 billion to $2.81 trillion, prime money market fund assets increased by $626 million to $256.47 billion, and tax-exempt fund assets increased by $86 million to $11.63 billion." Institutional assets accounted for 68.3% of all MMF assets, with Government Institutional assets making up 91.3% of all Institutional MMF totals.

In other news, Charles Schwab Asset Management posted a primer entitled, "Money Market Fund Reform and Form N-CR," which explains, "Money market funds are required to comply with disclosure requirements relating to Form N-CR. We are providing the questions and answers below to help you to better understand Form N-CR as well as the events that would lead to its filing."

They write, "As part of the 2014 Money Market Fund (MMF) Reform Amendments, the Securities and Exchange Commission (SEC) requires all MMFs to report information on Form N-CR regarding certain material events occurring on or after July 14, 2015 and make related website disclosures. Form N-CR is required to be filed with the SEC only if a MMF experiences any of the material events listed below. If such an event occurs, a MMF must file an initial report on Form N-CR with the SEC within one business day of the occurrence, followed by a second more detailed filing on Form N-CR within four business days of the occurrence."

Schwab tells us, "The purpose of the Form N-CR is to provide better industry oversight and increased transparency of all MMFs. The Schwab Money Funds are prepared to meet the disclosure requirements relating to Form N-CR should any of the material events be triggered."

They ask, "What is Form N-CR?" The update answers, "Form N-CR is an important part of the amendments adopted by the SEC on July 23, 2014. This document provides MMF shareholders with additional transparency by disclosing if a MMF experienced any one of the five material events identified below. If a MMF experiences any of the material events listed below, it must file an initial report on Form N-CR with the SEC within one business day after the occurrence, followed by a second more detailed filing on Form N-CR within four business days after the occurrence. In the case of three of the events, a MMF must disclose on its website substantially the same information that is required in the initial report on Form N-CR."

The events include: "Defaults and Insolvency: A MMF is required to file a Form N-CR with the SEC if the issuer or guarantor of a security that makes up more than one half of one percent of the MMF's total assets either defaults or becomes insolvent; Decline in Shadow Price: A MMF is required to file a Form N-CR with the SEC if its current NAV per share deviates downward by more than one quarter of one percent from its intended stable price of $1.00; and, Financial Support: A MMF is required to file a Form N-CR with the SEC if it is provided with financial support by a sponsor or affiliate. In addition to filing the Form N-CR with the SEC, a MMF must also disclose this event on its website."

Schwab also lists, "Liquidity Fees: A MMF is required to file a Form N-CR with the SEC if it (i) imposes a liquidity fee; or (ii) has less than 10% of its total assets invested in weekly liquid assets, regardless of whether it imposes a liquidity fee; or (iii) removes a liquidity fee. In addition to filing the Form N-CR with the SEC, a MMF must also disclose this event on its website; and, Fund Redemption Gates: A MMF is required to file a Form N-CR with the SEC if it either suspends redemptions by imposing a redemption gate or resumes redemptions by removing a redemption gate. In addition to filing the Form N-CR with the SEC, a MMF must also disclose this event on its website."

The Q&A continues, "How can I determine if any of the Schwab MMFs filed a Form N-CR?" The brief responds, "Schwab Money Funds will indicate on the 'Prospectus & Reports' page on `www.schwabassetmanagement.com that a Form N-CR was filed with the SEC for the following triggering events: Financial Support, Liquidity Fees, and Redemption Gates. A PDF in the column titled 'Form N-CR' beside the affected MMF will describe the event which required that the Form N-CR be filed with the SEC. The Form N-CR column will only appear on the 'Prospectus & Reports' page if a Schwab Money Fund has filed a Form N-CR. The Form N-CR column will not appear unless there is an affected MMF in one of the MMF product categories."

Finally, Schwab asks, "For what period of time will the Form N-CR notification be posted online?" They reply, "For any of the three above material events which require online disclosure, a MMF must maintain this disclosure online for one year after having filed with the SEC. Are the Schwab MMFs prepared to comply with the disclosure requirements relating to Form N-CR should a filing be required? Yes. The Schwab Money Funds are prepared to meet the disclosure requirements relating to Form N-CR." (Note: Click here to visit the SEC's listing of Form N-MFP filings.)

