News Archives: January, 2024

A press release entitled, "Dreyfus Celebrates 50 Years of Liquidity Management" tells us, "Dreyfus, one of the largest liquidity managers and affiliate of BNY Mellon (BK), celebrates the 50th anniversary of the launch of its first Dreyfus money market fund and the start of its journey as a trusted leader in the space. On January 28, 1974, Dreyfus introduced Dreyfus Liquid Assets, Inc., one of the first money market funds offered to investors. This year, BNY Mellon is also celebrating its 240-year anniversary and position as one of the pioneers of US financial services. Today, as BNY Mellon's liquidity solutions expert, Dreyfus aligns investor-specific needs, investment time horizons and risk profiles with the current market cycle and offers clients differentiated investment solutions across the liquidity vertical."

Chief Investment Officer John Tobin comments, "We are proud to be a part of the BNY Mellon family and our contributions to its heritage of innovation and resilience. As the world has changed, supporting our clients and local communities has always been at the center of what we do and how we do it."

The release continues, "Dreyfus has a history of innovation and launching intelligent solutions for its clients, including leveraging BNY Mellon's investment platforms and capabilities to align clients' philanthropic goals with their liquidity needs. This unique approach has led to recent launches of SPARK and BOLD share classes, offered exclusively through its flagship money market fund, Dreyfus Government Cash Management."

It adds, "Dreyfus offers a full suite of short-duration liquidity solutions, including domestic and offshore money market funds, separately managed accounts, an ultra-short income exchange-traded fund, sub-advised portfolio solutions, collective investment trusts (CITs), as well as white label and private label options. Dreyfus has been committed to delivering leading and innovative liquidity solutions for investors and investment professionals since 1974 -- a commitment they are excited to carry forward for the next 50 years."

In other news, the Investment Company Institute published its latest monthly "Trends in Mutual Fund Investing" and "Month-End Portfolio Holdings of Taxable Money Funds" for December 2023 on Tuesday. ICI's monthly Trends shows money fund totals jumping $34.9 billion in December to a record $5.916 trillion (after a jump in November, a decrease in October and increases in September, August, July, June, May and April). Prior to this, the March 2023 jump (a $371.0 billion increase) was the third largest monthly increase ever and the largest in history if you exclude 2 coronavirus lockdown panic months in March and April 2020. Bond fund assets surged $135.5 billion to $4.745 trillion.

MMFs have increased by $1.139 trillion, or 23.8%, over the past 12 months (according to ICI's Trends through 12/31). Money funds' December asset increase follows an increase of $213.9 billion in November, a decrease of $13.6 billion in October and gains of $74.1 billion in September, $123.9 billion in August $31.4 billion in July, $30.6 billion in June, $172.7 billion in May, $8.4 billion in April, $371.0 billion in March, $60.0 billion in February and $31.5 billion in January. Money fund assets surpassed bond fund assets in September 2022 for the first time since 2010 and they continued to hold a sizeable lead last month. (The bond fund totals don't include bond ETFs, which total $1.446 trillion as of 11/30, according to ICI.)

ICI's monthly release states, "The combined assets of the nation's mutual funds increased by $822.22 billion, or 3.3 percent, to $25.52 trillion in December, according to the Investment Company Institute's official survey of the mutual fund industry. In the survey, mutual fund companies report actual assets, sales, and redemptions to ICI.... Bond funds had an outflow of $8.50 billion in December, compared with an outflow of $14.07 billion in November.... Money market funds had an inflow of $16.93 billion in December, compared with an inflow of $196.35 billion in November. In December funds offered primarily to institutions had an outflow of $22.88 billion and funds offered primarily to individuals had an inflow of $39.82 billion."

The Institute's latest statistics show that Taxable and Tax Exempt MMFs were both higher last month. Taxable MMFs increased by $33.8 billion in December to $5.792 trillion. Tax-Exempt MMFs increased $1.1 billion to $123.6 billion. Taxable MMF assets increased year-over-year by $1.128 trillion (24.2%), and Tax-Exempt funds rose by $11.2 billion over the past year (10.0%). Bond fund assets increased by $135.5 billion (after increasing $170.5 billion in November) to $4.745 trillion; they've increased by $252.4 billion (5.6%) over the past year.

Money funds represent 23.2% of all mutual fund assets (down 0.6% from the previous month), while bond funds account for 18.6%, according to ICI. The total number of money market funds was 275, unchanged from the prior month and down from 291 a year ago. Taxable money funds numbered 229 funds, and tax-exempt money funds numbered 46 funds.

ICI's "Month-End Portfolio Holdings" confirms a jump in Repo and Treasuries last month. Repurchase Agreements remained the largest composition segment in December having increased $80.9 billion, or 3.3%, to $2.513 trillion, or 43.4% of holdings. Repo holdings have decreased $149.1 billion, or -5.6%, over the past year. (See our Jan. 11 News, "Jan. Portfolio Holdings: Repo Jumps, Time Deposits, Agenecies Slide.")

Treasury holdings in Taxable money funds increased last month; they remain the second largest composition segment. Treasury holdings increased $49.6 billion, or 2.4%, to $2.136 trillion, or 36.9% of holdings. Treasury securities have increased by $1.048 billion, or 96.3%, over the past 12 months. U.S. Government Agency securities were the third largest segment; they decreased $8.3 billion, or -1.3%, to $653.2 billion, or 11.3% of holdings. Agency holdings have increased by $121.0 billion, or 22.7%, over the past 12 months.

Certificates of Deposit (CDs) remained in fourth place; they decreased by $49.5 billion, or -15.6%, to $266.8 billion (4.6% of assets). CDs held by money funds rose by $95.7 billion, or 55.9%, over 12 months. Commercial Paper remained in fifth place, down $8.0 billion, or -3.3%, to $230.9 billion (4.0% of assets). CP increased $60.2 billion, or 35.3%, over one year. Other holdings increased to $22.4 billion (0.4% of assets), while Notes (including Corporate and Bank) decreased to $6.2 billion (0.1% of assets).

The Number of Accounts Outstanding in ICI's series for taxable money funds increased to 64.356 million, while the Number of Funds was unchanged at 229. Over the past 12 months, the number of accounts rose by 5.032 million and the number of funds decreased by 7. The Average Maturity of Portfolios was 37 days, up 3 from November. Over the past 12 months, WAMs of Taxable money have increased by 23.

Investors' Business Daily (IBD) recently featured a piece entitled, "How The Best Online Brokers Boost Your Cash Holdings which tells us, "Online brokers face stiff competition when it comes to paying clients to park their idle cash. They've had to up the ante as interest rates have risen and investors had plenty of cash management options to choose from. Cash management options are a priority for online investors. So say the customers who decided the winners of IBD's 12th annual Best Online Brokers survey. Cash-heavy traders who have been sitting on the sidelines expect higher rates on their cash balances. Online brokerages are competing with 5% interest rates on Treasury bills and some CDs, as 2023 interest rates hit levels not seen in more than 20 years."

It explains, "Meanwhile, yields on uninvested brokerage cash can vary from less than 1% to around 5%. Some institutions have increased yields and offered products to retain clients' dough, while others still pay less than 1%. Based on the overall scores of the eight online brokers that qualified for the survey analysis, IBD identified its four Best Online Brokers for 2024. They are Ally Invest, Fidelity Investments, Charles Schwab (SCHW) and Merrill Edge. Ally Invest is the brokerage arm of Ally Bank/Ally Financial (ALLY). Merrill is part of Bank of America (BAC)."

The article states, "IBD's 2024 Best Online Brokers survey asked respondents to rate their primary brokers on 20 attributes. One criteria was cash management choices and their level of trust in that area. The survey found online brokerages Fidelity, Robinhood (HOOD), Ally Invest, and Vanguard highly ranked in this category."

It comments, "According to Bankrate, the national average annual percentage yield on a money market account was less than 0.5%, while the national average on a savings account was slightly more than 0.5% in January. Yes, less than 1%. With 11 Federal Reserve rate hikes in the past two years and the federal funds rate at 5.25% to 5.50%, that may be surprising. But select money market funds are paying around 5%, including low-risk government securities funds."

IBD says, "Fidelity has ranked among IBD's Best Online Brokers for all 12 years the survey has been conducted. A company spokesperson said that for retail brokerage and retirement accounts, Fidelity works on the side of investors by automatically directing investors' cash into a money market fund. When you open a Fidelity non-retirement account, it establishes what is called a core position, used for cash transactions and uninvested cash. You have the choice of two high-yield government money market funds to hold your surplus cash. Its default fund is the Government Money Market Fund (SPAXX) or you can opt to have your balance put into the Treasury Money Market Fund (FZFXX). Both have an APY of around 5%. Not bad. These funds have an expense ratio around 0.42% to 0.46%."

They also write, "Online brokerage Vanguard offers six money market funds with a $3,000 minimum investment requirement. One of its high-yielding funds is the Federal Money Market Fund (VMFXX) with a 5.29% APY and an 0.11% expense ratio. This is the default fund used for Vanguard brokerage account settlement funds.... Vanguard's Cash Reserves Federal Money Market (VMRXX) pays a 5.30% compound yield with a 0.10% expense ratio. A third option is the Treasury Money Market Fund (VUSXX), with a 5.3% annualized yield and a 0.09% expense ratio."

IBD adds, "Next is Ally, which took top honors for overall customer experience score in this year's Best Online Brokers survey. Ally Invest's no-minimum balance Money Market account earns around 4.4% APY. Also, Ally is currently offering a 12-month CD with a 5.00% APY. And its savings account pays 4.35%. Ally offers products specifically for IRA accounts including a 5.25% high-yield CD. It literally pays to find out how much your uninvested cash is earning."

In other news, Pensions & Investments posted a piece on money funds around the globe entitled, "Higher-for-longer interest rates sustain money market fund inflows." They explain, "Money market funds are expected to continue seeing strong inflows even as the Federal Reserve's rate-hiking cycle comes to an end, sources agreed. And while inflows could slow when the Fed eventually moves to cut interest rates, managers are confident that demand will remain high relative to the low-rate period of 2008-2022. In March and April 2020, money market fund assets leapt 16.17% and 12.13% month-on-month as the stock market plummeted, and even though there hasn't been double-digit growth since, total assets have continued to climb. Between June and December 2023, the total assets grew 8.39%. Over the past five years, total assets grew to $5.89 trillion as of Dec. 29, from $3.6 trillion on Dec. 31, 2019."

P&I tells us, "Money market funds are currently yielding 'very nicely' at 5.5%, said Philippe Billot, head of money markets at Pictet Asset Management, in an interview in Singapore. 'So it's very competitive vs. deposits. And on top of liquidity, also in terms of risk management, money market funds are relatively sophisticated instruments,' he said.... 'Interest rates were almost zero in U.S. dollars and negative in European currencies and I'm not sure central banks were happy with (that) situation,' he added. At Pictet AM, which managed 230 billion Swiss francs ($251.7 billion) in assets as of Sept. 30, money market funds are diversified and assessed for credit and liquidity risk."

They continue, "The fund manager also actively manages its duration. Over the past two years, Pictet AM has kept a low duration positioning in its U.S. dollar money market portfolio, with about $10 billion of the $57 billion under management in money markets having a duration of less than 10 days. The duration has been increased now to 48 days and can go up to 60 days, 'which is overall not a lot,' Billot admitted. 'But when you manage $60 billion it can be sensitive -- every basis point of a basis point (matters). We live in a very small world in money markets but with huge amounts."

This article adds, "Money market inflows are likely to continue to be strong in 2024, agreed Thomas Kaegi, chair of the Investment Management Association of Singapore and managing director, head of asset management for Singapore and Southeast Asia at UBS. Looking back following the rate hikes of 2006 and 2007, flows to money markets continued for some time even when interest rates plateaued and started to fall, he said. Fund managers that offer money market funds have benefited from this.... [W]ith cash rates obviously many people are moving from equities or fixed income to money market funds."

Federated Hermes, the 6th largest manager of money funds, reported Q4'23 earnings and hosted its Q4'23 earnings call late last week. On the call, President & CEO J. Christopher Donahue, comments, "We had solid asset growth in Q4, ending with record assets under management of $758 billion, driven by record money market assets.... We recently marked 50 years of innovation and successful management of money market funds as we launched the first fund to ever use the term money market on January 16th of 1974. At year-end 2023, we reached record highs for money market fund assets of $406 billion. Money market separate account assets of $154 billion and total money market assets of $560 billion. Total money market assets increased by $83 billion or 17% during 2003 and by $35 billion or 7% in the fourth quarter. Money market strategies continue to benefit from favorable market conditions for cash as an asset class, elevated liquidity levels in the financial system and attractive yields compared to cash management alternatives such as bank deposits and more recently direct investments in money market instruments such as T-bills and commercial paper."

He explains, "In the expected upcoming period of declining short-term rates, we believe that market conditions for money market strategies will continue to be favorable compared to direct market rates and bank deposit rates. Our estimate of money market mutual fund market share, which includes sub-advised funds, was about 7.4% at the end of 2023, up from about 7.3% at the end of the third quarter last year. Now, looking at recent asset totals as of a few days ago, managed assets were approximately $764 billion, including $568 billion in money markets, $78 billion in equities, $95 billion in fixed income, $20 billion in alternative private markets, and $3 billion in multi-asset. Money market mutual fund assets were at $406 billion."

During the Q&A session, an analyst asked about the "outlook and goals for the money market fund and the alternatives business." Donahue answers, "On the money market funds, remember that over 50 years, we have had the strategy of keeping the money funds alive and well, and they work on the basis of higher highs and higher lows over all that time frame. And our dedication to it in terms of arguing with the SEC, dealing with the realities of the marketplace, have been well rewarded. These money market funds into the future will continue to serve as ballast for the ship of FHI, which it has done to date, noting that when there are variations in the marketplace, the money market funds prove the viability of a differentiated franchise for all seasons, and we continue to maintain that."

He continues, "And don't forget that as the money supply is now back up, that is really the engine of monies going into money funds. So we think that it is a permanent good long-term business. And in terms of top goals for various enterprises, the one way to look at the way we internally view growth in various spheres is simply double them all in five years. Now, that's not going to happen on the money funds, but it's certainly what we would establish as the goals for fixed income equity and especially private markets."

When asked about money market funds versus direct money markets (in a falling rate environment), MM CIO Deborah Cunningham responds, "I think what it does mostly is take the direction of flows and increase it more towards the institutional side. [It] doesn't take away the retail side that has certainly been the driver of the flows in 2022 and 2023. But I think it emphasizes more the institutional side.... You've seen what has been over the course of the last 18 months a fairly steep money market yield curve turn into something that's relatively flat from a prime perspective and relatively inverted from two months out on the government side."

She says, "Ultimately, that means that the institutional buyer of cash securities ... is going to go out of the [direct] securities market, where they've been for the last 18 months, and into something that holds onto yield a little bit longer. That would, in most instances, be money market funds. So our outlook is very positive with regard to flows and somewhat of a shift that occurs [from] 2022 and 2023 being mostly retail [to] 2024 being institutionally driven."

Another question asked about savings accounts still paying 10 or 20 bps, retail inertia and "continuing inflows in retail," Cunningham comments, "Let me just start with a little bit of a history lesson. If you go back prior to the financial problems in 2008, deposits at that point were in the little over $8 trillion area. They ran up to something that was close to $20 trillion ... during the zero-rate environment.... So ultimately, deposit products doubled not because of the attractiveness of the yield, but because there really wasn't any yield in the marketplace."

She states, "The concern was from a safety perspective ... retail trades went into deposits in that environment. What you've seen over the course of the last year and a half has been a small reversal of that, which is why I'm not saying that the retail trade is done. Certainly, it's not surprising that with money funds increasing $1.2 trillion in the past year, deposits are decreasing $1 trillion -- those two numbers are equitable."

Cunningham adds, "Having said that, there's still $17 trillion left in deposits out there, many of which, as you note, are in the 10, 20, 30 basis point camp from a payment perspective. So the expectations would be that that trade continues. Certainly, when you look at deposit betas, [banks] have been loath to increase ... rates, but [they] have been very quick to decrease. Now I'm not sure that that will be the case at this point in this scenario, given that they haven't gone up very far to begin with, but ... I think the retail trade has been awakened and it will continue. I think it will be matched basically by the institutional trade in 2024, but certainly will be a factor that continues to contribute to the flows in this market."

Another analyst asks whether expected institutional inflows due to falling rates will be sticky? Cunningham replies, "How sticky? I think very sticky. Ultimately, institutional investors generally have more options than the retail investor does. But once a trend is begun ... in response to what market conditions are, it stays for a while. So in what I'll call flat to inverted or declining rate environment, you're going to see institutional investors in a product that has more duration associated with it."

She tells us, "Now, institutional investors in the zero percent rate environment ultimately became more measured about how their cash was put into play in the market. They created buckets essentially from a cash perspective, operating cash, which is very short-term overnight type needs, then what would be strategic cash and core cash, depending upon transactions and maybe longer-term needs of their firms. Ultimately, in a declining and stable environment, almost all of that cash becomes part of the sort of the money market franchise. It's only when you start to see interest rates start to go back up that it becomes a little bit more transitory in the context of strategic and operating, trying to capture those higher yields for a longer, or the yields for a longer period of time."

