News Archives: December, 2024
Dramatic asset growth was again the biggest story of the year, as money market fund assets jumped by $800 billion to a record $6.7 trillion (after jumping by over $1.0 trillion last year). With still almost a month to go, money fund asset growth could approach $1.0 trillion by yearend. In 2023, rising yields were the big news. Though yields have begun declining, and are now below 4.5%, yields remained above 5% for most of the past year. So great yields were another theme of 2024. Other major headlines of 2024 included: the implementation (and minor impact) of the SEC's latest Money Fund Reforms, the birth of tokenized money market funds (and money fund ETFs), the continued growth of Social (and shrinkage of ESG) MMFs and the increase in assets and now decline in yields in European and other worldwide markets. Below, we excerpt from a number of our biggest and most representative news stories of 2024 to highlight the major trends of the past year. (Note: As a reminder, register ASAP for our Money Fund University, Dec. 19-20 in Providence, at the Renaissance Providence Downtown. Clients and friends are also welcome to stop by Crane Data's Holiday Cocktail Party at MFU on 12/19 from 5-7:30pm!)
Crane Data's Top 10 Stories of 2024 include (in chronological order): "Dreyfus Liquid Assets Celebrates 50th Birthday; ICI Trends for December" (1/31/24); "American Funds Central Cash to Convert to Govt to Avoid Liquidity Fees" (2/6/24); "BlackRock Launches Private Tokenized Money Fund, BUIDL; BVI Domicile" (3/22/24); "ICI: Worldwide MF Assets Jump in Q4'23, Break $10 Trillion; US Leads" (3/25/24); "Goldman Files to Liquidate Prime Inst MMFs; Barron's: MMFs Tempting" (4/22/24); "More AFP Liquidity Survey: Banks, MMFs, T-Bills Kings of Cash; MMFs Up" (6/27/24); "WSJ, Investment News on Brokerage Deposit, Advisory Sweep Pressures" (7/19/24); "SSGA Sticks w/Prime Inst Money Funds; Discusses Reforms; Benchmarks" (8/29/24); "MMF Assets Break $6.7 Trillion; Crane 100 Falls Below 5.0%; FT on MMFs" (9/24/24); "Bloomberg, ignites on Latest MMF Reforms; Prime Inst Shift a Nonevent" (10/3/24); and, "Money Fund Assets Break Over $7.0 Trillion; S&P on AAA Rated MFs in Q3" (11/13/24).
Our Jan. 31 story, "Dreyfus Liquid Assets Celebrates 50th Birthday; ICI Trends for December," discusses the 50th birthday of Dreyfus's oldest money fund. The piece says, "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.'" See also our Jan. 5 story, "Rolling w/Reform Changes V: Little Change in '23 Ahead of MMF Reforms."
Our Feb. 6 story describes the start of the shift from Prime Inst to Government ahead of the SEC's MMF Reforms. The piece, "American Funds Central Cash to Convert to Govt to Avoid Liquidity Fees." It says, "Capital Group's $144.4 billion American Funds Central Cash fund, the largest Prime Inst money market fund, has filed to convert to a Government MMF, making it the first major Prime MMF casualty of the latest round of the SEC's pending Money Fund Reforms. A Form N-1A filing for the Capital Group Central Fund Series' American Funds Central Cash M (CMQXX) tells us, 'On or about June 7, 2024 (the 'Effective Date'), the fund intends to operate as a government money market fund pursuant to rule 2a-7 under the 1940 Act.'" See also our Feb. 2 story, "ICI: Money Fund Assets Jump to Record $6.0 Trillion; Ameriprise Q4 Cash."
In March, we published, "BlackRock Launches Private Tokenized Money Fund, BUIDL; BVI Domicile," which reviews one of the first major 'tokenizations' of an MMF. It states, "A press release entitled, 'BlackRock Launches Its First Tokenized Fund, BUIDL, on the Ethereum Network,' explains, 'BlackRock unveil[ed] its first tokenized fund issued on a public blockchain, the BlackRock USD Institutional Digital Liquidity Fund (BUIDL). BUIDL will provide qualified investors with the opportunity to earn U.S. dollar yields by subscribing to the Fund through Securitize Markets, LLC.' BlackRock's Head of Digital Assets Robert Mitchnick comments, 'This is the latest progression of our digital assets strategy. We are focused on developing solutions in the digital assets space that help solve real problems for our clients, and we are excited to work with Securitize.'" See also our March 20 story, "Vanguard Market Liquidity Fund Files to Go Government, Joins American."