The Financial Times writes that the "Debt ceiling fight pushes money market funds to brink," which discusses the latest battle over the debt ceiling, the dramatic shrinkage in Treasury debt and its impact on money market funds. They tell us, "The supply of the safest US government bonds has been cut this month after federal spending limits were reinstated, driving prices higher and reigniting problems for the money market fund industry -- which has already been bailed out by the Federal Reserve once this year. Treasury bills -- US bonds which mature in a year or less -- were already scant this year after the US lengthened the average duration of its new debt issues. Supply then took another hit after Congress failed to pass legislation in July that would have allowed the Treasury department to issue new debt -- known as raising the debt ceiling."

The article says, "Analysts estimate issuance of new Treasury bills has been cut by roughly $900bn so far this year. That limited supply has driven prices higher and yields -- the premium investors are paid to hold the debt -- down to levels just above zero. When some yields turned negative in May, the Fed intervened to put a floor under those rates. But the worsening supply crunch is drastic enough that rates are heading back towards zero despite the Fed's support."

The FT explains, "Rock-bottom yields cause problems for money market funds, a $4.4tn industry that relies heavily on short-dated debt, erasing their profits or forcing them to close their doors to new investors. Money market funds are a linchpin in the global financial system because they are used by investors as a safe place to store cash for short periods."

They quote TD Securities' Gennadiy Goldberg, "Money funds are having trouble making ends meet because of these very low rates. It's not exactly a conducive environment to be a money-market fund unfortunately. As if zero interest rates weren't enough, this is just piling on." The article continues, "That dynamic will only get worse in the next month, said Goldberg. He does not expect the spending limits to be lifted before the end of October at least."

The FT adds, "The Treasury department is not expected to run out of money until late October or early November. After the decline in supply earlier this year drove some short-term rates negative, the Fed backstopped the market by paying interest on money placed in its Overnight Reverse Repo Facility. The facility provides money market funds with an alternative place to park cash, bolstering those short-term interest rates. The problem is that the RRP facility is now consistently being used at record levels, and is approaching the limits put on its usage by the Fed."

Finally, they comment, "The Fed could ultimately raise the counterparty limits on the facility, which could relieve some pressure on the market, an option it signalled it was open to in the minutes from its July policymaking meeting. But because of pandemic-related monetary and fiscal stimulus, there is still an enormous amount of money in the economy chasing too few investments. That is likely to keep yields on bills low and money market funds under pressure."

According to Crane Data's latest Money Fund Portfolio Holdings data (as of 7/31/21), Treasury securities represent $2.057 trillion of the $4.831 trillion in Taxable money market funds, or 42.6% of the total. This is down from a record high of $2.571 trillion (52.6%) in March 2021. Currently, Treasury money funds total $1.210 trillion, while Government money funds total another $2.759 trillion. Though the FT article doesn't discuss it, during previous debt ceiling scares the main concern was of a technical default in Treasuries and the possible flight from Treasury money funds.

Below, we list a number of Crane Data News articles that covered previous episodes of debt ceiling showdowns and their impact on Treasury money market funds. For more, see: "Wells Money Market Funds Debt Ceiling FAQ; Impact on Treasuries, Repo" (9/7/17), "BlackRock on Return of the Debt Ceiling, Avoiding T-Bills in October" (9/5/17), "Treasury Default, Debt Ceiling Concerns Loom; Problem for Govt MMFs?" (8/30/17), "OFR's Berner on Repo, MMFs; Fidelity on Debt Ceiling; Wells on 2016" (1/26/17), "Strategists on Treasury Debt Ceiling; SEC Stats on Liquidity Funds" (10/19/15), "Fed RRP Usage Breaks Record Sept. 30; T-Bills, and Debt Ceiling" (10/6/15) and "Federated's Hill and Cunningham on Debt Ceiling, Fed's Reverse Repo" (2/4/14).