Cunningham also says, "So it's ultimately something that, we've kind of seen as a trend in the flows over time and expect it. In the last rising rate environment of '16, '17, and '18, we saw that, and we saw it similarly change on the decline during COVID. But our expectations are that there's nothing really that drives it. There's no different products in the marketplace that would drive different dynamics in this current cycle."

ICI's latest weekly "Money Market Fund Assets" report shows MMF assets were flat, down a mere $1.4 billion to $5.960 trillion, after their first decrease of the New Year last week. They rose $10.0 billion two weeks ago and $78.6 billion the week before that. The latest weekly dip keeps assets just below their record $5.975 trillion set on 1/10/24. Assets are up by $73 billion, or 1.5%, year-to-date in 2024, with Institutional MMFs up $24 billion, or 0.8% and Retail MMFs up $49 billion, or 2.9%. Over the past 52 weeks, money funds have risen a massive $1.140 trillion, or 23.7%, with Retail MMFs rising by $593 billion (34.0%) and Inst MMFs rising by $547 billion (17.8%).

The weekly release says, "Total money market fund assets decreased by $1.39 billion to $5.96 trillion for the week ended Wednesday, January 24, the Investment Company Institute reported.... Among taxable money market funds, government funds decreased by $5.03 billion and prime funds increased by $8.10 billion. Tax-exempt money market funds decreased by $4.46 billion." ICI's stats show Institutional MMFs falling $6.4 billion and Retail MMFs rising $5.0 billion in the latest week. Total Government MMF assets, including Treasury funds, were $4.857 trillion (81.5% of all money funds), while Total Prime MMFs were $978.3 billion (16.6%). Tax Exempt MMFs totaled $116.3 billion (2.0%).

ICI explains, "Assets of retail money market funds increased by $5.03 billion to $2.34 trillion. Among retail funds, government money market fund assets increased by $3.93 billion to $1.52 trillion, prime money market fund assets increased by $4.63 billion to $711.41 billion, and tax-exempt fund assets decreased by $3.53 billion to $105.83 billion." Retail assets account for over a third of total assets, or 39.2%, and Government Retail assets make up 65.1% of all Retail MMFs.

They add, "Assets of institutional money market funds decreased by $6.42 billion to $3.62 trillion. Among institutional funds, government money market fund assets decreased by $8.96 billion to $3.34 trillion, prime money market fund assets increased by $3.47 billion to $274.97 billion, and tax-exempt fund assets decreased by $931 million to $10.42 billion." Institutional assets accounted for 60.8% of all MMF assets, with Government Institutional assets making up 92.1% of all Institutional MMF totals.

According to Crane Data's separate Money Fund Intelligence Daily series, money fund assets have risen by $56.4 billion in the first 24 days of January to $6.357 trillion, slightly off their record $6.372 trillion level set on 1/23/24. Assets rose $32.7 billion in December, jumped $226.4 billion in November but fell by $31.9 billion in October. They rose $93.9 billion in September, $98.3 billion in August and $34.7 billion in July. Note that ICI's asset totals don't include a number of funds tracked by the SEC and Crane Data, so they're over $400 billion lower than Crane's asset series.

J.P. Morgan's latest "Mid-Week US Short Duration Update" is entitled, "MMF AUMs: We're not going anywhere." They tell us, "YTD, taxable MMF balances have increased by $75bn, a stark contrast to prior years where we typically saw seasonal outflows immediately following the turn that continued into 1H.... And while it's only been three weeks into the year, the rise in MMF AUMs is also challenging the view among some market participants that the $6tn of cash that's currently sitting in MMFs will rotate into alternative assets such as fixed income and/or equities."

The piece explains, "For context, in 2023, MMF AUMs rose by over $1.1tn (or 22%), one of the largest increases seen in the past decade, surpassing even the growth observed during the pandemic. The regional banking crisis in March, alongside an inverted yield curve that has cash yielding above 5%, in addition to market volatility, all contributed to the impressive rise in MMF balances last year."

It comments, "We continue to think MMF AUMs will remain elevated in 2024 and do not expect there to be meaningful net outflows.... Despite the current outlook for interest rates and the expected shift into longer duration fixed income, we do not think those flows will be funded from substantial drawdowns in cash. Indeed, a look at historical MMF AUM flows going back to 1995, spanning over three easing cycles, shows that MMFs continued to see inflows even when the Fed began to cut rates."

JPM says, "This makes sense, as MMF yields tend to lag yields of direct cash alternatives such as T-bills when the Fed starts to cut rates, thus attracting flows from other liquidity alternatives. We also took a look at MMF flows versus changes in the shape of the curve. As Figure 3 shows, flows into MMFs tend to continue even as the curve begins to disinvert/steepen; it's not until the curve more or less stablizes that outflows begin to take place."

They write, "Perhaps most importantly, we believe a substantial majority of the cash that sits in MMFs is core liquidity among institutional and retail investors. In essence, they use MMFs for cash management/liquidity purposes rather than an investment asset class as part of one's overall investment portfolio. Accordingly, this should limit the amount of cash pivoting into riskier asset classes. Nor do we think the cash will pivot into bank deposits, even as banks have raised their deposit betas. Relative to bank deposits, MMFs are still far more attractive from a yield perspective. Furthermore, banks still do not want non-operational institutional deposits on their balance sheets."

The update adds, "We think the amount of core cash in MMFs is around $5.5tn, which leaves about $500bn susceptible to flight risk, particularly from retail investors. And while retail investors are more sensitive to cash reallocations, the outlook for interest rates does not suggest a large shift into fixed income this year. Indeed, even if the Fed is expected to cut rates, the yield spread between cash and bonds is expected to remain negative for the better part of 2024, suggesting little incentive to immediately extend out the curve."

Finally, JPM concludes, "Overall, while there could be some rotation from cash to out the curve, we suspect net outflows will be limited. With the expectation that the Fed is going to stay higher for longer and with MMFs yielding above 5% for same day liquidity, MMFs remain compelling both as a liquidity product and as an investment asset class. MMF AUMs are likely flat with a slight bias lower this year. At the sector level, most of the cash will likely remain in government MMFs versus prime MMFs. If anything, MMF reform should continue to bias government MMF AUMs higher."

We wrote late last week about some of the money fund and cash mentions on fourth quarter earnings calls. (See our Jan. 19 News, "BlackRock, Schwab Earnings Discuss Shift to Money Funds; WSJ on Cash.") Today, we quote from State Street's recent earnings report and conference call, and quote from a Wall Street Journal article on Charles Schwab & Co. CEO Ron O'Hanley says, "At Global Advisors, we undertook targeted strategic actions aimed at gaining market share and driving occupancy growth in the coming years.... Our cash business had an exceptional year delivering record annual flows in 2023 with institutional money market fund AUM also reaching a record. Overall, we gained market share in a number of key areas, including institutional money market funds and U.S. low-cost equity and fixed income ETFs."

CFO Eric Aboaf states, "Fourth quarter management fees were $479 million, up 5% year-on-year, primarily reflecting higher average equity market levels and some performance fees, partially offset by a previously described shift of certain management fees into NII and the impact of a strategic product suite repricing initiative that has aided ETF flows.... Across our cash franchise, we saw quarterly cash net inflows of $29 billion, primarily into money market funds, which contributed to the record total full year 2023 cash net inflows of $76 billion and institutional money market fund market share gains."

He continues, "Fourth quarter NII increased 14% year-on-year but decreased 9% sequentially to $678 million. The year-on-year decrease was largely due to lower average deposit balances and deposit mix shift, partially offset by the impact of higher interest rates.... Some of the higher deposit balances may have been seasonal. But the Fed's quantitative tightening appears to have been offset by the reduction of the Fed's Reverse repo operation, which seems to have resulted in clients leaving higher bank deposit balances. It's hard to know how deposits will trend but we are pleased with this higher step-off going into the first quarter of 2024.... Average deposits increased 4% quarter-on-quarter with non-interest bearing deposits up 3% for the quarter."

During the "Q&A," Aboaf comments further on deposits, "I'll just say deposits and deposit levels continue to be volatile; they surprised to the upside.... We also saw interest bearing deposits up.... I think you did see, in the Fed reports, the banking system deposits are up 1%, 2% quarter-on-quarter from third quarter to fourth quarter. So it does seem like there's something happening in the market that's creating a little more stability.... There's some amount of seasonality that we always tend to see at the end of the year as folks accumulate cash.... A lot of that is just client engagement and helping put their cash to work. And sometimes they put cash to work in deposits, in repo, in money market sweeps ... each one of those is an important category and outlet for clients. What we're seeing is clients using ... all the above, including just holding Treasury securities."

He adds, "We expect to continue, and we think deposits will be roughly in this zone in the first quarter. What's a little harder to read is just how noninterest bearing deposits play out. We do expect those to continue to float downward. They tend to float downward for our clients with the largest funds, those are the ones that have been floating down over the last two years.... There continues to be a little bit of repricing that plays out into the first quarter or two as well. That's why I guided on an NII basis to flat to down 3% for the first quarter, just to give you a little bit of an indication, but we expect that to be on roughly flattish deposits."

Asked about the institutional money market space and a declining rate environment, O'Hanley responds, "Part of way we've attracted more money market funds ... is we just have a broader client base.... We've gained market share, not just in terms of assets, but we've just attracted more clients. And once you have them, whether the balances go up or down, typically you have them. I think historically ... the really sophisticated holders of institutional money market funds tend to hang on, because the fund itself, depending on its duration ... actually lags. So it's usually the opposite -- when rates are rising, the very sophisticated holders are toggling in and out depending on whether they see opportunities to go direct."

He says, "I would expect that we would see ... a continued risk on environment that itself will cause a little bit of reallocation of institutional money market funds.... Everybody is talking about that there's so much parked on the sidelines, [but] a lot of it is parked here [in institutional funds]. I would go back to where I began the answer, which is it really is about establishing more client relationships, servicing them very well and then continue to grow the number of clients based on that track record."

In related news, the WSJ's story, "Charles Schwab Just Survived a Year From Hell. The Trouble Isn't Over Yet," tells us, "Schwab, founded some 50 years ago, grew from a discount brokerage for Main Street into a personal-finance supermarket that came to rival Wall Street firms as an asset-gathering machine. While Schwab cut fees and made less revenue from trading, it minted money sweeping cash from its brokerage customers into bank deposits that paid out little interest. When rates were low, it worked well for Schwab. Customers were content keeping their money at the bank when there were few alternatives for better yield."

It states, "That business model was put to the test last year, when the Federal Reserve continued to aggressively raise interest rates. Yield-hungry customers moved money into options like money-market funds. Since early 2022, Schwab has lost some $175 billion in bank deposits, or nearly 40% of what it held at its peak. Trading activity also stalled, since customers could make robust returns just parking their money in cash-like investments. The company has said customer funds largely stayed at Schwab when clients moved money from bank deposits to other investments. Still, with bank deposits fleeing, Schwab had to turn to more expensive funding that cut into profits, like borrowing from the Federal Home Loan Bank system and issuing certificates of deposit."

The Journal piece continues, "Last March, the rapid collapse of several regional banks put Schwab in the spotlight. The company had invested chunks of its balance sheet in longer-term bonds when rates were low. When rates rose, the value of those bonds fell. Schwab's shares lost more than a third of their value in just a month."

Finally, they write, "The company said it has seen promising signs that customers' movement of cash out of bank deposits is nearing an end. Transactional sweep cash -- client cash that hasn't been invested yet -- increased month over month in November and December, Schwab reported. Bank deposits increased quarter over quarter at the end of 2023 for the first time since early 2022."

Another WSJ brief asks, "The Money-Market Bonanza Is Over. So Is Now the Time for Stocks?" It speculates, "One of the easiest, safest investments last year is losing its luster. And there really isn't an easy answer for what to do now. For much of 2023, the boring money-market fund became one of the hottest investments on Wall Street. These often-default funds where investors park their money before they decide what to actually do with their money were returning well over 5%. By the end of the third quarter, investors had more than $8.8 trillion in money-market funds and CDs."

The SEC published its latest quarterly "Private Funds Statistics" report recently, which summarizes Form PF reporting and includes some data on "Liquidity Funds," or pools which are similar to but not money market funds. The publication shows overall Liquidity fund assets were higher in the latest reported quarter (Q2'23) at $319 billion (up from $313 billion in Q1'23 and down from $327 billion in Q2'22). We also again briefly review the part of the SEC's MMF Reforms which addresses "Amendments to Form PF Reporting Requirements for Large Liquidity Fund Advisers" and which go into effect in coming months, below.

The SEC's "Introduction" tells us, "This report provides a summary of recent private fund industry statistics and trends, reflecting data collected through Form PF and Form ADV filings. Form PF information provided in this report is aggregated, rounded, and/or masked to avoid potential disclosure of proprietary information of individual Form PF filers. This report reflects data from Third Calendar Quarter 2021 through Second Calendar Quarter 2023 as reported by Form PF filers." (Note: Crane Data believes the largest portion of these liquidity fund assets are securities lending reinvestment pools.)

The tables in the SEC's "Private Funds Statistics: Second Calendar Quarter 2023," with the most recent data available, show 69 Liquidity Funds (most of which are "Section 3 Liquidity Funds," which are Liquidity Funds from advisers with over $1 billion total in cash), down 1 from last quarter and down 10 from a year ago. (There are 50 Section 3 Liquidity Funds out of the 69 Liquidity Funds.) The SEC receives Form PF reports from 33 Liquidity Fund advisers (21 of which are Section 3 Liquidity Fund advisers), unchanged from last quarter and down 6 from a year ago.

The SEC's table on "Aggregate Private Fund Net Asset Value" shows total Liquidity Fund assets at $319 billion, up $6 billion from Q1'23 and down $8 billion from a year ago (Q2'22). Of this total, $317 billion is in Section 3 (large manager) Liquidity Funds. The SEC's table on "Aggregate Private Fund Gross Asset Value" shows total Liquidity Fund assets at $332 billion, up $12 billion from Q1'23 and down $3 billion from a year ago (Q2'22). Of this total, $330 billion in is Section 3 (large manager) Liquidity Funds.

A table on "Beneficial Ownership for Section 3 Liquidity Funds" shows $114 billion is held by Other (36.0%), $49 billion is held by Private Funds (15.5%), $64 billion is held by Unknown Non-U.S. Investors (20.2%), $16 billion is held by SEC-Registered Investment Companies (5.0%), $11 billion is held by Insurance Companies (3.5%) and $3 billion is held by Non-Profits (0.9%).

The tables also show that 71.0% of Section 3 Liquidity Funds have a liquidation period of one day, $301 billion of these funds may suspend redemptions, and $274 billion of these funds may have gates. WAMs average a short 30 days (30 days when weighted by assets), WALs are 47 days (50 days when asset-weighted), and 7-Day Gross Yields average 5.05% (4.90% asset-weighted). Daily Liquid Assets average about 56% (56% asset-weighted) while Weekly Liquid Assets average about 61% (65% asset-weighted).

Overall, these portfolios appear shorter with a heavier Treasury exposure than money market funds in general; almost half of them (36.0%) are fully compliant with Rule 2a-7. When calculating NAVs, 72.0% are "Stable" and 28.0% are "Floating."

As we've mentioned before, last July, when the SEC's Money Market Fund Reforms were passed, they also included "Amendments to Form PF Reporting Requirements for Large Liquidity Fund Advisers." The release explains, "Separately, the amendments will also modify certain reporting forms that are applicable to money market funds and large private liquidity funds advisers." The "Fact Sheet" explains, "In addition, the Commission adopted amendments to Form PF, the confidential reporting form for certain SEC-registered investment advisers to private funds, to require additional information regarding the liquidity funds they advise that is generally aligned with the amended reporting for money market funds. These amendments were proposed by the Commission in January 2022."

The full final rules tell us, "The Commission is also amending Form PF, the confidential reporting form for certain SEC-registered investment advisers to private funds to require additional information regarding the liquidity funds they advise. Liquidity funds are private funds that seek to maintain a stable NAV (or minimize fluctuations in their NAVs) and thus can resemble money market funds. The amendments to section 3 of Form PF will provide a more complete picture of the short-term financing markets in which liquidity funds invest and enhance the Commission's and the Financial Stability Oversight Council's ('FSOC') ability to assess short-term financing markets and facilitate our oversight of those markets and their participants. This, in turn, is designed to enhance investor protection efforts and systemic risk assessment. `We have consulted with FSOC to gain input on these amendments to help ensure that Form PF continues to provide FSOC with information it can use to assess systemic risk."

It adds, "In a January 2022 release proposing amendments to Form PF, the Commission proposed changes to section 3 of Form PF that were intended to require large liquidity fund advisers to report substantially the same information that the Commission had proposed money market funds to report on Form N-MFP. The proposed amendments to section 3 of Form PF included requirements for additional and more granular information regarding large liquidity fund operational information and assets, portfolio holdings, financing, and investor information as well as a new item concerning the disposition of portfolio securities. Consistent with the final amendments to Form N-MFP, we are adopting largely as proposed the amendments to section 3 of Form PF, with some modifications to better tailor the reporting to private liquidity funds and remain consistent with the final requirements for money market funds under amended Form N-MFP."

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 January 19) includes Holdings information from 52 money funds (down 17 from a week ago), or $2.565 trillion (down from $3.098 trillion) of the $6.341 trillion in total money fund assets (or 40.5%) tracked by Crane Data. (Our Weekly MFPH are e-mail only and aren't available on the website. See our latest Monthly Money Fund Portfolio Holdings here.)