Later in March, we wrote about money fund markets outside the U.S. in, "ICI: Worldwide MF Assets Jump in Q4'23, Break $10 Trillion; US Leads." This piece says, "The Investment Company Institute published, 'Worldwide Regulated Open-Fund Assets and Flows, Fourth Quarter 2023,' last week, which shows that money fund assets globally jumped by $497.0 billion, or 5.1%, in Q4'23 to $10.441 trillion. The increases were led by a sharp jump in money funds in U.S., while Ireland, Luxembourg, France and China also rose. Meanwhile, money funds in Argentina and Belgium were lower. MMF assets worldwide increased by $1.585 trillion, or 19.1%, in the 12 months through 12/31/23, and money funds in the U.S. now represent 56.7% of worldwide assets."
Our April 22 news discussed more shifts away from Prime Inst MMFs and the overall attraction of MMFs in, "Goldman Files to Liquidate Prime Inst MMFs; Barron's: MMFs Tempting." This piece says, "The hits keep coming to the Prime Institutional money fund sector, as Goldman Sachs becomes the latest fund firm to announce an exit from the space. A Prospectus Supplement filing Friday for the $1.6 billion Goldman Sachs Financial Square Money Market Fund and the $2.9 billion Goldman Sachs Financial Square Prime Obligations Fund, including its Administration, Capital, Institutional, Preferred, Select, Service, and Drexel Hamilton Class Shares, explains, 'At a meeting held on April 16-17, 2024, upon the recommendation of Goldman Sachs Asset Management, L.P., the Board of Trustees of Goldman Sachs Trust approved a proposal to liquidate the Goldman Sachs Financial Square Money Market Fund and Goldman Sachs Financial Square Prime Obligations Fund.... The Funds are expected to be liquidated on or about September 16, 2024, pursuant to Plans of Liquidation approved by the Board. The Liquidation Date may be changed without notice at the discretion of the Trust's officers.' This brings the total of Prime Institutional money funds declaring either pending conversions to Government or pending liquidations to 5 funds to date, representing $229.3 billion in assets, or 34.9% of the $657.0 billion total in Prime Inst MMFs (assets as of 3/31/24)."
Crane Data's June 27 News, "More AFP Liquidity Survey: Banks, MMFs, T-Bills Kings of Cash; MMFs Up," states, "We wrote earlier this week on the '2024 AFP Liquidity Survey.' (See our June 24 News, 'AFP 2024 Liquidity Survey: Cash Still King Among Corporates, Increasing.') Today, we continue our excerpts from the annual survey of corporate investors' cash habits. Discussing 'Current Allocations of Short-Term Investments,' AFP says, 'Companies maintain their investments in relatively few vehicles. Organizations invest in an average 2.7 vehicles for their cash and short-term investments -- unchanged from the average reported in 2023. Most organizations continue to allocate a large share of their short-term investment balances -- an average of 83% — in safe and liquid investment vehicles: bank deposits, money market funds (MMFs) and Treasury securities. This result is four percentage points higher than the 79% reported in 2023 -- and the highest percentage on record since AFP began tracking the data. The typical organization currently maintains 47% of its short-term investments in bank deposits. This allocation is the same as reported last year (2023) but is 8 percentage points lower than the 55% reported in 2022.'" See also our June 13 story, "Invesco Files to Liquidate Prime Inst MMFs; UBS MF Converting to Retail."