The most acute episodes of these were in 2013 and 10 years ago, in July and August 2011. Our News on these periods includes: "Another Silly MMF Article from FT; Swirsky on Debt Ceiling Lessons" (11/25/13), "Fitch on Fed's Reverse Repos, Bank Support; Wells on Debt Ceiling" (11/13/13), "November MFI Features Debt Ceiling, JPMAM's Donohue, Portal News" (11/7/13), "MMF Assets Surge Following Debt Ceiling Resolution; ICI Blasts FT" (10/25/13), "MMFs See Big Outflows Prior to Debt Ceiling Extension; ICI's Reid" (10/18/13), "ICI, Stevens, Fitch Comment on Debt Ceiling Issues and Treasury MMFs (10/10/13), "October MFI Features Comment Letters, Fidelity's Prior, Debt Ceiling" (10/7/13), "ICI on S&P Downgrade, Reviews Flows During Debt Ceiling Debate" (8/8/11), "Fidelity's Huyck Comments on Debt Ceiling Countdown, Answers FAQs" (8/1/11), "More Debt Ceiling; Reuters Quotes Shapiro on Floating NAV, Europe" (7/22/11), "ICI's McMillan and Reid on Debt Ceiling Scenarios and Impact on MMFs" (7/21/11), "Invesco on Understanding the Debt Ceiling Debate and Money Funds" (7/13/11) and "Federated's Sue Hill Says Don't Sweat The Debt-Ceiling Showdown" (7/20/11).

Federated Hermes, the sixth largest manager of money market mutual funds in the world according to Crane Data, also submitted a comment letter to the Financial Stability Board in response to the FSB's "Policy proposals to enhance money market fund resilience: Consultation Report". Federated's Deborah Cunningham and Dennis Gepp state, "Federated Hermes has been in business since 1955 and has more than 45 years of experience managing money market funds ('MMFs').... Federated Hermes manages Low-Volatility Net Asset Value MMFs ('LVNAV'), and Public Debt Constant NAV MMFs ('CNAV') domiciled in the EU, and LVNAV and Variable NAV MMFs ('VNAV') in the UK. Federated Hermes also manages MMFs in the United States [and] accounts for institutional customers that invest in money market instruments, as well as US local government investment pools that invest in money market instruments. In all, Federated Hermes manages more than $400 billion (€330 billion) in money market assets, the vast majority of which have ESG integrated into their investment process. We appreciate the opportunity to comment on the consultation report on the FSB's policy proposals to enhance money market fund resilience that was published on 30 June 2021." (Note: Federated's Cunningham is scheduled to co-keynote our upcoming Money Fund Symposium conference, Sept. 21-23 (live) in Philadelphia. We hope to see you there!)

The letter's "Executive Summary" explains, "In March 2020, financial markets around the world experienced a liquidity crisis caused by the affirmative decisions of governments around the world to shut down their local economies in response to the Covid-19 Global Health Pandemic ('Liquidity Crisis'). Contrary to assertions made in the FSB report, the Liquidity Crisis was not caused or amplified by MMFs and any statements to such effect are simply untrue and are not supported by the data."

It continues, "In assessing the events of the Liquidity Crisis, it is critically important to follow the data and understand the timeline of events as they unfolded and how the markets were impacted. The Liquidity Crisis started with public reaction to the then rapidly spreading COVID-19 pandemic, the very sharp contraction of the real economy in early March as people stayed home to avoid contracting the illness under government-imposed lockdowns in many jurisdictions around the globe. These government actions to stem the pandemic sharply reduced investor confidence, price discovery and liquidity across all markets. Predictably, a contagion then ensued as the prospect of the worst pandemic in 100 years shut down global markets."

Federated comments, "The data clearly shows that the Liquidity Crisis did not discriminate against any one asset class, it impacted funds across the spectrum and investors of all types. While MMFs experienced significant liquidity pressure in March 2020, such pressure exposed a critical error in previous regulatory reform efforts: the improper linkage of potential liquidity fees and gates to a MMF's weekly liquid asset ('WLA') requirement. This linkage created an unnecessary incentive for investors to redeem and led to artificially high redemptions in both the United States ('US') and in the European Union ('EU') during the Liquidity Crisis. This linkage of WLA and potential imposition of fees and gates is without question the key vulnerability in US and EU MMFs that should be remedied, and it is supported by the data."

They write, "In addition to delinking the WLA thresholds from the potential imposition of fees and gates, the FSB should expand its review and focus on improving the resilience of the short-term funding markets ('STFMs'). The FSB must better analyse how the STFMs function and the role of their market participants. A proper analysis of the STFMs needs be a collaborative endeavour. MMFs are but one small player in the STFMs and playing a role in the markets and reacting to market stresses should not be confused with causing such market stresses. Additionally, vulnerabilities in the STFMs should not be confused or designated as vulnerabilities in MMFs. Most of the vulnerabilities identified in the FSB report are inherent to the STFMs, not MMFs."