Our latest Weekly MFPH Composition summary shows Government assets dominating the holdings list with Treasuries totaling $1.080 billion (down from $1.319 trillion a week ago), or 42.1%; Repurchase Agreements (Repo) totaling $991.0 trillion (down from $1.243 trillion a week ago), or 38.6%, and Government Agency securities totaling $244.9 billion (down from $266.3 billion), or 9.5%. Commercial Paper (CP) totaled $89.7 billion (down from a week ago at $97.4 billion), or 3.5%. Certificates of Deposit (CDs) totaled $70.9 billion (down from $75.1 billion a week ago), or 2.8%. The Other category accounted for $63.1 billion or 2.5%, while VRDNs accounted for $25.4 billion, or 1.0%.

The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $1.080 trillion (42.1% of total holdings), Federal Home Loan Bank with $188.4B (7.3%), Fixed Income Clearing Corp with $167.9B (6.5%), the Federal Reserve Bank of New York with $167.0 billion (6.5%), RBC with $68.1B (2.7%), Barclays PLC with $61.7B (2.4%), JP Morgan with $61.2B (2.4%), Citi with $55.6B (2.2%), Federal Farm Credit Bank with $49.4B (1.9%) and BNP Paribas with $48.0B (1.9%).

The Ten Largest Funds tracked in our latest Weekly include: JPMorgan US Govt MM ($263.3B), Goldman Sachs FS Govt ($218.8B), Fidelity Inv MM: Govt Port ($190.8B), JPMorgan 100% US Treas MMkt ($188.3B), State Street Inst US Govt ($154.8B), Morgan Stanley Inst Liq Govt ($137.0B), Fidelity Inv MM: MM Port ($123.1B), Allspring Govt MM ($116.3B), Dreyfus Govt Cash Mgmt ($116.1B), and Goldman Sachs FS Treas Instruments ($85.8B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary.)

As we wrote earlier this month (and reprint here), our January MFI issue recognized the top performing money funds, ranked by total returns, for calendar year 2023, as well as the top funds for the past 5-year and 10-year periods. We present the funds below with our annual Money Fund Intelligence Awards. These are given to the No. 1‐ranked funds based on 1-year, 5-year and 10-year returns, through Dec. 31, 2023, in each of our major fund categories -- Prime Institutional, Government Institutional, Treasury Institutional, Prime Retail, Government Retail, Treasury Retail and Tax‐Exempt. (Let us know if you'd like to see our latest Money Fund Intelligence issue with the MFI Awards article or our latest MFI XLS product with the performance data and rankings behind the awards.)

The Top-Performing Prime Institutional fund (and fund overall) was BlackRock Cash Inst MMF SL (BISXX), which returned 5.38%. Excluding private and internal funds, the best performer in 2023 was Western Asset Prem Inst Liquid Res Capital (WAAXX) with a return of 5.35%. Among Prime Retail funds, Allspring Money Market Fund Premier (WMPXX) had the best return in 2023 (5.28%). (Our Crane 100 Money Fund Index returned 4.90% in 2023.)

The Top‐Performing Govt Institutional funds in 2023 were Fidelity Flex Govt Money Market Fund (FLGXX) and Fidelity Series Govt Money Market Fund (FGNXX), which both returned 5.22%. Vanguard Cash Reserves Federal MM Adm (VMRXX) was the Top Government Retail fund with a 5.10% return. Dreyfus Inst Pref Treas Obl Inst (DNSXX) and Dreyfus Treas & Agen Liquidity MMF (DTLXX) tied to rank No. 1 in the Treasury Institutional class with returns of 5.11%. Vanguard Treasury Money Market (VUSXX) was No. 1 among Treasury Retail, returning 5.05%.

For the 5‐year period through Dec. 31, 2023, BlackRock Cash Inst MMF SL (BISXX) took top honors for the best performing Prime Institutional money fund with a return of 2.08%. Allspring MMF Premium (WMPXX) ranked No. 1 among Prime Retail with an annualized return of 1.99%.

Fidelity Flex Govt Money Market Fund (FLGXX) and Fidelity Series Govt Money Market Fund (FGNXX) both ranked No. 1 among Govt Institutional funds with returns of 1.93%, while Vanguard Cash Reserves Federal MM Adm (VMRXX) ranked No. 1 among Govt Retail funds over the past 5 years with a return of 1.90%. BlackRock Cash Treas MMF SL (BRC03) ranked No. 1 in 5-year performance among Treasury Inst funds with a return of 1.84%. Vanguard Treasury Money Market (VUSXX) ranks No. 1 among Treasury Retail funds with a return of 1.82%.

The highest performers of the past 10 years and No. 1 among Prime Inst MMFs was BlackRock Cash Inst MMF SL (BRC01), which returned 1.46%. Morgan Stanley Inst Liq MMP Wealth (MWMXX), which returned 1.37%, was best among Prime Retail. Northern Inst Liquid Assets Portfolio (NOR03) returned 1.31% and ranked No. 1 among Govt Inst funds. Vanguard Cash Reserves Federal MM Adm (VMRXX) ranked No. 1 among Govt Retail funds, returning 1.33%.

BlackRock Cash Treas MMF SL (BRC03) returned the most among Treasury Inst funds over the past 10 years at 1.21%. Vanguard Treasury Money Market (VUSXX) ranked No. 1 among Treasury Retail money market funds at 1.19%.

We're also giving out awards for the best-performing Tax-Exempt MMFs. Federated Hermes Muni Obligs WS (MOFXX) ranked No. 1 among T-E funds over 1-year with a return of 3.49%. JPMorgan Inst Tax Free MM Inst (JOFXX) ranked No. 1 over 5-years ended Dec. 31, 2023 with a return of 1.70%. Federated Hermes Muni Obligs WS (MOFXX) also ranked No. 1 for the 10-year period with a return of 0.93%.

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

In other news, money fund yields dipped one basis point to 5.16% on average (as measured by our Crane 100 Money Fund Index) in the week ended Jan. 19, after falling 1 bp the week prior. Our Crane 100 is an average of 7-day yields for the 100 largest taxable money funds. Yields were 5.20% on 12/31/23 and on 11/30, 5.19% on 10/31, 5.17% on 9/30, 5.16% on 8/31, 5.09% on July 31, 4.94% on June 30, 4.61% on March 31 and 4.05% on 12/31/22. The vast majority of money market fund assets now yield 5.0% or higher. Assets of money market funds rose by $8.2 billion last week to $6.341 trillion according to Crane Data's Money Fund Intelligence Daily. Weighted average maturities were unchanged last week.

The broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 690), shows a 7-day yield of 5.07%, unchanged in the week through Friday. Prime Inst MFs were unchanged at 5.28% in the latest week. Government Inst MFs were down 1 bp at 5.13%. Treasury Inst MFs were unchanged at 5.09%. Treasury Retail MFs currently yield 4.88%, Government Retail MFs yield 4.85%, and Prime Retail MFs yield 5.10%, Tax-exempt MF 7-day yields were up 1 bp at 2.03%.

According to Monday's Money Fund Intelligence Daily, with data as of Friday (1/19), 124 money funds (out of 814 total) yield under 3.0% with $126.6 billion in assets, or 2.0%; 4 funds yield between 3.00% and 3.99% ($845 million, or 0.0%), 222 funds yield between 4.0% and 4.99% ($1.057 trillion, or 16.7%) and 464 funds now yield 5.0% or more ($5.157 trillion, or 81.3%).

Our Brokerage Sweep Intelligence Index, an average of FDIC-insured cash options from major brokerages, was unchanged at 0.61%. The latest Brokerage Sweep Intelligence, with data as of Jan. 19, shows that there were no changes over the past week. Three of the 11 major brokerages tracked by our BSI still offer rates of 0.01% for balances of $100K (and lower tiers). These include: E*Trade, Merrill Lynch and Morgan Stanley.

The Securities and Exchange Commission's latest monthly "Money Market Fund Statistics" summary shows that total money fund assets jumped by $34.0 billion in December to a record $6.372 trillion. The SEC shows Prime MMFs rising $1.2 billion in December to $1.320 trillion, Govt & Treasury funds increasing $31.7 billion to $4.920 trillion and Tax Exempt funds increasing $1.1 billion to $131.3 billion. Taxable yields were mixed in December after inching up in November. The SEC's Division of Investment Management summarizes monthly Form N-MFP data and includes asset totals and averages for yields, liquidity levels, WAMs, WALs, holdings, and other money market fund trends. We review their latest numbers below. (Month-to-date in January through 1/18, total money fund assets have increased by $52.2 billion to $6.352 trillion, according to our separate, and slightly smaller, MFI Daily series.)

December's overall asset increase follows an increase of $225.7 billion in November, a decrease of $41.2 billion in October, and increases of $79.7 billion in September, $114.2 billion in August and $28.8 billion in July. Assets rose $19.6 billion in June, $156.6 billion in May, $49.9 billion in April, $364.4 billion in March, $52.1 billion in February and $53.2 billion last January. Over the 12 months through 12/31/23, total MMF assets increased by a record $1.137 trillion, or 21.7%, according to the SEC's series.

The SEC's stats show that of the $6.372 trillion in assets, $1.320 trillion was in Prime funds, up $1.2 billion in December. Prime assets were up $32.5 billion in November, $13.9 billion in October, $14.3 billion in September, $18.5 billion in August, $28.9 billion in July, $11.0 billion in June, $13.7 billion in May and $36.0 billion in April. They were down $22.2 billion in March, but up $35.4 billion in February and $86.2 billion last January. Prime funds represented 20.7% of total assets at the end of December. They've increased by $269.4 billion, or 25.6%, over the past 12 months. (Note that the SEC's series includes a number of internal money funds not tracked by ICI, though Crane Data includes most of these assets in its collections.)

Government & Treasury funds totaled $4.920 trillion, or 77.2% of assets. They increased $31.7 billion in December, $193.7 billion in November, decreased $62.4 billion in October, increased $64.6 billion in September, $92.2 billion in August, $3.1 billion in July, $4.9 billion in June, $137.4 billion in May, $19.3 billion in April, $387.9 billion in March and $16.1 billion in February. They decreased $33.2 billion last January. Govt & Treasury MMFs are up $855.3 billion over 12 months, or 21.0%. Tax Exempt Funds increased $1.1 billion to $131.3 billion, or 2.1% of all assets. The number of money funds was 291 in December, up 1 from the previous month and down 7 funds from a year earlier.

Yields for Taxable MMFs mostly inched lower while Tax Exempt MMFs jumped in December. The Weighted Average Gross 7-Day Yield for Prime Institutional Funds on Dec. 31 was 5.50%, unchanged from the prior month. The Weighted Average Gross 7-Day Yield for Prime Retail MMFs was 5.59%, up 2 bp from the previous month. Gross yields were 5.42% for Government Funds, unchanged from last month. Gross yields for Treasury Funds were down 3 bps at 5.40%. Gross Yields for Tax Exempt Institutional MMFs were up 73 basis points to 4.14% in December. Gross Yields for Tax Exempt Retail funds were up 59 bps to 4.04%.

The Weighted Average 7-Day Net Yield for Prime Institutional MMFs was 5.43%, down 1 basis point from the previous month and up 108 bps from 12/31/22. The Average Net Yield for Prime Retail Funds was 5.32%, up 2 bps from the previous month, and up 101 bps since 12/31/22. Net yields were 5.18% for Government Funds, unchanged from last month. Net yields for Treasury Funds were down 1 bp from the previous month at 5.20%. Net Yields for Tax Exempt Institutional MMFs were up 72 bps from November to 4.03%. Net Yields for Tax Exempt Retail funds were up 59 bps at 3.80% in December. (Note: These averages are asset-weighted.)

WALs and WAMs were mostly up in December. The average Weighted Average Life, or WAL, was 49.0 days (up 0.8 days) for Prime Institutional funds, and 47.3 days for Prime Retail funds (down 3.6 days). Government fund WALs averaged 83.1 days (up 2.5 days) while Treasury fund WALs averaged 77.4 days (up 4.2 days). Tax Exempt Institutional fund WALs were 7.3 days (up 0.4 days), and Tax Exempt Retail MMF WALs averaged 25.4 days (down 0.7 days).

The Weighted Average Maturity, or WAM, was 33.4 days (up 0.5 days from the previous month) for Prime Institutional funds, 33.9 days (down 1.7 days from the previous month) for Prime Retail funds, 36.5 days (up 3.4 days from previous month) for Government funds, and 41.6 days (up 4.9 days from previous month) for Treasury funds. Tax Exempt Inst WAMs were up 0.3 days to 7.2 days, while Tax Exempt Retail WAMs were down 0.5 days from previous month at 24.5 days.

Total Daily Liquid Assets for Prime Institutional funds were 53.3% in December (up 2.3% from the previous month), and DLA for Prime Retail funds was 41.8% (up 1.1% from previous month) as a percent of total assets. The average DLA was 69.3% for Govt MMFs and 95.5% for Treasury MMFs. Total Weekly Liquid Assets was 65.1% (unchanged from the previous month) for Prime Institutional MMFs, and 57.2% (down 1.2% from the previous month) for Prime Retail funds. Average WLA was 81.9% for Govt MMFs and 98.7% for Treasury MMFs.

In the SEC's "Prime Holdings of Bank-Related Securities by Country table for December 2023," the largest entries included: Canada with $183.4 billion, the U.S. with $159.9B, Japan with $126.4 billion, France with $88.8 billion, Aust/NZ with $43.0B, the U.K. with $32.9B, the Netherlands with $20.4B, Germany with $19.3B and Switzerland with $10.1B. The gainers among the "Prime MMF Holdings by Country" included: Canada (up $27.1B), the U.S. (up $6.3B), Aust/NZ (up $6.2B). Decreases were shown by: Netherlands (down $21.6B), Germany (down $14.3B), France (down $12.0B), the U.K. (down $11.6B), Japan (down $4.7B) and Switzerland (down $0.7B).

The SEC's "Prime Holdings of Bank-Related Securities by Region" table shows The Americas had $343.3 billion (up $33.5B), while Eurozone had $142.5B (down $57.8B). Asia Pacific subset had $189.4B (down $3.2B), while Europe (non-Eurozone) had $78.0B (down $34.1B from last month).

The "Prime MMF Aggregate Product Exposures" chart shows that of the $1.306 trillion in Prime MMF Portfolios as of Dec. 31, $618.2B (47.3%) was in Government & Treasury securities (direct and repo) (up from $ 550.5B), $294.5B (22.5%) was in CDs and Time Deposits (down from $351.5B), $188.9B (14.5%) was in Financial Company CP (down from $206.2B), $132.7B (10.2%) was held in Non-Financial CP and Other securities (down from $141.9B), and $72.1B (5.5%) was in ABCP (up from $63.7B).

The SEC's "Government and Treasury Funds Bank Repo Counterparties by Country" table shows the U.S. with $393.8 billion, Canada with $218.3 billion, France with $132.8 billion, the U.K. with $93.4 billion, Germany with $17.9 billion, Japan with $131.3 billion and Other with $36.1 billion. All MMF Repo with the Federal Reserve was down $82.3 billion in December to $1.024 billion.

Finally, a "Percent of Securities with Greater than 179 Days to Maturity" table shows Prime Inst MMFs 6.3%, Prime Retail MMFs with 5.6%, Tax Exempt Inst MMFs with 0.1%, Tax Exempt Retail MMFs with 4.0%, Govt MMFs with 13.5% and Treasury MMFs with 10.9%.

A number of asset managers, brokerages and banks reported fourth-quarter earnings over the past week and a half, and those that mentioned money market funds and bank deposits so far show that "cash sorting," or the shift into money funds from bank deposits, remains alive and well. On BlackRock's latest earnings release and earnings call, CFO Martin Small tells us, "The last two years have been a character-building and awe-inspiring time for investors, for clients, and certainly for us at BlackRock. The monetary policy shock of a rapid rate-rising campaign upended 10 years of asset allocation practices and spurred repositioning of portfolios into cash and money market funds at the expense of risk assets. At BlackRock, our business is to serve clients with excellence and help them design portfolios for the future."

He continues, "We've spoken throughout the year about what conditions we'd expect to bring investors out of cash and into risk assets. It's generally unfolding as we described. With greater clarity on terminal rates in the fourth quarter, we saw evidence of portfolio 're-risking', and we expect this trend to accelerate in 2024. BlackRock's a share winner when there's assets in motion and clients continue to consolidate more of their portfolios with us."

Small adds, "BlackRock's cash management platform saw $33 billion of net inflows in the fourth quarter and $79 billion of net inflows in 2023. We're pleased with the continued strong growth in our cash and liquidity business. With year-end AUM up 14%, or over $90 billion year on year, we're leveraging our scale and integrated cash offerings to engage with clients who are using these products not only to manage liquidity but also to earn attractive returns."

During the Q&A, Analyst Mike Brown of Keefe, Bruyette and Woods, asks, "When you think about the fixed income inflows, where should we think about where that money will kind of shift from? Is it from the money market funds or is it kind of the ownership of direct securities moving into funds or from bank deposits? I'd love some commentary on that."