Our July 19 update, "WSJ, Investment News on Brokerage Deposit, Advisory Sweep Pressures," discussed pressures on brokerage sweep accounts. It explains, "We wrote earlier this week on a number of earnings reports which show a continued shift from bank deposits into money market funds. (See our July 17 News, 'Schwab, BlackRock Q2 Earnings: Cash Migration Slowing, But Continues.') The Wall Street Journal covers the topic in, 'Yield-Hungry Wealth Management Clients Are Becoming a Headache for Big Banks.' They explain, 'Brokerage customers are still demanding more for their cash. And banks are scrambling to keep up. Across several banks with large wealth-management businesses, a common theme in second-quarter earnings reports was continuing to have to pay higher rates to hang on to brokerage customers' cash.... Wells Fargo and Morgan Stanley called out increases in some of the rates they pay on certain brokerage account deposit products, and Bank of America noted a rise in rates paid on wealth-management deposits.'" Also check out our July 18 piece, "Schwab, JPM, Meeder Announce Prime Inst Conversions to Government."
Our August 29 News, "SSGA Sticks w/Prime Inst Money Funds; Discusses Reforms; Benchmarks," explains, "State Street Global Advisors (SSGA) recently confirmed that they'll be sticking with their Prime Institutional money fund offering. They published an update titled, 'Money Market Reform 2024,' which reviews the current round of regulatory changes impacting money market mutual funds. It explains, 'During March of 2020 and the onset of the pandemic, there was broader stress in the short-term funding markets and significant redemptions of Prime Fund assets. In response, the SEC proposed additional regulations to further strengthen the Institutional Prime Fund space during periods of volatility with the goal to disincentivize any first mover advantage. In October 2024, the final wave of the SEC's money market fund reform rule changes will take effect, marking the most substantial shift since the 2016 reforms. These changes are set to redefine the landscape of Institutional Prime Money Market funds. This transition signifies a pivotal moment for the industry, reflecting the evolving regulatory environment and the drive for greater stability and transparency in the financial markets.'" Also, see: "DFA Short-Term Investment Fund Converts to Ultra-Short; FT on Flows" (8/6/24) and "More on SEC Sweeps Scrutiny; Inv News on Sweeps, UBS's Earnings Call" (8/20/24).
Our September 24 story, "MMF Assets Break $6.7 Trillion; Crane 100 Falls Below 5.0%; FT on MMFs," signals the end of 5% yields, stating, "Money market mutual fund assets surged on Thursday and Friday following the Federal Reserve's 50 basis point rate cut, jumping by $81.8 billion over 2 days to a record $6.717 trillion. (They increased another $28.1 billion yesterday, Sept. 23.) Money fund yields slid lower to 4.94% (down 12 bps) on average in the week ended Sept. 20 (as measured by our Crane 100 Money Fund Index, an average of 7-day yields for the 100 largest taxable money funds) after falling 2 bps the week prior. (Yields fell another 7 bps on Monday to 4.87%.) Yields were 5.10% on 8/31, 5.13% on 7/31 and 6/28, 5.14% on 5/31, 5.13% on 4/30, 5.14% on 3/31 and 2/29/24, 5.17% on 1/31/24, 5.20% on 12/31/23, 4.94% on 6/30/23, 4.61% on 3/31/23 and 4.05% on 12/31/22." See also our Sept. 18 piece, "Janus Offers MMF to Support American Cancer Society; Weekly Holdings."
In October, we published, "Bloomberg, ignites on Latest MMF Reforms; Prime Inst Shift a Nonevent," which says, "Bloomberg published an article titled, 'Money-Market Funds Stay in Vogue Even as Reforms Go Into Effect,' which recapped the latest changes to the Prime Institutional money fund space. They write, 'Money-market funds are attracting record amounts of cash, even as a regulatory overhaul pins the industry with costly mandatory fees. The US Securities and Exchange Commission approved measures last year designed to make the $6.42 trillion industry more transparent and prevent investors from yanking money from such funds during market volatility or financial stress like in March 2020. The final piece of the reform requiring fund managers to impose mandatory liquidity fees went into effect on Wednesday.'"
Finally, we cover the year-end surge in MMF assets in "Money Fund Assets Break Over $7.0 Trillion; S&P on AAA Rated MFs in Q3." This article says, "Money market mutual fund assets broke the $7.0 trillion barrier for the first time ever on Wednesday, Nov. 13, according to our Money Fund Intelligence Daily. Assets have jumped following the Federal Reserve's 25 basis point rate cut last Thursday (11/7), increasing by $91.4 billion in the week through Wednesday to a record $7.001 trillion. Money fund assets have increased by $147.3 billion in November month-to-date through 11/13, and they have increased by $709.4 billion (11.3%) year-to-date in 2024."