Cunningham and Gepp tell the FSB, "We appreciate the desire for central banks to avoid having to step in and provide liquidity in the markets and we fully support any enhanced regulation that makes sense, is supported by the data, and increases the safety and stability of MMFs. However, in a Liquidity Crisis caused by affirmative actions by governments around the world, central banks, however reluctant, will need to step in and support market-wide liquidity. A desire to eliminate any risk that central bank intervention will be required again is simply not realistic, contrary to a fundamental tenet of central banks (to provide liquidity) and ill-conceived if one believes regulating MMFs out of existence will accomplish an impossible objective."

They write, "To enhance the safety and stability of MMFs the FSB should focus on the following Reforms which would strengthen and enhance the safety and stability of MMFs in the US and EU: 1. Eliminate the Link Between WLA Requirements and Potential Fee/Gate Implementation. Reducing/removing the ill-conceived regulatory incentive to runs by delinking the 30% WLA requirement and potential imposition of a fee or gate addresses the FSB's point on 'reducing the demand from the non-bank financial system for liquidity rising unduly in stress periods.'"

Federated's letter also suggests, "2. Enhance Know Your Customer ('KYC') Requirements. In the EU, MMFs are already required to 'establish, implement, and apply procedures and exercise all due diligence with a view to anticipating the effect of concurrent redemptions by several investors, taking into account at least the type of investor, the number of units or shares in the fund owned by a single investor and the evolution of inflows and outflows' as part of KYC requirements set forth in Article 27 of the Money Market Fund Regulation ('MMFR'). However, for an intermediated investor, whilst MMF managers are required to ask for such information, intermediaries are not subject to a regulatory obligation to provide the information. In the US, the scope of Rule 22c-2 under the Investment Company Act of 1940 should be expanded to apply to MMFs (currently excluded)."

It also recommends, "3. Short-Term Funding Market Reform. Enhancing the resiliency of STFMs by addressing the vulnerabilities in the STFM structure addresses the FSB's point on 'ensuring the resilience of the supply of liquidity in stress; and assessing what can, or should, be done by central banks to backstop market functioning effectively, without creating incentives for market participants to take on more risks'."

The comment letter adds, "In addition to the reforms noted above, to further enhance the safety and stability of MMFs in Europe, the FSB should also focus on the following reforms: 1. With a MMF's liquidity delinked from the potential imposition of a liquidity fee or gate we believe that the current regulatory requirements of 10% daily and 30% weekly (subject to increase by the KYC Rule) are appropriate and should not be increased. These levels are consistent in both the EU and the US but for one type of EU MMF (VNAV MMFs) which are subjected to lower liquidity requirements, which likely contributed to its stress during the Liquidity Crisis. As such, we support increasing the required liquidity levels of EU VNAV MMFs from 7.5% daily and 15% weekly liquidity, to 10% daily and 30% weekly liquidity requirements consistent with other EU MMFs and US VNAV MMFs."

Federated says, "MMFs in the EU are also subject to arbitrary restrictions on holding high-quality government securities, which is inconsistent with the economic realities of these securities. We support removing the arbitrary 17.5% restriction on including high-quality government securities as WLA for EU MMFs as, through both the 2008 Financial Crisis and Liquidity Crisis, high-quality government securities have proved to be the most liquid; and 3. MMFs in the EU are also restricted on their ability to use repo due to a drafting inconsistency. The global standard should support the inclusion of 5-day repo as eligible WLA. The conflict between Article 15 of the EU MMFR, which limits investments in repo to 2 days, and Article 24 of the MMFR, which specifically sets forth the inclusion of 5-day repo as part of an EU MMF's WLA, should be corrected."

Finally, they summarize, "MMFs are important short-term high-quality diversified and transparent investment products which have provided significant benefits to investors and issuers in the US and EU since their inception. MMFs in the EU and the US are the highest regulated product in the market and they are fully transparent to not only regulators but to investors. MMFs are 100% capitalized and investment risk remains with the investors. It is critically important that MMFs remain a viable product available for global investors."