President Rob Kapito responds, "I'll just add just two things, Mike. I wake up every morning salivating about the $7 trillion that's sitting in money market accounts that's waiting to move. And in order for it to move, you have to have a wide plate of products. That's what we have been developing in client solutions.... ETFs are becoming the investor's preferred vehicle with access to investments.... As we blend the active and passive business together, we're going to see a lot of active fixed-income portfolios move into an ETF wrapper. We're the leader in ETF wrappers as well. So, I think there's a huge, huge runway for fixed income. And really, the wind is right behind our back for that."

Analyst, Patrick Davitt of Autonomous Research, questions, "You guys have been pushing this idea that the 7 trillion in money funds will start to rotate into risk assets for a while now. But the historical data we can see from past fed cycles does not really show that, at least from what we can see. It looks like last year's flows maybe came more from the bank deposits than risk positions. So, what are you seeing maybe that we can't see that suggests this cycle will be different? And if rates really are higher for longer, can't both money funds and bonds win with $17 trillion still sitting in bank deposits?"

Kapito dodges, "So the answer is it's going to be dependent upon rates and alternative investments. I think history shows, when the cycle stops, that's when people first start to re-risk. We saw about $40 billion come out of money market funds to us as people re-risked, and then there's market volatility and it stops. So, I think we have to get to what people will feel is the end of the cycle in rates, and then people will look. The benefit for us is then when they re-risk, they usually come into more precision investments, which are higher fee-type investments, and yield really matters. So, I think if you look at it, there's a blurring between the bank deposits and the money markets, all dependent upon rates."

In its latest earnings release, Charles Schwab CFO Peter Crawford states, "Total net revenues were down 9% versus prior year levels to $18.8 billion, as client cash realignment activity impacted our net interest revenue. The benefits of rising rates were more than offset by lower interest-earning assets and increased utilization of higher-cost supplemental funding, driving net interest revenue down 12% year-over-year to $9.4 billion. Asset management and administration fees rose to a record $4.8 billion, bolstered by rebounding equity markets as well as strong client interest in purchased money fund products and advisory solutions.... Exclusive of these items, adjusted total expenses increased by 6% to $11.0 billion, approximately 2% of which reflected the $172 million FDIC special assessment."

He continues, "While the pace of rate increases slowed substantially during the year, the upper bound of the Fed Funds target range still climbed to 5.50%. As expected, clients took advantage of the highest yields in nearly two decades by increasing their allocations to investment cash and fixed income alternatives available at Schwab. These movements caused Schwab's balance sheet to shrink by $59 billion, or an 11% decline from the year-end 2022 level. As we have done since the onset of the current tightening cycle, we facilitated these client allocation decisions using cash flows from our investment portfolios as well as the continued utilization of certain supplemental funding sources, including Federal Home Loan Bank advances and retail certificates of deposit."

A "Supplement" to Schwab's Q4'23 earnings release, entitled, "The Charles Schwab Corporation Supplemental Monthly Client Metrics for December 2023 shows Transactional Sweep Cash totaling $417.4 billion as of Dec. 2023, vs. $581.1 billion a year ago, a decline of $163.7 billion (-28.2%). Total Money Market Funds were listed at $477.4 billion as of Dec. 2023 vs. $282.1 billion a year earlier, a jump of $195.3 billion (69.2%).

In related news, The Wall Street Journal writes on "The $8.8 Trillion Cash Pile That Has Stock-Market Bulls Salivating. They comment, "Wall Street wants your money off the sidelines. Rising interest rates drew trillions of dollars into money-market funds and other cash-like investments in the past two years, with more than $8.8 trillion parked in money funds and CDs as of the third quarter of 2023. Investors are optimistic that with rates poised to fall, people will redirect that money and fuel markets' next leg higher."

The piece states, "Wall Street is pinning its hopes on cash moving from money-market funds to provide the next big boost. Rates above 5% were flashy after years of safe investments offering little interest. Their fall could drive investors to U.S. stocks, which have historically provided the highest returns in the long run.... Bond yields have declined from their peaks, but rates offered on Wall Street remain high relative to recent history, pulling cash toward money-market funds. Stocks also still look expensive, meaning bargain hunters might find rates on CDs more alluring than playing the market -- for now."

It adds, "'The assets in money-market funds are staggering,' said Randy Gwirtzman, a portfolio manager at Baron Capital. 'All that dry powder is on the sidelines and waiting to invest.' Expectations for cash to pour into the market once rates fall may prove overly optimistic, however. Money-market funds raked in cash during previous Fed-tightening cycles but didn't hemorrhage it when the central bank began to ease. Assets retreated from their peaks, but still plateaued at much higher levels.... There is some debate over how much of the assets in cash-like products should be thought of as investments, with potential to enter other parts of the market, versus as bank deposits to be saved or spent later on. Total deposits at U.S. lenders have fallen to $17.4 trillion from a peak of $18.2 trillion since the Fed began tightening policy in early 2022."

Federated Hermes announced the 50th anniversary of Money Market Management, the company's first and one of the industry's oldest money market mutual funds. A press release entitled, "Federated Hermes, Inc. celebrates 50 years of money market innovation" explains, "Federated Hermes, Inc. (FHI), a global leader in active, responsible investing, today celebrates 50 years of money market innovations focused on improving client experiences and investment outcomes. Over five decades, Federated Hermes has maintained a steadfast dedication to products and services that are vetted through diligent credit analysis and broad diversification -- providing clients with competitive yields and daily liquidity." (Note: Federated Hermes will feature several speakers and play host for our next Money Fund Symposium, which will take place June 12-14 in Pittsburgh, Pa. Mark your calendars and watch for more on the 50th anniversary at the show!)

President & CEO J. Christopher Donahue comments, "For 50 years, through seasons of volatility and calm, Federated Hermes has confidently managed money market funds as the ballast in our ship. Our team of investment management professionals has maintained an unwavering focus on providing sound and innovative cash management solutions for our clients. With an average of 25 years of investment experience, the investment professionals on our liquidity team have provided rigorous money market management through a variety of interest-rate environments, regulatory changes, bull and bear economies and changing geopolitical conditions."

The release tells us, "On Jan. 16, 1974, the company launched a mutual fund called Money Market Management. It was the first fund name to include 'money market,' an asset class that has grown to $6 trillion at the start of 2024. Federated Hermes managed approximately $560 billion in money market assets, as of Dec. 31, 2023."

Deborah A. Cunningham, CIO for Global Liquidity Markets, adds, "For five decades, we have offered clients innovation, creativity and experience navigating various market conditions with the goal of making cash a resilient and attractive asset class. Even as the current rate environment benefits our clients, we continue to explore future innovations that could enhance the utility of money markets for clients around the world."

In other news, Crane Data published its latest Weekly Money Fund Portfolio Holdings statistics Wednesday (a day late due to the MLK Day Holiday), which track a shifting subset of our monthly Portfolio Holdings collection. The most recent cut (with data as of January 12) includes Holdings information from 69 money funds (down 5 from two weeks ago), or $3.098 trillion (up from $3.071 trillion) of the $6.333 trillion in total money fund assets (or 48.9%) tracked by Crane Data. (Our Weekly MFPH are e-mail only and aren't available on the website. See our latest Monthly Money Fund Portfolio Holdings here.)

Our latest Weekly MFPH Composition summary shows Government assets dominating the holdings list with Treasuries totaling $1.319 billion (up from $1.147 trillion two weeks ago), or 42.6%; Repurchase Agreements (Repo) totaling $1.243 trillion (down from $1.328 trillion two weeks ago), or 40.1%, and Government Agency securities totaling $266.3 billion (down from $290.1 billion), or 8.6%. Commercial Paper (CP) totaled $97.4 billion (down from two weeks ago at $109.4 billion), or 3.1%. Certificates of Deposit (CDs) totaled $75.1 billion (down from $93.4 billion two weeks ago), or 2.4%. The Other category accounted for $68.0 billion or 2.2%, while VRDNs accounted for $29.6 billion, or 1.0%.

The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $1.319 trillion (42.6% of total holdings), Fixed Income Clearing Corp with $267.6B (8.6%), Federal Home Loan Bank with $204.4B (6.6%), the Federal Reserve Bank of New York with $201.9 billion (6.5%), RBC with $81.4B (2.6%), JP Morgan with $73.4B (2.4%), Citi with $68.2B (2.2%), Goldman Sachs with $65.0B (2.1%), BNP Paribas with $55.8B (1.8%) and Federal Farm Credit Bank with $54.0B (1.7%).

The Ten Largest Funds tracked in our latest Weekly include: JPMorgan US Govt MM ($259.2B), Goldman Sachs FS Govt ($224.4B), JPMorgan 100% US Treas MMkt ($184.8B), Fidelity Inv MM: Govt Port ($184.5B), State Street Inst US Govt ($151.5B), BlackRock Lq FedFund ($147.9B), Morgan Stanley Inst Liq Govt ($141.7B), Fidelity Inv MM: MM Port ($123.2B), Allspring Govt MM ($119.2B) and Dreyfus Govt Cash Mgmt ($115.2B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary.)

ICI also released its latest monthly "Money Market Fund Holdings" summary, which reviews the aggregate daily and weekly liquid assets, regional exposure, and maturities (WAM and WAL) for Prime and Government money market funds. This release says, "The Investment Company Institute (ICI) reports that, as of the final Friday in December, prime money market funds held 41.3 percent of their portfolios in daily liquid assets and 56.0 percent in weekly liquid assets, while government money market funds held 80.6 percent of their portfolios in daily liquid assets and 88.8 percent in weekly liquid assets." Prime DLA was down from 41.5% in November, and Prime WLA was down from 58.5%. Govt MMFs' DLA was up from 79.1% and Govt WLA increased from 86.7% the previous month.

ICI explains, "At the end of December, prime funds had a weighted average maturity (WAM) of 36 days and a weighted average life (WAL) of 52 days. Average WAMs and WALs are asset-weighted. Government money market funds had a WAM of 38 days and a WAL of 81 days." Prime WAMs were 2 days shorter and WALs were 3 days shorter from the previous month. Govt WAMs were 4 days longer and WALs were 3 days longer from November.

Regarding Holdings by Region of Issuer, the release tells us, "Prime money market funds’ holdings attributable to the Americas rose from $473.15 billion in November to $562.38 billion in December. Government money market funds' holdings attributable to the Americas rose from $4,332.73 billion in November to $4,496.18 billion in December."

The Prime Money Market Funds by Region of Issuer table shows Americas-related holdings at $562.4 billion, or 59.8%; Asia and Pacific at $167.0 billion, or 17.8%; Europe at $201.6 billion, or 21.4%; and, Other (including Supranational) at $9.4 billion, or 1.1%. The Government Money Market Funds by Region of Issuer table shows Americas at $4.496 trillion, or 91.9%; Asia and Pacific at $121.1 billion, or 2.5%; Europe at $259.8 billion, 5.3%, and Other (Including Supranational) at $15.1 billion, or 0.3%.

Crane Data's latest Money Fund Intelligence International shows that assets in European or "offshore" money market mutual funds moved higher again over the past 30 days to a record $1.210 trillion, while yields inched lower. Assets for USD, EUR and GBP MMFs all rose over the past month. Last month, European MMF assets broke above their previous record high of $1.185 trillion set in mid-December 2023, and they've now surpassed last month's record of $1.197 trillion. These U.S.-style money funds, domiciled in Ireland or Luxembourg and denominated in US Dollars, Pound Sterling and Euros, increased by $25.6 billion over the 30 days through 1/12. The totals are up $13.0 billion (1.1%) year-to-date for 2024, they were up $166.9 billion (16.2%) for the year 2023. (Note that currency moves in the U.S. dollar cause Euro and Sterling totals to shift when they're translated back into totals in U.S. dollars. See our latest MFI International for more on the "offshore" money fund marketplace. These funds are only available to qualified, non-U.S. investors and are almost entirely institutional.)

Offshore US Dollar money funds increased $12.0 billion over the last 30 days and are up $6.3 billion YTD to $655.8 billion, they’ve increased $100.0 billion for the year of 2023. Euro funds increased E8.4 billion over the past month. YTD, they're down E3.5 billion to E231.4 billion, for 2023, they increased by E54.5 billion. GBP money funds increased L3.7 billion over 30 days, and they're up L8.3 billion YTD at L243.6B, for 2023, they fell L28.1 billion. U.S. Dollar (USD) money funds (209) account for over half (54.2%) of the "European" money fund total, while Euro (EUR) money funds (115) make up 20.5% and Pound Sterling (GBP) funds (139) total 25.3%. We summarize our latest "offshore" money fund statistics and our Money Fund Intelligence International Portfolio Holdings (which went out to subscribers Tuesday), below.

Offshore USD MMFs yield 5.30% (7-Day) on average (as of 1/12/23), down 2 bp from a month earlier. Yields averaged 4.20% on 12/30/22, 0.03% on 12/31/21, 0.05% on 12/31/20, 1.59% on 12/31/19 and 2.29% on 12/31/18. EUR MMFs finally left negative yield territory in the second half of 2022 but they should remain flat until the ECB moves rates again. They're yielding 3.86% on average, unchanged from a month ago and up from 1.48% on 12/30/22, -0.80% on 12/31/21, -0.71% at year-end 2020, -0.59% at year-end 2019 and -0.49% at year-end 2018. Meanwhile, GBP MMFs broke the 5.0% barrier 6 months ago and now yield 5.23%, down 1 bp from a month ago, and up from 3.17% on 12/30/22. Sterling yields were 0.01% on 12/31/21, 0.00% on 12/31/20, 0.64% on 12/31/19 and 0.64% on 12/31/18.

Crane's January MFI International Portfolio Holdings, with data as of 12/31/23, show that European-domiciled US Dollar MMFs, on average, consist of 24% in Commercial Paper (CP), 15% in Certificates of Deposit (CDs), 22% in Repo, 26% in Treasury securities, 10% in Other securities (primarily Time Deposits) and 3% in Government Agency securities. USD funds have on average 41.5% of their portfolios maturing Overnight, 6.4% maturing in 2-7 Days, 11.9% maturing in 8-30 Days, 12.5% maturing in 31-60 Days, 7.5% maturing in 61-90 Days, 13.7% maturing in 91-180 Days and 6.6% maturing beyond 181 Days. USD holdings are affiliated with the following countries: the US (43.7%), Canada (11.3%), France (10.5%), Japan (8.0%), Sweden (4.5%), the U.K. (3.4%), Australia (3.3%), the Netherlands (2.8%), Germany (2.7%), and Belgium (1.7%).

The 10 Largest Issuers to "offshore" USD money funds include: the US Treasury with $178.6 billion (25.7% of total assets), Fixed Income Clearing Corp with $45.8B (6.6%), RBC with $19.1B (2.8%), Mizuho Corporate Bank Ltd with $17.3B (2.5%), BNP Paribas with $16.2B (2.3%), Credit Agricole with $15.9B (2.3%), Nordea Bank with $15.2B (2.2%), Bank of Nova Scotia with $15.1B (2.2%), Toronto-Dominion Bank with $14.3B (2.1%) and Mitsubishi UFJ Financial Group Inc with $12.7B (1.8%).

Euro MMFs tracked by Crane Data contain, on average 42% in CP, 22% in CDs, 19% in Other (primarily Time Deposits), 13% in Repo, 3% in Treasuries and 1% in Agency securities. EUR funds have on average 37.3% of their portfolios maturing Overnight, 9.2% maturing in 2-7 Days, 16.2% maturing in 8-30 Days, 14.5% maturing in 31-60 Days, 9.0% maturing in 61-90 Days, 8.4% maturing in 91-180 Days and 5.4% maturing beyond 181 Days. EUR MMF holdings are affiliated with the following countries: France (32.6%), Japan (14.2%), the U.S. (8.2%), Canada (6.9%), the U.K. (6.4%), Germany (6.2%), the Netherlands (4.4%), Austria (3.5%), Belgium (3.0%) and Sweden (2.9%).

The 10 Largest Issuers to "offshore" EUR money funds include: Credit Agricole with E14.0B (6.3%), Republic of France with E12.9B (5.8%), BNP Paribas with E12.2B (5.5%), Credit Mutuel with E10.9B (4.9%), Mizuho Corporate Bank Ltd with E7.9B (3.5%), Mitsubishi UFJ Financial Group Inc with E7.6B (3.4%), Sumitomo Mitsui Banking Corp with E7.0B (3.1%), BPCE SA with E6.7B (3.0%), Societe Generale with E6.6B (3.0%), and Toronto-Dominion Bank with E5.6B (2.5%).

The GBP funds tracked by MFI International contain, on average (as of 12/31/23): 37% in CDs, 19% in CP, 23% in Other (Time Deposits), 17% in Repo, 4% in Treasury and 0% in Agency. Sterling funds have on average 36.4% of their portfolios maturing Overnight, 10.2% maturing in 2-7 Days, 13.1% maturing in 8-30 Days, 13.8% maturing in 31-60 Days, 8.1% maturing in 61-90 Days, 12.6% maturing in 91-180 Days and 5.7% maturing beyond 181 Days. GBP MMF holdings are affiliated with the following countries: Japan (16.5%), the U.K. (16.2%), France (15.6%), Canada (13.8%), the U.S. (8.1%), Australia (7.8%), the Netherlands (3.4%), Sweden (3.2%), Singapore (3.1%) and Abu Dhabi (2.3%).