For more 2024 (and soon 2025) News (and prior years going back to 2006), see Crane Data's News Archives. We'll continue to provide daily updates on the money fund marketplace in the coming year, so `keep reading our News and Link of the Day commentaries in 2025. Let us know if you need web access (unlimited access is for subscribers only), or if you'd like to see our latest Money Fund Intelligence, Bond Fund Intelligence or MFI Daily publications. Thanks to all of our readers and subscribers for your support in 2024, and we wish you all the best in the coming year. Merry Christmas, Happy Holidays and Happy New Year!
Money fund yields declined by 1 basis point to 4.44% on average during the week ended Friday, Nov. 29 (as measured by our Crane 100 Money Fund Index), after falling 3 bps the week prior and 9 bps two weeks prior. Yields are now reflecting most of the Federal Reserve's 25 basis point cut on November 7, but they may continue inching lower this week and next. They've declined by 62 bps since the Fed cut its Fed funds target rate by 50 bps percent on Sept. 18 and they've declined by 19 bps since the Fed cut rates by 1/4 point on 11/7. Yields were 4.65% on average on 10/31, 4.75% on 9/30, 5.10% on 8/31, 5.13% on 7/31 and 6/28, 5.14% on 5/31, 5.13% on 4/30, 5.14% on 3/31 and 2/29/24, 5.17% on 1/31/24, and 5.20% on 12/31/23.
The broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 672), shows a 7-day yield of 4.35%, down 1 bp in the week through Friday. Prime Inst money fund yields were unchanged at 4.56% in the latest week. Government Inst MFs were down 1 bp at 4.45%. Treasury Inst MFs were down 1 bp at 4.40%. Treasury Retail MFs currently yield 4.19%, Government Retail MFs yield 4.15%, and Prime Retail MFs yield 4.34%, Tax-exempt MF 7-day yields were down 19 bps to 2.67%.
Assets of money market funds rose by $70.1 billion last week to a new record high $7.063 trillion, according to Crane Data's Money Fund Intelligence Daily. For the month of November, MMF assets have surged by $200.5 billion, after increasing by $97.5 billion in October and $149.8 billion in September. Weighted average maturities were up 1 bp at 37 days for the Crane MFA and unchanged at 37 days for the Crane 100 Money Fund Index.
According to Monday's Money Fund Intelligence Daily, with data as of Friday (11/29), 112 money funds (out of 786 total) yield under 3.0% with $134.8 billion in assets, or 1.9%; 76 funds yield between 3.00% and 3.99% ($77.3 billion, or 1.1%), 598 funds yield between 4.0% and 4.99% ($6.851 trillion, or 97.0%) and following the recent rate cut there continues to be zero funds yielding 5.0% or more.
Our Brokerage Sweep Intelligence Index, an average of FDIC-insured cash options from major brokerages, was unchanged at 0.46%, after dropping 2 basis points two weeks prior. The latest Brokerage Sweep Intelligence, with data as of Nov. 29, shows that there was one change over the past week. Merrill Lynch lowered rates once again for their advisory accounts; they're now at 4.47% (down 1 bp from the week prior). Three of the 10 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.
In sweep-related news, Investment News writes, "Fidelity to move RIA clients' sweep balances to in-house product." They explain, "Cash sweep account options have long been a source of contention. These programs, used by major broker-dealers as a short holding place for client cash that is between investments, are often criticized for prioritizing profits."
The piece tells us, "Recently, Fidelity began notifying RIAs that it will default all non-retirement cash to its in-house option, FCASH. Beginning in 2025, RIAs partnered with Fidelity will find sweep account cash going from money market funds to FCASH. That decision adds to the recent dilemmas of cash sweep practices. Industrywide, companies have been criticized for having low rates in their sweep options.... There have been numerous lawsuits filed over the issue, and companies have responded to the pressure by increasing the rates they pay clients for those cash positions [on advisory-type accounts]."