The 10 Largest Issuers to "offshore" GBP money funds include: UK Treasury with L18.6B (8.2%), Toronto-Dominion Bank with L9.5B (4.2%), Mizuho Corporate Bank Ltd with L9.0B (4.0%), Mitsubishi UFJ Financial Group Inc with L8.9B (3.9%), Sumitomo Mitsui Trust Bank with L7.5B (3.3%), Sumitomo Mitsui Banking Corp with L7.5B (3.3%), BNP Paribas with L7.3B (3.2%), RBC with L7.2B (3.2%), Credit Agricole with L6.8B (3.0%) and BPCE SA with L6.8B (3.0%).

In other news, money fund yields dipped by one basis point to 5.17% on average (as measured by our Crane 100 Money Fund Index) in the week ended Jan. 12, after falling 2 bps the week prior. Our Crane 100 is an average of 7-day yields for the 100 largest taxable money funds. Yields were 5.20% on 12/31/23 and on 11/30, 5.19% on 10/31, 5.17% on 9/30, 5.16% on 8/31, 5.09% on July 31, 4.94% on June 30, 4.61% on March 31 and 4.05% on 12/31/22. The vast majority of money market fund assets now yield 5.0% or higher. Assets of money market funds fell by $12.8 billion last week to $6.333 trillion according to Crane Data's Money Fund Intelligence Daily. Weighted average maturities were unchanged last week.

The broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 690), shows a 7-day yield of 5.07%, down 1 bp in the week through Friday. Prime Inst MFs were down 2 bps at 5.28% in the latest week. Government Inst MFs were down 1 bp at 5.14%. Treasury Inst MFs were down 1 bp at 5.09%. Treasury Retail MFs currently yield 4.88%, Government Retail MFs yield 4.84%, and Prime Retail MFs yield 5.09%, Tax-exempt MF 7-day yields were down 96 bps to 2.02%.

According to Tuesday's Money Fund Intelligence Daily, with data as of Friday (1/12), 124 money funds (out of 814 total) yield under 3.0% with $130.9 billion in assets, or 2.1%; 3 funds yield between 3.00% and 3.99% ($12.0 billion, or 0.0%), 223 funds yield between 4.0% and 4.99% ($1.294 trillion, or 20.4%) and 464 funds now yield 5.0% or more ($4.908 trillion, or 77.5%). Our Brokerage Sweep Intelligence Index, an average of FDIC-insured cash options from major brokerages, was unchanged at 0.61%. The latest Brokerage Sweep Intelligence, with data as of Jan. 12, shows that there were no changes over the past week. Three of the 11 major brokerages tracked by our BSI still offer rates of 0.01% for balances of $100K (and lower tiers). These include: E*Trade, Merrill Lynch and Morgan Stanley.

The January issue of our Bond Fund Intelligence, which will be sent to subscribers Tuesday morning, features the stories, "Top Stories & Funds of '23: Big Asset Declines, Losses," which features the top BFI stories from 2023 and "Worldwide BF Assets Drop to $12.0 Trillion, Led by U.S," which recaps the latest statistics on bond fund markets outside the U.S. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that bond fund returns jumped again in December while yields plunged once more. 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.)

Our "Top Stories" piece states, "Bond funds staged a miraculous comeback in late 2023, after a brutal 2022 and an ugly start to the past year. Bond assets were flat in 2023 at $2.626 trillion, according to our BFI XLS, while bond ETFs rose to $1.047 trillion. The year began with the Fed hiking rates and ended with the market expecting cuts in 2024."

It continues: "According to ICI's broader fund asset series, bond funds saw asset outflows of $25.9 billion YTD in 2023 through 11/30/23, after seeing outflows of $488.5B for the same period in 2022. These followed two straight years of $500 billion plus, double-digit asset gains. ICI's asset series stood at $4.609 trillion as of Nov. 30, 2022, up $43.2 billion, or 0.9%, from a year earlier. Bond ETFs totaled $1.446 trillion on 11/30/23, up $183.2 billion, or 14.5%, over 12 months."

Our "Worldwide BF" article states, "Bond fund assets worldwide decreased sharply in the latest quarter to $12.0 trillion, led lower by the four largest bond fund markets -- the U.S., Luxembourg, Ireland and Brazil. We review the ICI's 'Worldwide Open-End Fund Assets and Flows, Third Quarter 2023' release and statistics below."

It states: "ICI's report says, 'Worldwide regulated open-end fund assets decreased 2.6% to $63.39 trillion at the end of the third quarter of 2023.... The Investment Company Institute compiles worldwide regulated open-end fund statistics on behalf of the International Investment Funds Association (IIFA).'"

Our first News brief, "Returns Jump Again, Yields Plunge in Dec.," states, "Bond fund returns had another big monthly jump while yields plummeted once more last month. Our BFI Total Index increased 2.52% over 1-month and 6.68% over 12 months. The BFI 100 rose 3.00% in Dec. and 6.72% in 2023. Our BFI Conservative Ultra-Short Index was up 0.72% over 1-month and 5.62% for 1-year; Ultra-Shorts rose 0.79% and 6.04%. Short-Term rose 1.50% and 5.69%, and Intm-Term increased 3.42% in Dec. and 5.89% over 1-year. BFI's Long-Term Index rose 4.24% and 6.70%. High Yield jumped 2.85% in Dec. and 11.17% in 2023."

A second News brief, "Morningstar on 'How the Largest Bond Funds Did In 2023.' Subtitled, ‘Dodge & Cox Income, PGIM Total Return lead, while Vanguard Short-Term Bond lags,’ the piece says, 'After two years of losses, investors in the largest bond funds have reason to cheer. Across the board, the most widely owned bond funds posted gains for 2023, avoiding what just a few months ago looked like an unprecedented third consecutive year in the red.'"

Our next News brief, "Reuters' 'US Bond Bulls Look to 2024 Fed Pivot to Sustain Searing Rally,' tells us, ‘As bonds emerge from a historic selloff, some investors expect better times in the U.S. fixed income market next year -- as long as the Federal Reserve's rate cuts play out as anticipated. A fourth-quarter rally saved bonds from an unprecedented third straight annual loss in 2023, following the worst-ever decline a year earlier.... Year-to-date, the Vanguard Total Bond Market Index Fund, with over $300 billion in assets, posted a 5.67% return, up from negative 13.16% last year. PIMCO's flagship $132 billion bond fund, the Income Fund, had year-to-date returns of 9.25% from minus 7.81% last year.'"

A BFI sidebar, "New Federated Bond ETF," says, "A press release entitled, 'Federated Hermes, Inc. launches Total Return Bond ETF,' tells us, 'Federated Hermes, Incorporated. (FHI) ... announced the launch of the Federated Hermes Total Return Bond ETF (FTRB) <b:>`_. The new actively managed ETF benefits from Federated Hermes' 50 years of experience managing fixed-income securities, a veteran portfolio management team and the advantages of an ETF structure.'"

Finally, another sidebar, "ICI Hits SEC Liquidity Props," comments, "A new ICI Viewpoint entitled, 'The SEC's Liquidity Proposal Is Arbitrary and Harmful to Investors,' tells us, 'Open-end long-term mutual funds have a long history of successfully managing liquidity, enabling them to meet shareholder redemptions in a timely manner while pursuing their investment objectives. Over the past four decades, 99.94% of these funds have met redemptions, including every single fund during the 2008 global financial crisis and the 2020 dash for cash.'"

The Investment Company Institute published, "Worldwide Regulated Open-Fund Assets and Flows, Third Quarter 2023," last week, which shows that money fund assets globally jumped by $225.3 billion, or 2.3%, in Q3'23 to $9.944 trillion. The increases were led by a sharp jump in money funds in U.S., while Ireland, Luxembourg, Mexico and Canada also rose. Meanwhile, money funds in China and Australia were lower. MMF assets worldwide increased by $1.639 trillion, or 19.7%, in the 12 months through 9/30/23, and money funds in the U.S. now represent 57.1% of worldwide assets. We review the latest Worldwide MMF totals, below.

ICI's release says, "Worldwide regulated open-end fund assets decreased 2.6 percent to $63.39 trillion at the end of the third quarter of 2023, excluding funds of funds. Worldwide net cash inflow to all funds was $403 billion in the third quarter, compared with $513 billion of net inflows in the second quarter of 2023. The Investment Company Institute compiles worldwide regulated open-end fund statistics on behalf of the International Investment Funds Association (IIFA), the organization of national fund associations. The collection for the third quarter of 2023 contains statistics from 45 jurisdictions."

It explains, "The growth rate of total regulated open-end fund assets reported in US dollars was decreased by US dollar appreciation over the third quarter of 2023. For example, on a US dollar–denominated basis, fund assets in Europe decreased by 3.0 percent in the third quarter, compared with a decrease of 0.6 percent on a euro-denominated basis."

ICI's quarterly continues, "On a US dollar–denominated basis, equity fund assets decreased by 3.8 percent to $28.71 trillion at the end of the third quarter of 2023. Bond fund assets decreased by 2.0 percent to $11.97 trillion in the third quarter. Balanced/mixed fund assets decreased by 5.4 percent to $6.83 trillion in the third quarter, while money market fund assets increased by 2.3 percent globally to $9.94 trillion."

The release also tells us, "At the end of the third quarter of 2023, 45% of worldwide regulated open-end fund assets were held in equity funds. The asset share of bond funds was 19% and the asset share of balanced/mixed funds was 11%. Money market fund assets represented 16% of the worldwide total. By region, 54% of worldwide assets were in the Americas in the third quarter of 2023, 31% were in Europe, and 15 percent were in Africa and the Asia-Pacific regions."

ICI adds, "Net sales of regulated open-end funds worldwide were $403 billion in the third quarter of 2023.... Globally, bond funds posted an inflow of $107 billion in the third quarter of 2023, after recording an inflow of $226 billion in the second quarter.... Money market funds worldwide experienced an inflow of $276 billion in the third quarter of 2023 after registering an inflow of $314 billion in the second quarter of 2023."

According to Crane Data's analysis of ICI's "Worldwide" fund data, the U.S. sustained its position as the largest money fund market in Q3'23 with $5.681 trillion, or 57.1% of all global MMF assets. U.S. MMF assets increased by $230.6 billion (4.2%) in Q3'23 and have increased by $1.110 trillion (24.3%) in the 12 months through September 30, 2023. China remained in second place among countries overall. China saw assets decrease $22.8 billion (-1.4%) in Q3 to $1.561 trillion (15.7% of worldwide assets). Over the 12 months through September 30, 2023, Chinese MMF assets have increased by $58.6 billion, or 3.9%.

Ireland remained third among country rankings, ending Q3 with $721.6 billion (7.3% of worldwide assets). Irish MMFs were up $10.1B for the quarter, or 1.4%, and up $93.4B, or 14.9%, over the last 12 months. Luxembourg remained in fourth place with $509.9 billion (5.1% of worldwide assets). Assets there increased $8.4 billion, or 1.7%, in Q3, and were up $105.3 billion, or 26.0%, over one year. France was in fifth place with $427.3B, or 4.3% of the total, down $242 million in Q3 (-0.1%) and up $118.6B (38.4%) over 12 months.

Australia was listed in sixth place with $248.9 billion, or 2.5% of worldwide assets. Its MMFs decreased by $4.6 billion, or -1.8%, in Q3. Korea was the 7th ranked country and saw MMF assets decrease $652 million, or -0.5%, in Q3'23 to $128.6 billion (1.3% of the total); they've increased $28.9 billion (29.0%) for the year. Brazil was at 8th place with $118.4 billion (1.2%); assets there increased $1.8 billion (1.5%) in Q3 and increased by $18.7 billion (18.8%) over 12 months. Mexico remained in 9th place, as assets increased $4.0 billion, or 3.6%, to 115.8 billion (1.2% of total assets) in Q3. They've increased $32.8 billion (39.4%) over the previous 12 months. ICI's statistics show Japan was listed in 10th place with $101.5B, or 1.0% of total assets, down $4.4 billion (-4.1%) for the quarter.

India was in 11th place, decreasing $5.5 billion, or -8.0%, to $62.7 billion (0.6% of total assets) in Q3 and increasing $6.3 billion (11.2%) over the previous 12 months. Canada ($53.3B, up $4.5B and up $22.6B over the quarter and year, respectively) ranked 12th ahead of Switzerland. ($39.5B, up $2.6B and up $15.2B). Chile ($31.5B, up $1.4B and up $9.2B) and The United Kingdom ($26.1B, down $73M and up $3.6B), rank 14th and 15th, respectively. Chinese Taipei, Argentina, South Africa, Belgium and Germany round out the 20 largest countries with money market mutual funds.

ICI's quarterly series shows money fund assets in the Americas total $6.027 trillion, up $245.4 billion in Q3. Asian MMFs decreased by $40.5 billion to $2.135 trillion, and Europe saw its money funds jump $19.6 billion in Q3'23 to $1.761 trillion. Africa saw its money funds increase $816 million to $21.3 billion.

Note that Ireland and Luxembourg's totals are primarily "offshore" money funds marketed to global multinationals, while most of the other countries in the survey have mainly domestic money fund offerings. Contact us if you'd like our latest "Largest Money Market Funds Markets Worldwide" spreadsheet, based on ICI's data. (Let us know too if you'd like to see our latest Money Fund Intelligence International product, which tracks "offshore" money market funds domiciled in Europe and outside the U.S.)

Crane Data's January Money Fund Portfolio Holdings, with data as of Dec. 31, 2023, show that Repo jumped while Agencies and Time Deposits (Other) fell. Money market securities held by Taxable U.S. money funds (tracked by Crane Data) decreased by $16.8 billion to $6.144 trillion, after increasing $244.0 billion in November and decreasing $57.9 billion in October. Assets increased $56.1 in September, $106.7 billion in August and $78.3 billion in July. Repo finally saw a rebound after falling for months, jumping $74.8 billion; it remains the largest portfolio segment. Treasuries increased by $1.9 billion, ranking in the No. 2 spot. The U.S. Treasury surpassed the Federal Reserve Bank of New York as the largest Issuer to MMFs four months ago. In December, U.S. Treasury holdings inched up to $2.181 trillion vs. the Fed RRP's $966.9 billion (up $122.6 billion). 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.

Among taxable money funds, Repurchase Agreements (repo) increased $74.8 billion (2.9%) to $2.646 trillion, or 43.1% of holdings, in December, after decreasing $20.3 billion in November, 329.2 billion in October and $84.0 billion in September. Treasury securities rose $1.9 billion (0.1%) to $2.181 trillion, or 35.5% of holdings, after increasing $250.1 billion in November, $178.1 billion in October and $164.9 billion in September. Government Agency Debt was down $21.8 billion, or -3.0%, to $694.2 billion, or 11.3% of holdings. Agencies increased $4.4 billion in November and $36.1 billion in October, but they decreased $8.3 billion in September. Repo, Treasuries and Agency holdings now total $5.521 trillion, representing a massive 89.9% of all taxable holdings.

Money fund holdings of CP, CDs and Time Deposits decreased in December. Commercial Paper (CP) decreased $14.8 billion (-4.8%) to $291.5 billion, or 4.7% of holdings. CP holdings increased $5.5 billion in November, $17.6 billion in October and $3.0 billion in September. Certificates of Deposit (CDs) decreased $5.4 billion (-2.4%) to $215.7 billion, or 3.5% of taxable assets. CDs increased $6.9 billion in November, $11.2 billion in October and $0.5 billion in September. Other holdings, primarily Time Deposits, decreased $52.1 billion (-33.4%) to $104.0 billion, or 1.7% of holdings, after decreasing $3.1 billion in November, increasing $28.4 billion in October and decreasing $20.4 billion in September. VRDNs rose to $11.6 billion, or 0.2% of assets. (Note: This total is VRDNs for taxable funds only. We will post our Tax Exempt MMF holdings separately Thursday around noon.)

Prime money fund assets tracked by Crane Data fell to $1.294 trillion, or 21.1% of taxable money funds' $6.144 trillion total. Among Prime money funds, CDs represent 16.7% (down from 17.0% a month ago), while Commercial Paper accounted for 22.5% (down from 23.6% in November). The CP totals are comprised of: Financial Company CP, which makes up 14.5% of total holdings, Asset-Backed CP, which accounts for 5.5%, and Non-Financial Company CP, which makes up 2.5%. Prime funds also hold 3.7% in US Govt Agency Debt, 9.7% in US Treasury Debt, 25.2% in US Treasury Repo, 0.2% in Other Instruments, 6.1% in Non-Negotiable Time Deposits, 5.1% in Other Repo, 8.6% in US Government Agency Repo and 0.7% in VRDNs.

Government money fund portfolios totaled $3.219 trillion (52.4% of all MMF assets), up from $3.208 trillion in November, while Treasury money fund assets totaled another $1.631 trillion (26.5%), down from $1.653 trillion the prior month. Government money fund portfolios were made up of 20.1% US Govt Agency Debt, 18.3% US Government Agency Repo, 29.1% US Treasury Debt, 32.4% in US Treasury Repo, 0.0% in Other Instruments. Treasury money funds were comprised of 68.6% US Treasury Debt and 31.4% in US Treasury Repo. Government and Treasury funds combined now total $4.850 trillion, or 78.9% of all taxable money fund assets.

European-affiliated holdings (including repo) decreased by $189.6 billion in December to $547.8 billion; their share of holdings fell to 8.9% from last month's 12.0%. Eurozone-affiliated holdings decreased to $369.5 billion from last month's $479.6 billion; they account for 6.0% of overall taxable money fund holdings. Asia & Pacific related holdings fell to $277.8 billion (4.5% of the total) from last month's $299.3 billion. Americas related holdings rose to $5.315 trillion from last month's $5.116 trillion, and now represent 86.5% of holdings.

The overall taxable fund Repo totals were made up of: US Treasury Repurchase Agreements (up $109.7 billion, or 6.2%, to $1.880 trillion, or 30.6% of assets); US Government Agency Repurchase Agreements (down $31.7 billion, or -4.3%, to $700.7 billion, or 11.4% of total holdings), and Other Repurchase Agreements (down $3.2 billion, or -4.7%, from last month to $65.8 billion, or 1.1% of holdings). The Commercial Paper totals were comprised of Financial Company Commercial Paper (down $17.1 billion to $187.8 billion, or 3.1% of assets), Asset Backed Commercial Paper (up $8.6 billion to $71.0 billion, or 1.2%), and Non-Financial Company Commercial Paper (down $6.3 billion to $32.7 billion, or 0.5%).

The 20 largest Issuers to taxable money market funds as of Dec. 31, 2023, include: the US Treasury ($2.181T, 35.5%), the Federal Reserve Bank of New York ($966.9B, or 15.7%), Federal Home Loan Bank ($555.2B, 9.0%), Fixed Income Clearing Corp ($450.0B, 7.3%), RBC ($208.4B, 3.4%), Goldman Sachs ($137.6B, 2.2%), Citi ($123.9B, 2.0%), Federal Farm Credit Bank ($120.0B, 2.0%), JP Morgan ($114.0B, 1.9%), BNP Paribas ($98.6B, 1.6%), Bank of America ($97.5B, 1.6%), Barclays PLC ($66.2B, 1.1%), Mitsubishi UFJ Financial Group Inc ($65.1B, 1.1%), Wells Fargo ($64.4B, 1.0%), Sumitomo Mitsui Banking Corp ($61.5B, 1.0%), Bank of Montreal ($48.0B, 0.8%), Toronto-Dominion Bank ($47.2B, 0.8%), Canadian Imperial Bank of Commerce ($45.3B, 0.7%), Mizuho Corporate Bank Ltd ($41.9B, 0.7%) and Credit Agricole ($41.7B, 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 ($966.9B, 36.5%), Fixed Income Clearing Corp ($450.0B, 17.0%), RBC ($170.1B, 6.4%), Goldman Sachs ($136.9B, 5.2%), Citi ($109.5B, 4.1%), JP Morgan ($103.3B, 3.9%), BNP Paribas ($87.3B, 3.3%), Bank of America ($77.6B, 2.9%), Barclays PLC ($54.3B, 2.1%) and Wells Fargo ($53.7B, 2.0%). The largest users of the $966.9 billion in Fed RRP include: Fidelity Govt Money Market ($69.6B), Vanguard Federal Money Mkt Fund ($64.8B), Goldman Sachs FS Govt ($49.0B), Fidelity Govt Cash Reserves ($48.8B), Fidelity Inv MM: Govt Port ($43.7B), Fidelity Cash Central Fund ($37.4B), Schwab Value Adv MF ($35.2B), Fidelity Inv MM: MM Port ($34.0B), Schwab Treasury Oblig MF ($31.2B) and Fidelity Money Market ($30.4B).

The 10 largest issuers of "credit" -- CDs, CP and Other securities (including Time Deposits and Notes) combined -- include: RBC ($38.3B, 7.0%), Mizuho Corporate Bank Ltd ($27.9B, 5.1%), Bank of Montreal ($27.8B, 5.1%), Australia & New Zealand Banking Group Ltd ($24.9B, 4.6%), Toronto-Dominion Bank ($24.8B, 4.6%), Mitsubishi UFJ Financial Group Inc ($22.3B, 4.1%), Bank of America ($20.0B, 3.7%), Canadian Imperial Bank of Commerce ($18.8B, 3.5%), Sumitomo Mitsui Trust Bank ($18.6B, 3.4%) and Bank of Nova Scotia ($17.9B, 3.3%).

The 10 largest CD issuers include: Mizuho Corporate Bank Ltd ($15.3B, 7.1%), Sumitomo Mitsui Banking Corp ($14.9B, 6.9%), Mitsubishi UFJ Financial Group Inc ($14.5B, 6.7%), Bank of America ($14.3B, 6.6%), Mitsubishi UFJ Trust and Banking Corporation ($12.5B, 5.8%), Toronto-Dominion Bank ($11.8B, 5.5%), Sumitomo Mitsui Trust Bank ($11.3B, 5.2%), Wells Fargo ($10.6B, 4.9%), Credit Agricole ($9.7B, 4.5%) and Canadian Imperial Bank of Commerce ($9.1B, 4.2%).

The 10 largest CP issuers (we include affiliated ABCP programs) include: Bank of Montreal ($19.3B, 7.5%), RBC ($19.2B, 7.4%), BPCE SA ($13.8B, 5.3%), JP Morgan ($10.7B, 4.1%), National Bank of Canada ($9.5B, 3.7%), Bank of Nova Scotia ($9.4B, 3.6%), UBS AG ($9.0B, 3.5%), Toronto-Dominion Bank ($8.3B, 3.2%), Mitsubishi UFJ Financial Group Inc ($7.8B, 3.0%) and Barclays PLC ($7.6B, 2.9%).

The largest increases among Issuers include: Federal Reserve Bank of New York (up $122.6B to $966.9B), Fixed Income Clearing Corp (up $33.9B to $450.0B), Goldman Sachs (up $31.2B to $137.6B), RBC (up $26.4B to $208.4B), Citi (up $10.6B to $123.9B), Toronto-Dominion Bank (up $8.6B to $47.2B), Federal Farm Credit Bank (up $5.8B to $120.0B), Canadian Imperial Bank of Commerce (up $3.3B to $45.3B), Australia & New Zealand Banking Group Ltd (up $2.5B to $31.9B) and Westpac Banking Corp (up $2.4B to $5.7B).

The largest decreases among Issuers of money market securities (including Repo) in December were shown by: Barclays PLC (down $49.4B to $66.2B), Federal Home Loan Bank (down $24.8B to $555.2B), Credit Agricole (down $20.3B to $41.7B), BNP Paribas (down $18.8B to $98.6B), ING Bank (down $17.2B to $20.6B), Bank of America (down $15.0B to $97.5B), Deutsche Bank AG (down $14.2B to $18.4B), Skandinaviska Enskilda Banken AB (down $10.4B to $8.5B), Nomura (down $7.2B to $31.3B) and JP Morgan (down $7.2B to $114.0B).

The United States remained the largest segment of country-affiliations; it represents 80.0% of holdings, or $4.915 trillion. Canada (6.5%, $400.3B) was in second place, while Japan (4.2%, $260.5B) was No. 3. France (3.7%, $225.8B) occupied fourth place. The United Kingdom (2.1%, $129.0B) remained in fifth place. Australia (0.8%, $51.3B) was in sixth place, followed by Netherlands (0.6%, $37.8B), Germany (0.6%, $35.5B), Sweden (0.5%, $28.3B), and Spain (0.3%, $16.9B). (Note: Crane Data attributes Treasury and Government repo to the dealer's parent country of origin, though money funds themselves "look-through" and consider these U.S. government securities. All money market securities must be U.S. dollar-denominated.)

As of Dec. 31, 2023, Taxable money funds held 50.8% (up from 49.3%) of their assets in securities maturing Overnight, and another 9.0% maturing in 2-7 days (down from 10.8%). Thus, 59.8% in total matures in 1-7 days. Another 10.8% matures in 8-30 days, while 10.2% matures in 31-60 days. Note that over three-quarters, or 80.8% 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 5.7% of taxable securities, while 10.0% matures in 91-180 days, and just 3.5% 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 Wednesday, and we'll be writing our regular monthly update on the new December 31 data for Thursday's News. But we also already uploaded a separate and broader Portfolio Holdings data set based on the SEC's Form N-MFP filings on Tuesday. (We continue to merge the two series, and the N-MFP version is now available via our Portfolio Holdings file listings to Money Fund Wisdom subscribers.) Our new N-MFP summary, with data as of Dec. 31, includes holdings information from 933 money funds (down 40 from last month), representing assets of $6.401 trillion (up from $6.353 trillion). Prime MMFs now total $1.306 trillion, or 20.4% of the total. We review the new N-MFP data, and we also look at our revised MMF expense data, which shows charged expenses flat and money fund revenues seeing a rebound in December. (Note: The latest Form N-MFP cut is missing First American Funds filing, so this data will be revised later this week once they're posted.)

Our latest Form N-MFP Summary for All Funds (taxable and tax-exempt) shows Repurchase Agreement (Repo) holdings in money market funds totaling $2.666 trillion (up from $2.592 trillion), or 41.6% of all assets. Treasury holdings totaled $2.270 trillion (up from $2.198 billion), or 35.5% of all holdings, and Government Agency securities totaled $708.2 billion (down from $731.1 billion), or 11.1%. Holdings of Treasuries, Government agencies and Repo (almost all of which is backed by Treasuries and agencies) combined total $5.644 trillion, or a massive 88.2% of all holdings.

Commercial paper (CP) totals $301.3 billion (down from $316.6 billion), or 4.7% of all holdings, and the Other category (primarily Time Deposits) totals $110.9 billion (down from $167.0 billion), or 1.7%. Certificates of Deposit (CDs) total $215.8 billion (down from $221.2 billion), 3.4%, and VRDNs account for $129.6 billion (up from $126.4 billion last month), or 2.0% of money fund securities.

Broken out into the SEC's more detailed categories, the CP totals were comprised of: $189.0 billion, or 3.0%, in Financial Company Commercial Paper; $71.5 billion or 1.1%, in Asset Backed Commercial Paper; and, $40.8 billion, or 0.6%, in Non-Financial Company Commercial Paper. The Repo totals were made up of: U.S. Treasury Repo ($1.899 trillion, or 29.7%), U.S. Govt Agency Repo ($698.9B, or 10.9%) and Other Repo ($68.5B, or 1.1%).

The N-MFP Holdings summary for the Prime Money Market Funds shows: CP holdings of $294.1 billion (down from $309.5 billion), or 22.5%; Repo holdings of $504.9 billion (up from $437.6 billion), or 38.7%; Treasury holdings of $130.4 billion (up from $120.3 billion), or 10.0%; CD holdings of $215.8 billion (down from $221.2 billion), or 16.5%; Other (primarily Time Deposits) holdings of $102.4 billion (down from $154.7 billion), or 7.8%; Government Agency holdings of $49.5 billion (down from $61.9 billion), or 3.8% and VRDN holdings of $9.3 billion (up from $8.6 billion), or 0.7%.

The SEC's more detailed categories show CP in Prime MMFs made up of: $188.9 billion (down from $206.2 billion), or 14.5%, in Financial Company Commercial Paper; $71.5 billion (up from $63.0 billion), or 5.5%, in Asset Backed Commercial Paper; and $33.7 billion (down from $40.3 billion), or 2.6%, in Non-Financial Company Commercial Paper. The Repo totals include: U.S. Treasury Repo ($328.0 billion, or 25.1%), U.S. Govt Agency Repo ($110.3 billion, or 8.4%), and Other Repo ($66.6 billion, or 5.1%).

In related news, money fund charged expense ratios (Exp%) were flat in December. Our Crane 100 Money Fund Index and Crane Money Fund Average were 0.26% and 0.37%, respectively, as of Dec. 31, 2023. 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 Tuesday 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, then.) Visit our "Content" page for the latest files.

Our Crane 100 Money Fund Index, a simple average of the 100 largest taxable money funds, shows an average charged expense ratio of 0.26%, unchanged from last month's level (but 18 bps higher than 12/31/21's 0.08%). The average is now back around the level (0.27%) it was on Dec. 31, 2019, so we estimate that funds are charging normal expenses (though they are waiving a minimal amount of fees for competitive purposes). The Crane Money Fund Average, a simple average of all taxable MMFs, showed a charged expense ratio of 0.37% as of Dec. 31, 2023, unchanged from the month prior and slightly below the 0.40% at year-end 2019.

Prime Inst MFs expense ratios (annualized) average 0.28% (unchanged from last month), Government Inst MFs expenses average 0.27% (unchanged from last month), Treasury Inst MFs expenses average 0.28% (down 1 bp from last month). Treasury Retail MFs expenses currently sit at 0.52%, (unchanged from last month), Government Retail MFs expenses yield 0.53% (down 1 bp from last month). Prime Retail MF expenses averaged 0.48% (unchanged from last month). Tax-exempt expenses were also unchanged at 0.40% on average.

Gross 7-day yields were mixed during the month ended Dec. 31, 2023. The Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 754), shows a 7-day gross yield of 5.45%, down 1 bp from the prior month. The Crane Money Fund Average was 1.72% at the end of 2019, 0.15% at the end of 2020 and 0.09% at the end of 2021. Our Crane 100's 7-day gross yield was unchanged, ending the month at 5.46%.

According to our revised MFI XLS and Crane Index numbers, we now estimate that annualized revenue for all money funds is $16.573 billion (as of 12/31/23). Our estimated annualized revenue totals decreased from the record $16.600B last month but are still up from $15.892B two months ago. Revenue levels are more than five times larger than May's 2021's record-low $2.927B level. Charged expenses and gross yields are driven by a number of variables, but revenues should continue their climb higher as money funds continue to see inflows in the last month of the year.

Crane Data's latest monthly Money Fund Market Share rankings show assets increased among most of the largest U.S. money fund complexes in December, after jumping sharply in November. Money market fund assets rose by $24.5 billion, or 0.4%, last month to a record $6.311 trillion. Total MMF assets have increased by $211.6 billion, or 3.5%, over the past 3 months, and they've increased by $1.143 trillion, or 22.1%, over the past 12 months. The largest increases among the 25 largest managers last month were seen by Fidelity, Vanguard, SSGA, Federated Hermes and BlackRock, which grew assets by $21.0 billion, $17.7B, $11.4B, $10.7B and $8.8B, respectively. Declines in December were seen by Goldman Sachs and JPMorgan, which decreased by $30.5 billion and $13.2B, 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, and look at money fund yields, which inched higher in December.

Over the past year through Dec. 31, 2023, Fidelity (up $282.3B, or 28.9%), JPMorgan (up $219.3B, or 51.5%), Schwab (up $197.5B, or 70.8%), Vanguard (up $106.0B, or 22.9%) and Federated Hermes (up $69.4B, or 18.9%) were the `largest gainers. Fidelity, Schwab, JPMorgan, Vanguard and Federated Hermes had the largest asset increases over the past 3 months, rising by $77.6B, $40.1B, $34.4B, $31.4B and $21.9B, respectively. The largest declines over 12 months were seen by: Invesco (down $11.9B), American Funds (down $7.4B), Western (down $6.9B), and T Rowe Price (down $236M). The largest declines over 3 months included: Goldman Sachs (down $28.5B), Invesco (down $17.3B) and American Funds (down $12.0B).

Our latest domestic U.S. Money Fund Family Rankings show that Fidelity Investments remains the largest money fund manager with $1.260 trillion, or 20.0% of all assets. Fidelity was up $21.0B in December, up $77.6 billion over 3 mos., and up $282.3B over 12 months. JPMorgan ranked second with $644.8 billion, or 10.2% market share (down $13.2B, up $34.4B and up $219.3B for the past 1-month, 3-mos. and 12-mos., respectively). Vanguard ranked in third place with $568.9 billion, or 9.0% of assets (up $17.7B, up $31.4B and up $106.0B). BlackRock ranked fourth with $509.7 billion, or 8.1% market share (up $8.8B, up $4.9B and up $36.2B), while Schwab was the fifth largest MMF manager with $476.4 billion, or 7.5% of assets (up $7.8B, up $40.1B and up $197.5B for the past 1-month, 3-mos. and 12-mos.).

Federated Hermes was in sixth place with $436.8 billion, or 6.9% (up $10.7B, up $21.9B and up $69.4B), while Goldman Sachs was in seventh place with $393.7 billion, or 6.2% of assets (down $30.5B, down $28.5B and up $1.2B). Dreyfus ($266.2B, or 4.2%) was in eighth place (up $5.0B, up $1.5B and up $4.3B), followed by Morgan Stanley ($251.0B, or 4.0%; down $1.2B, down $10.4B and up $7.5B). SSGA was in 10th place ($224.1B, or 3.6%; up $11.4B, up $21.5B and up $66.4B).

The 11th through 20th-largest U.S. money fund managers (in order) include: Allspring (formerly Wells Fargo) ($206.7B, or 3.3%), Northern ($162.1B, or 2.6%), American Funds ($161.9B, or 2.6%), First American ($139.9B, or 2.2%), Invesco ($135.0B, or 2.1%), UBS ($98.5B, or 1.6%), T. Rowe Price ($49.8B, or 0.8%), HSBC ($47.8B, or 0.8%), DWS ($43.1B, or 0.7%) and Western ($30.4B, or 0.5%). Crane Data currently tracks 60 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 are the same as the domestic list, except: BlackRock moves up to the No. 3 spot, Vanguard moves down to the No. 4 spot and Goldman Sachs moves up to No. 5. Schwab moves down to the No. 6 spot, while Federated Hermes moves down to the No. 7 spot. Morgan Stanley moves up to the No. 8 spot while Dreyfus moves down to 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 ($1.273 trillion), JP Morgan ($883.6B), BlackRock ($761.3B), Vanguard ($568.9B) and Goldman Sachs ($544.3B). Schwab ($476.4B) was in sixth, Federated Hermes ($448.3B) was seventh, followed by Morgan Stanley ($334.1B), Dreyfus/BNY Mellon ($289.0B) and SSGA ($269.0B), which round out the top 10. These totals include "offshore" U.S. Dollar money funds, as well as Euro and Pound Sterling (GBP) funds converted into U.S. dollar totals.

The January issue of our Money Fund Intelligence and MFI XLS, with data as of 12/31/23, shows that yields were mostly unchanged in December across the Crane Money Fund Indexes. The Crane Money Fund Average, which includes all taxable funds covered by Crane Data (currently 754), was 5.08% (unchanged) for the 7-Day Yield (annualized, net) Average, the 30-Day Yield was unchanged at 5.08%. The MFA's Gross 7-Day Yield was at 5.46% (unchanged), and the Gross 30-Day Yield also remained unchanged at 5.45%. (Gross yields will be revised Tuesday at noon, though, once we download the SEC's Form N-MFP data for 12/31/23.)

Our Crane 100 Money Fund Index shows an average 7-Day (Net) Yield of 5.20% (unchanged) and an average 30-Day Yield at 5.19% (unchanged). The Crane 100 shows a Gross 7-Day Yield of 5.46% (unchanged), and a Gross 30-Day Yield of 5.46% (unchanged). Our Prime Institutional MF Index (7-day) yielded 5.30% (up 4 bps) as of Dec. 31. The Crane Govt Inst Index was at 5.15% (unchanged) and the Treasury Inst Index was at 5.12% (down 2 bps). Thus, the spread between Prime funds and Treasury funds is 18 basis points, and the spread between Prime funds and Govt funds is 15 basis points. The Crane Prime Retail Index yielded 5.11% (unchanged), while the Govt Retail Index was 4.87% (down 1 bp), the Treasury Retail Index was 4.89% (down 2 bps from the month prior). The Crane Tax Exempt MF Index yielded 3.68% (up 58 bps) as of December.

Gross 7-Day Yields for these indexes to end December were: Prime Inst 5.57% (up 4 bps), Govt Inst 5.42% (unchanged), Treasury Inst 5.41% (down 2 bps), Prime Retail 5.59% (unchanged), Govt Retail 5.42% (unchanged) and Treasury Retail 5.41% (down 2 bps). The Crane Tax Exempt Index rose to 4.08% (up 58 bps). The Crane 100 MF Index returned on average 0.44% over 1-month, 1.31% over 3-months, 4.90% YTD, 4.90% over the past 1-year, 2.10% over 3-years (annualized), 1.74% over 5-years, and 1.14% over 10-years.

The total number of funds, including taxable and tax-exempt, was unchanged in December at 883. There are currently 754 taxable funds, unchanged from the previous month, and 129 tax-exempt money funds (unchanged from last month). (Contact us if you'd like to see our latest MFI XLS, Crane Indexes or Market Share report.)

The January issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Monday morning, features the articles: "Record '23 for Money Funds: Assets, Revenues & Dividends," which reviews the record-setting year for MMFs in 2023; "Wall Street's Enthralled by $6 Trillion in MMFs, But Mirage," which attempts to debunk the "Wall of Cash" theory; and, "Top Money Funds of 2023; 15th Annual MFI Awards," which reviews the best performing MMFs of 2023. We also sent out our MFI XLS spreadsheet Monday a.m., and we've updated our Money Fund Wisdom database with 12/31/23 data. Our January Money Fund Portfolio Holdings are scheduled to ship on Wednesday, January 10, and our January Bond Fund Intelligence is scheduled to go out on Tuesday, January 16.

MFI's "Record '23" article says, "Money funds had perhaps the best year in their 52-year history in 2023, with assets surging $1.1 trillion to record $6.3 trillion, yields rising to over 5% and revenues jumping to well over $15.0 billion. Money fund investors collected more in dividends this year than they had in the prior 15 years combined (almost $300 billion), and, predictions of Fed cuts and outflows notwithstanding, the party shows no signs of stopping."

It continues, "The Financial Times' article, 'Stampede Into Money Market Funds Sparks Fee Bonanza for Asset Managers' explains, 'Record inflows into US money market funds in 2023 have triggered a multi-billion-dollar fee bonanza for the asset management industry, which for years treated the product as a loss-leader. US money market fund providers -- such as Fidelity, Vanguard and Charles Schwab -- collectively earned $7.6bn in fees in 2023 as assets passed $6.3tn, according to government figures. That was more than $1bn higher than in 2022 and a jump of around 35% from 2021, before US interest rates began to rise, according to the data from the Office for Financial Research.'"

We write in our Wall Street's Enthralled article, "Over the past month, a myriad of articles and financial news shows have cited the $6 trillion in money funds as a reason stocks will go higher. We've been hearing this 'Wall of Cash' theory for decades, and still don't buy it. (They never mention the $17 trillion in bank deposits nor the fact that almost 2/3 of the MMF total is Institutional.) Below, we quote from a number of the recent mentions, and look at whether they have any merit."

It tells us, "One of the few that gets it right is Bloomberg's 'Stock Skeptics Say $6 Trillion Cash Waiting on Sidelines Is a Mirage.' It says, 'One often-made argument in favor of stocks says investors should dive in before roughly $6 trillion of money-market cash gets redeployed into equity assets globally. But buying the theory requires a big leap of faith -- there's significantly less out there to actually fund riskier gambles. So say a pack of stock skeptics who, while not counseling selling out of the market, warn that some of the bull cases going around suffer from some optimistic framings.'"

Our "Top Money Funds" piece states, "This issue recognizes the top performing money funds, ranked by total returns, for calendar year 2023, as well as the top funds for the past 5‐year and 10‐year periods. We present the funds below with our annual Money Fund Intelligence Awards. These are given to the No. 1‐ranked funds based on 1‐year, 5‐year and 10‐year returns, through Dec. 31, 2023, in each of our major fund categories -- Prime Institutional, Government Institutional, Treasury Institutional, Prime Retail, Government Retail, Treasury Retail and Tax‐Exempt."

It continues, "The Top-Performing Prime Institutional fund (and fund overall) was BlackRock Cash Inst MMF SL (BISXX), which returned 5.38% <b:>The Top-Performing Prime Institutional fund (and fund overall) was BlackRock Cash Inst MMF SL (BISXX), which returned 5.38%. Excluding private and internal funds, the best performer in 2023 was Western Asset Prem Inst Liquid Res Capital (WAAXX) with a return of 5.35%. Among Prime Retail funds, Allspring Money Market Fund Premier (WMPXX) had the best return in 2023 (5.28%). (Our Crane 100 Money Fund Index returned 4.90% in 2023.)"

MFI also includes the News brief, "MF Assets Continue Record Run," which says, "Our MFI XLS shows assets rising $24.5 billion, or 0.4%, to a record $6.312 trillion in December. For 2023, MMFs are up $1.143 trillion (22.1%) with Taxable Retail MMFs up $603.3B (36.9) and Taxable Inst MMFs up $528.0B (15.5%). Assets continue jumping in January too, rising $66.5B to a record $6.367T in the first 4 days of the New Year, according to our MFI Daily."

Another News brief states, "Bloomberg Interviews Wells Fargo's Vanessa McMichael in, '2023 the Year for Money Market Funds.' McMichael says, 'This year has undoubtedly been the year of the money market funds. Right now, money market funds are sitting at about $6 trillion.... At the end of 2019, total money market fund assets were only $3 trillion.... There's been about $1 trillion in cash that has flown into money market funds throughout this year.... You can't deny the value.... Over the past couple of months, money market fund yields have remained stable while the rest of the curve has continued ... to decline.... But ... we think that [corporate] investors do need to think about extending duration.'"

A third News brief, "Dec. Portfolio Holdings: Treasuries Jump Again, Repo Slides," says, "Our latest Money Fund Portfolio Holdings statistics show that Treasury holdings surged again in November while Repo fell. Treasuries jumped by over $250 billion, ranking in the No. 2 spot. Agencies were the third largest segment, CP remained fourth, ahead of CDs, Other/Time Deposits and VRDNs."

A sidebar, "Reuters on $6 Tril. Cash Hoard," says, "Reuters' 'A $6 trillion cash hoard could fuel more U.S. stock gains as Fed pivots,' explains, 'Investors wondering whether markets can continue their torrid rally are eyeing one important factor that could boost assets: a nearly $6 trillion pile of cash on the sidelines. Soaring yields have pulled cash into money markets and other short-term instruments.... Total MMF assets hit a record $5.9 trillion on Dec. 6, according to ICI.'"

Our January MFI XLS, with December 31 data, shows total assets increased $24.5 billion to $6.312 trillion, after increasing $219.8 billion in November, decreasing $39.3 billion in October, increasing $77.8 billion in September, $104.2 billion in August, $21.0 billion in July, $20.3 billion in June, $152.7 billion in May, $56.5 billion in April, $345.1 billion in March, $56.0 billion in February and $22.5 billion in January."

Our broad Crane Money Fund Average 7-Day Yield was unchanged at 5.08%, and our Crane 100 Money Fund Index (the 100 largest taxable funds) was unchanged at 5.20% in December. On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA and the Crane 100 both averaged 5.46%. Charged Expenses averaged 0.37% and 0.26% for the Crane MFA and the Crane 100. (We'll revise expenses on Tuesday once we upload the SEC's Form N-MFP data for 12/31/23.) The average WAM (weighted average maturity) for the Crane MFA was 37 days (up 2 days from previous month) and the Crane 100 WAM was also up 3 at 38 days. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)

In years past when new money market fund regulations were pending, we wrote about the major shifts and changes fund managers made ahead of the new rules. But 2023 has seen very few exits from Prime MMFs or other shifts in preparation of the latest round of Money Fund Reforms (though the year was eventful due to record assets and 5% yields). Two years ago, we wrote "Rolling w/Reform Changes IV: Recap of '21 Exits & Entries, ESG & News" (1/4/22), and three years ago, we wrote "Rolling w/Reform Changes III: Recap of '20 Prime Exits, News & Moves" (1/7/21), which explained, "In January 2016, money market mutual funds were in the midst of a series of dramatic changes ahead of October 2016's Money Fund Reforms, the biggest changes to money fund regulations since their introduction in October 1970. Eight years ago, we ran the story, "Rolling w/Reform Changes II: Recap of '15 Announcements, '16 Plans," which reviewed a number of major changes among the largest managers that took place during 2015. As in the past year, exits from Prime MMFs and fund repositioning were notable trends." Today, we review the changes over the past year, though few and far between, as money funds prepare for yet another round of regulatory changes and possible fund lineup shifts in the New Year. (See also our "Dec. 4, 2023 News, "Top 10 Stories of 2023: Assets Surge $1 Trillion to $6.2T; Yields Over 5%. Note: Readers may also review "Crane Data's News," "Link of the Day" and "Money Fund Intelligence Archives" for more stories from the past year, 5 years and decade-plus.)

While we haven't seen as many lineup shifts and big exits from Prime as in 2015-6 or in 2020-2, we continued to see a steady stream of minor liquidations and lineup changes in 2023. In November, we wrote, "WSJ on Record Cash Sums: Bullish or Not? BlackRock Liquidating CA, NY" (11/28/23) and in October, we wrote, "UBS Latest to Abandon ESG Money Funds; JNL Liquidates Money Fund" (10/13/23). The theme was continued gradual lineup consolidation with Tax Exempt, ESG and very small funds, as opposed to Prime MMFs, being the ones most likely to get liquidated. See also our September, August and July articles, "Morgan Stanley Liquidates Tax-Exempts" (9/21/23), "JPMorgan Liquidates E*Trade Shares" (9/7/23), "Morgan Stanley Latest to Abandon ESG MMFs" (8/16/23) and "Goldman Liquidating Resource Shares" (7/19/23). Finally, we wrote the briefs "Cavanal Hill Liquidates $71M U.S. Treasury Service Class, Added to Fed RRP List" (5/22/23), "Invesco Liquidating T-F Cash Reserves" (1/26/23) and "Harbor Money Market Fund Liquidates" (1/5/23) in the first half of 2023.

While very minor, we also wrote about asset manager moves and changes in the updates, "USAA Changes Name to Victory Funds" (5/4/23) and "Money Fund Mergers Continue; WSJ Touts Cash (Again), Blasts Sweeps" (2/6/23). the latter explains, "Money market mutual fund complexes continue to gradually merge away tiny funds and fine-tune their fund lineups. A Prospectus Supplement filing for JPMorgan Prime Money Market Fund, JPMorgan Liquid Assets Money Market Fund and JPMorgan U.S. Treasury Plus Money Market Fund (Class C Shares) describes the "Conversion of Class C Shares to Reserve Shares." It says, "The Board of Trustees of the J.P. Morgan Funds approved the automatic conversion of each Fund's Class C Shares into Reserve Class Shares, effective as of the close of business on January 31, 2023. Beginning January 31, 2023, Class C Shares of the Fund will no longer be available for purchase."

In addition to the sporadic exits and shifts, we saw continued new fund launches in the D&I and Social space (and exits in the ESG fund space). We wrote: "Ramirez Asset Management Launches Government MMF; Federated on 24 (1/3/24), "Nov. MFI: D&​I Shares All the Rage; Portal News; Liquidity Fee Filings (11/7/23), "HSBC Launches 'P' Purpose Share Class; Cavu Paper on DEI Money Funds (11/2/23), "Allspring Launches Roberts & Ryan Class; ICD's New Portfolio Analytics" (10/24/23), "UBS Latest to Abandon ESG Money Funds; JNL Liquidates Money Fund" (10/13/23), "Morgan Stanley Latest to Abandon ESG MMFs" (8/16/23) and "ESMA, FSB Push European Money Fund Reforms; New HSBC ESG Euro MF" (3/27/23).

Waiting for, and then digesting the new MMF regulations was also a major theme in 2023. On the European front (where we're still waiting for a proposal), we wrote: "U.K. Financial Conduct Authority's Consultation Paper on MMF Reforms" (12/20/23), "FCA Posts U.K. MMF Consultation" (12/07/23), "ESMA Paper on Reform Options Downplays Liquidity; Yields Flat at 5.16%" (9/6/23), "European Commission Posts Report on EU MMF Regulations; LVNAVs Okay" (7/21/23) and "ESMA, FSB Push European Money Fund Reforms; New HSBC ESG Euro MF" (3/27/23).

Discussing the mid-year release of U.S. MMFs Reforms, we wrote: "SEC Adopts Money Mkt Fund Reforms" (7/13/23), "SEC's Money Market Fund Reforms: Swing Pricing Out, More Liquidity In" (7/14/23), "More from the SEC's Money Market Fund Reforms: Liquidity Fee Excerpts" (7/24/23), "Money Fund Managers Publishing, Educating on Latest SEC MMF Reforms" (7/26/23) and "Amendments to Reporting Requirements in SEC Reforms; Investor Type" (8/3/23).

Our July 13 piece says, "As we said in a bulletin to Money Fund Intelligence subscribers earlier, the U.S. Securities & Exchange Commission (SEC) passed new Money Market Fund Reforms Wednesday morning, which abandoned their swing pricing proposal for Prime and Tax Exempt Institutional money market funds and replaced it with a mandatory liquidity fee regime. They also increased liquidity and disclosure requirements. The "Fact Sheet" says, "The Commission is considering adopting amendments to certain rules that govern money market funds under the Investment Company Act of 1940. The amendments are designed to improve the resilience and transparency of money market funds by: Increasing minimum liquidity requirements to provide a more substantial buffer in the event of rapid redemptions; Removing provisions from the current rule that permit a money market fund to temporarily suspend redemptions and removing the regulatory tie between the imposition of liquidity fees and a fund's liquidity level; Requiring certain money market funds to implement a liquidity fee framework that will better allocate the costs of providing liquidity to redeeming investors; and Enhancing certain reporting requirements to improve the Commissions ability to monitor and assess money market fund data."'

The SEC's release of reforms was followed by a flurry of articles from fund companies. Our News coverage included: "SSGA Gives History, Update on MMF Reforms; Explains New Liquidity Fee" (9/21/23), "Dechert on SEC's Money Fund Reforms" (8/28/23), "Stradley Ronon, K&L Gates Post Papers on SEC Reforms, Liquidity Fees" (8/21/23), "Federated's Cunningham on Reforms" (8/18/23), "JPM Writes on Reforms, Liquidity Fees" (8/14/23) and "August MFI: Managers Comment; SEC Money Fund Reforms; EU MF Regs" (8/7/23).

Earlier this week, we quoted a recent piece from Federated Hermes' Deborah Cunningham, who wrote, "The remainder of the SEC's new money market fund rules kick in this year, and the industry has been hard at work creating solutions for clients. The requirement for money funds to hold 30% and 50% in daily and weekly liquidity, respectively, begins April 2; enhanced reporting and accounting start June 11; and the mandatory liquidity fee on institutional prime and institutional municipal funds if net redemptions exceed 5% of the fund's total net assets (unless the liquidity cost is <0.01% of the value of the shares redeemed) begins Oct. 2. Expect the main players to alter some products and create new ones to continue to provide the benefits liquidity vehicles offer."

Happy New Year from Crane Data and Money Fund Intelligence! We'll be sure to keep you posted on product developments and any news impacting money market funds in 2024. So best wishes and thanks for your continued support!

Money market mutual fund assets jumped to record levels on the first business day of 2024, according to our Money Fund Intelligence Daily. Crane Data shows total money fund assets rose by $54.9 billion on Tuesday (1/2/24) to an all-time high of $6.355 trillion, breaking previous record highs from mid-December 2023. Assets increased by $32.7 billion in December and $226.4 billion in November, according to MFI Daily. Our MFI Daily shows money market mutual fund assets increasing by $1.11 trillion, or 21.4%, in 2023 to $6.300 trillion, with Taxable Retail MMFs jumping $1.583 trillion (38.4%) to $2.232 trillion and Taxable Inst MMFs rising $448.2 billion (12.8%) to $3.937 trillion. (Tax Exempt MMFs rose by $13.1 billion, or 11.1%, to $131.1 billion.) ICI will release its latest weekly asset totals later Thursday (so watch for more News on this tomorrow), and Crane Data will release its monthly MFI XLS totals on Monday, Jan. 8.

In other news, Bloomberg writes that, "Stock Skeptics Say $6 Trillion Cash Waiting on Sidelines Is a Mirage." They tell us, "One often-made argument in favor of stocks says investors should dive in before roughly $6 trillion of money-market cash gets redeployed into equity assets globally. But buying the theory requires a big leap of faith-- there's significantly less out there to actually fund riskier gambles. So say a pack of stock skeptics who, while not counseling selling out of the market, warn that some of the bull cases going around suffer from some optimistic framings."

The piece explains, "Among them is Deborah Cunningham of Federated Hermes, who estimates that at least 80% of the nearly $1 trillion that's poured into money-market funds since March's financial system woes represents depositors leaving banks, rather than people waiting for entry points in equities and credit. 'It's come through the deposit market, through the retail trade, with the likelihood of that being very sticky,' Cunningham said in a late-December interview on Bloomberg Television."

It says, "That view pours cold water on a bullish case for stocks that's quickly gaining steam -- that the breakneck rally over the past two months will be supercharged by cash coming off the sidelines. The record $5.9 trillion hoard in money-market fund represents dry powder ripe to be redeployed once central banks begin cutting rates, Barclays strategist Emmanuel Cau wrote in a note last week. UBS Asset Management floated a similar thesis in the firm's 2024 outlook, saying that investors exiting cash in favor of risk assets 'could catalyze much stronger performance' than consensus expects once short-term yields decline."

Bloomberg comments, "But even with the S&P 500 hovering near an all-time high, buoyed by growing conviction that the Federal Reserve will lower rates next year, money market funds continue to reliably attract fresh cash -- and the source of that capital matters. Deposits were already starting to leave banks in favor of higher-yielding vehicles in the run-up to March's banking sector turmoil as the Fed's hiking cycle boosted rates on the shortest-dated paper. That dynamic has only intensified in the months since."

They quote Matt Maley of Miller Tabak + Co, "With a lot of that cash coming from banking accounts, it's the money that people will use to meet their regular expenses. In other words, it's not available to move into the stock market.... That doesn't mean there won't be some money rotating into stocks next year, but we also have to remember that those money market account rates are still a lot more competitive than they were in 2020 and 2021."

The article adds, "To that point, Federated Hermes's Cunningham thinks money-market funds will stay competitive even as the Fed embarks on rate cuts to bring monetary policy out of restrictive territory. It's unlikely that the Fed's normalization process will bring interest rates back to zero, but rather to between 3% and 4%, she said. That level will keep retail investors engaged instead of returning their deposits to banks. As such, risk-free cash on the sidelines will prove sticky."

Finally, Crane Data published its latest Weekly Money Fund Portfolio Holdings statistics Wednesday, which track a shifting subset of our monthly Portfolio Holdings collection. The most recent cut (with data as of December 29) includes Holdings information from 74 money funds (up 5 from two weeks ago), or $3.071 trillion (up from $3.052 trillion) of the $6.300 trillion in total money fund assets (or 48.7%) tracked by Crane Data. (Our Weekly MFPH are e-mail only and aren't available on the website. See our latest Monthly Money Fund Portfolio Holdings here.)

Our latest Weekly MFPH Composition summary shows Government assets dominating the holdings list with Repurchase Agreements (Repo) totaling $1.328 trillion (up from $1.287 trillion two weeks ago), or 43.2%; Treasuries totaling $1.147 billion (down from $1.242 trillion two weeks ago), or 37.3%, and Government Agency securities totaling $290.1 billion (up from $266.4 billion), or 9.4%. Commercial Paper (CP) totaled $109.4 billion (up from two weeks ago at $91.2 billion), or 3.6%. Certificates of Deposit (CDs) totaled $93.4 billion (up from $74.6 billion two weeks ago), or 3.0%. The Other category accounted for $63.7 billion or 2.1%, while VRDNs accounted for $39.7 billion, or 1.3%.

The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $1.147 trillion (37.3% of total holdings), the Federal Reserve Bank of New York with $342.2 billion (11.1%), Fixed Income Clearing Corp with $272.2B (8.9%), Federal Home Loan Bank with $215.3B (7.0%), RBC with $93.6B (3.0%), Citi with $71.6B (2.3%), Federal Farm Credit Bank with $64.4B (2.1%), Goldman Sachs with $60.5B (2.0%), JP Morgan with $57.3B (1.9%) and BNP Paribas with $53.3B (1.7%).

The Ten Largest Funds tracked in our latest Weekly include: JPMorgan US Govt MM ($267.8B), Goldman Sachs FS Govt ($231.3B), Fidelity Inv MM: Govt Port ($189.6B), JPMorgan 100% US Treas MMkt ($185.0B), Federated Hermes Govt ObI ($151.3B), Morgan Stanley Inst Liq Govt ($143.6B), State Street Inst US Govt ($132.0B), Allspring Govt MM ($125.7B), Fidelity Inv MM: MM Port ($119.5B) and Dreyfus Govt Cash Mgmt ($111.4B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary.)

A press release entitled, "Ramirez Asset Management Readies to Launch Two Commingled Funds," tells us, "Ramirez Asset Management ('RAM') will enter the pooled investment market with the launch of two mutual funds that will offer share classes for both retail and institutional investors. These funds will launch on December 15, 2023. The Ramirez Government Money Market Fund (Retail: RMZXX; Institutional: RAMXX) will seek to maximize current income while prioritizing the preservation of capital and the maintenance of liquidity by investing securities issued by the U.S. government, its agencies, and instrumentalities; including repurchase agreements that are collateralized solely by U.S. government securities. The fund will be unique in the money fund marketplace as one of few managed by a diverse investment manager."

Ramirez' release explains, "Further, RAM has committed to donate 10 percent of the fund's net management revenues to the Hispanic Scholarship Fund and will target 50 percent of trades to be executed with minority, women, disabled persons and veteran dealers. The fund will be available for direct investment on December 15 and accessible on most of the industry-leading cash management portals in early January."

It continues, "The Ramirez Core Bond Fund (Retail: RAMRX; Institutional: RAMIX) will seek to maximize total return by investing primarily in a diversified portfolio of fixed income securities. The Core Bond Fund will be managed similarly to RAM's Strategic Core Strategy, which is benchmarked against the Bloomberg U.S. Aggregate index using a multi-sector approach utilizing a time-tested investment process and a differentiated investment style. RAM has a 10+ year track record managing this product for institutional investors in separately managed accounts."

The release adds, "RAM's fixed income team led by portfolio managers Sam Ramirez Jr., Louis Sarno, Helen Yee and Alex Bud, will manage both funds. These professionals collectively have more than 120 years of industry experience.... Founded in 2002 and headquartered in New York City, registered investment adviser Ramirez Asset Management, Inc. (RAM) is affiliated with Samuel A. Ramirez & Co. Inc., one of the oldest and largest Hispanic-owned investment banks in the U.S. and a leader in the fixed income market. RAM is focused on fixed income and equity asset management for a diverse client base, including public and private defined benefit and defined contribution plans, Taft Hartley plans, corporations, state and local governments, as well as foundations and endowments."

Ramirez Government Money Market Fund's Institutional (RAMXX) has a CUSIP of 00777X504, a Minimum Initial Investment of $1 million and expense ratio of 0.35%. The Retail class (RMZXX) has the CUSIP of 00777X405, a Minimum of $5,000 and an expense ratio of 0.60%.

For more on ESG see these Crane Data News stories: "Nov. MFI: D&​I Shares All the Rage; Portal News; Liquidity Fee Filings (11/7/23), "HSBC Launches 'P' Purpose Share Class; Cavu Paper on DEI Money Funds (11/2/23), "Allspring Launches Roberts & Ryan Class; ICD's New Portfolio Analytics" (10/24/23), "UBS Latest to Abandon ESG Money Funds; JNL Liquidates Money Fund" (10/13/23), "Morgan Stanley Latest to Abandon ESG MMFs" (8/16/23), "ESMA, FSB Push European Money Fund Reforms; New HSBC ESG Euro MF" (3/27/23), "Morgan Stanley Names OFN Beneficiary of Impact Shares; ESG to Retail" (10/27/22), "SSGA to Liquidate State Street ESG Liquid Reserves" (9/19/22), "ESG Cash Investments Still Minor Says AFP Liquidity Survey, 6% Over 10%" (6/29/22), "SEC Names Rule Proposal Could Impact or Ban ESG, Social Money Funds" (6/3/22), "Dreyfus Announces New BOLD D&I Share Class with Howard University" (3/1/22), "SSGA Debuts Opportunity Class; BlackRock Bancroft, Cabrera Shares Live" (11/17/21); "More D&I: State Street Files for Blaylock Van Shares; WSJ Hits Tether" (10/27/21); "BlackRock Expands ESG Lineup; Files for New Bancroft, Cabrera Shares" (8/19/21); "Northern Renames Diversity Shares Siebert Williams; Safened Platform" (4/20/21); "Morgan Stanley Files for CastleOak Shares; Bond Fund Symposium Today" (3/25/21); "JP Morgan Launches 'Empower' Share Class to Support Minority Banks" (2/24/21); "Mischler Financial Joins 'Impact' or Social Money Market Investing Wave" (12/5/19); and "Dreyfus Launches 'Impact' or Diversity Government Money Market Fund" (11/21/19). Click here to see the Federal Home Loan Bank Office of Finance's list of D&I or diversity and inclusion, dealers.

In other news, Federated Hermes' latest insight, "A year of intrigue: Three things to watch in 2024" comments, "The markets took the December FOMC dot plot as proof the Federal Reserve capitulated to their expectations for at least five rate cuts in 2024. In contrast, we take Chair Jerome Powell's word 'cautiously' at face value and anticipate only 75 basis points of easing in the back half of the year. We just don't see inflation declining enough to satisfy policymakers, especially as energy prices have accounted for much of the decrease. Officials have not put the cautionary tale of the 1970s back on the shelf. If PCE/CPI are stubborn or surprise to the upside, the Fed likely will return to its 'higher for longer' stance."

Money market CIO Deborah Cunningham writes, "This scenario would keep cash attractive, even as some investors extend duration to other asset classes. Most liquidity products should continue to mirror the target range. You might think clients will exit the broad sector as yields fall. But past instances of policy easing actually have led to asset inflows as yields declined slower than other cash options and direct securities. That's not assured, of course, but we can guarantee 2024 will have an abundance of intrigue."

She continues, "Many of the world's central banks face similar market calls for easing, in part because they typically follow in the Fed's footsteps. Most also are struggling to convince traders and investors they are in no hurry to cut rates. The banks of Europe, England, Australia and Canada, among others, are not ready to declare victory over inflation even in the face of potential recessions. Excepting the perma-doves in the Bank of Japan, the tension between expectations and projections likely will dominate the first half of the year."

Cunningham adds, "The remainder of the SEC's new money market fund rules kick in this year, and the industry has been hard at work creating solutions for clients. The requirement for money funds to hold 30% and 50% in daily and weekly liquidity, respectively, begins April 2; enhanced reporting and accounting start June 11; and the mandatory liquidity fee on institutional prime and institutional municipal funds if net redemptions exceed 5% of the fund's total net assets (unless the liquidity cost is <0.01% of the value of the shares redeemed) begins Oct. 2. Expect the main players to alter some products and create new ones to continue to provide the benefits liquidity vehicles offer."

The Financial Times published a feature article on money market funds entitled, "Stampede Into Money Market Funds Sparks Fee Bonanza for Asset Managers." They tell us, "Record inflows into US money market funds in 2023 have triggered a multibillion-dollar fee bonanza for the asset management industry, which for years treated the product as a loss-leader. US money market fund providers -- such as Fidelity, Vanguard and Charles Schwab -- collectively earned $7.6bn in fees in 2023 as assets passed $6.3tn, according to government figures. That was more than $1bn higher than in 2022 and a jump of around 35 percent from 2021, before US interest rates began to rise, according to the data from the Office for Financial Research, a government agency." (Note: Crane Data estimates that money fund fee revenue will total over $15.3 in 2023.)

The article explains, "Much of the phenomenon is due to retail investors keen to capitalise on high yields and the perceived safety of government debt. Money funds, which invest in very short-term securities and offer daily access, are dominated by a handful of very large players led by Fidelity, Vanguard, JPMorgan and BlackRock. The providers compete for cash with bank accounts and have benefited from more than a trillion dollars in inflows driven by rising interest rates and, earlier in the year, concern about instability among regional banks."

It states, "For the year as a whole the total has eclipsed even 2020, when cash flooded into money funds during the early stages of the pandemic. The big jump in revenues comes as a relief for money market funds. It follows a period when returns on short-term safe assets were so low many providers had to forgive part of their fees to avoid charging customers to put money in.... 'The fees they get are not amazing,' says Alex Blostein, an analyst at Goldman Sachs. But they 'are still a meaningful tailwind and the only asset class for traditional asset managers that has shown any material growth this year.'"

The FT cites, "Since the start of the year, EPFR data shows that investors have poured a record $1.17tn into US money market funds. Total assets reached $6.35trn by the end of November, according to the OFR. The huge flows were triggered by the Fed's aggressive campaign of interest rate rises, which pushed official US borrowing costs up to a range of 5.25 to 5.5 percent, from near zero as recently as March 2022. That in turn pushed the average yield on a bucket of government-focused institutional money market funds tracked by the ICI to 5.21 percent as of December 15."

They explain, "Inflows into money market funds accelerated in March, when the collapse of Silicon Valley Bank and other lenders piled pressure on the broader financial sector and sparked a flight to safety from ordinary deposit accounts. The regional banking ructions eventually subsided, but they prompted many customers to take a hard look at the returns they were getting on deposits. Cash has continued to flood into money funds: November marked the biggest month for net inflows since the spring, according to the ICI."

The piece continues, "Fidelity is the single largest manager of US money market funds with more than $1.26tn in assets, up 29 percent from the start of the year to the end of November, the most recent comprehensive OFR data shows. JPMorgan has leapt into second place with $700bn after growth of more than 55 per cent. Vanguard is third at $575bn, up 29 percent. Charles Schwab saw the biggest percentage increase, with assets jumping more than 68 percent to $465bn. The 10 largest money fund managers control about 80 percent of the assets, the data shows."

It says, "Not all asset managers break out their revenue from cash management products. But BlackRock's revenue from the business shot up from $470mn in 2021 to $864mn last year, and it should handily beat that figure in 2023. Goldman has reported that it is on track to reap about $1.1bn for 2023, up from about $970mn last year, and Federated's third quarter money market revenue was triple the comparable figure in 2021.... By contrast, Schwab's money fund flows came at the expense of its bank, where it had been holding customer cash balances and earning profits from investing that money. Schwab was forced to draw down on expensive lines of credit in order to cover the outflows without selling assets at a discount."

The FT adds, "Investors are now betting that the Fed will start aggressively cutting rates next year -- a scenario that could push down short-term Treasury yields and prompt some investors to start moving out of cash. But some of the biggest players, including BlackRock, Goldman Sachs and Federated Hermes, said they believe that the inflows will persist."

The piece quotes, "Peter Crane, who has been collecting and publishing data on the US money fund market for 18 years, said the pile-in shows 'no signs of stopping'. He said the gap between money market yields and interest on deposits -- which, while rising, remain below 1 percent on many bank accounts -- would still be 'humongous', even if the Fed were to slash rates to 3 percent."

Finally, the FT tells us, "Indeed, falling interest rates are likely to add to the inflows, at least initially, if history is any guide. While rates are rising, institutional investors such as pension funds and insurers typically buy short-term assets such as government bills and commercial paper directly.... But when rates are levelling off, they have historically shifted into money vehicles, because yields on funds normally remain elevated for a few weeks longer than their underlying holdings as Treasury yields start to fall. The average maturity of money market funds in mid-December was 36 days, according to Crane Data."

They quote Beccy Milchem, BlackRock's head of International Cash Management, "We don't see some of the drivers changing in terms of asset gathering.... For institutional investors, in past cycles when we have been approaching interest rate cuts, money market funds have been able to outperform."

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