It states, "Last year, Fidelity disclosed that FCASH, which has a much lower yield than money market funds, would become the only available option for RIAs' non-retirement core sweep accounts. 'To provide consistency for our advisor clients, custody non-retirement brokerage accounts will convert and default into FCASH as the core sweep position, beginning in 2025,' a Fidelity spokesperson said in an email. 'The FCASH rate is 2.32 percent as of Nov. 8, 2024.' Advisors who prefer other cash options for their clients continue to have access to a wide array of cash management choices with the ability to transact directly from those cash management vehicles, the spokesperson said."
The article quotes, "A Fidelity spokesperson told InvestmentNews via email that that the company does not resell client deposits to other banks. Fidelity's cash option, at its current rate of 2.32 percent, is significantly below the 4.27 percent available on the firm's government money market fund. RIAs could seek alternative options that maximize yield for their clients' cash holdings."
Ryan Halliday, managing partner at Crewe Advisors tells Investment News, "We still have the ability to purchase money market funds, even if they force everything back to FCASH. We just have to make sure we're watching and paying attention." The article adds, "Citywire earlier reported on Fidelity's pending switch to FCASH for all non-retirement sweep assets."
J.P. Morgan published "Short-Term Fixed Income 2025 Outlook" last week, which explains, "Cash continued to flood into MMFs as investors sought refuge in this asset class while earning 5% yields. More importantly, an inverted yield curve and low bank deposit yields made MMFs a very attractive liquidity investment. The inflows continued even as the Fed cut rates, pushing AUMs to a record $7tn, underscoring the abundance of liquidity in the system, most of which seemed to be sitting in the front end. To that end, money market spreads traded largely in a narrow range, even in the face of MMF reform." (Note: We're still taking registrations for our "basic training" event, Money Fund University, which will be held Dec. 19-20, 2024 in Providence, R.I. Please join us too for Crane Data's Holiday Party on Thursday, Dec. 19 at the Renaissance Providence from 5-7pm!)
JPM tells us, "In 2025, yields are heading lower, though we remain constructive on the money markets. Fed cuts are not going to shake off the attractive appeal of MMFs given the shallower easing cycle and uncertainty with respect to how the economy will unfold under the new US administration. We believe MMF AUMs will remain elevated at around $7tn, continuing to provide steady demand for money market instruments. In contrast to prior years, supply in the money markets in 2025 will not be driven by T-bills. Instead, it will be driven by collateral, as continued growth in net Treasury supply and demand for levered equity exposure translate into more Treasury repo, equity repo, and ABCP supply."
They write, "All told, we see total money market supply increasing by $775bn to $17.9tn in 2025. While demand for money market investors should persist, prices might need to adjust to incentivize continued absorption of that supply, particularly as RRP liquidity has fallen to low levels and hit a floor."
A section titled, "MMFs: Lower rates, no problem," states, "If we're right about our Fed interest rate forecast, a 3.75% terminal rate by 3Q25 is hardly a low yield. Cash will remain an attractive asset class even as the Fed cuts rates. This was certainly evident in the demand for MMFs this year, refuting the notion that lower rates would prompt imminent outflows. Through 11/21, total taxable money fund balances grew by $691bn (+11%) YTD and now register nearly $6.9tn. Even accounting for seasonality, this year's inflows were substantially higher than those of prior years, including 2020 but excluding 2023 when the COVID crisis and the regional banking crisis respectively drove cash into MMFs."
The outlook continues, "In the face of an inverted yield curve and volatile markets, MMFs provided a safe haven for investors seeking stability and yields -- and at extremely attractive yields at that for an overnight asset. So it was not surprising then that flows were widespread this year, with notable gains across different types of taxable MMFs with the exception of prime institutional funds as they underwent structural reforms."
JPM says, "We expect MMF AUMs to remain elevated next year. While the degree to which cash moves into MMFs may abate, we certainly do not foresee any outsized flows out of MMFs. Indeed, a look at MMF flows going back three decades, spanning over four easing cycles (1995, 2001, 2007, 2019), shows that MMFs continue to see inflows even as the Fed begins to cut rates.... In fact, in 1995, which we think is most reflective of the shallow cycle we are about to embark on and is also more comparable on an absolute yield basis, MMFs continued to see inflows throughout the entire cycle."
They add, "Fundamentally, the relative attractiveness between bank deposits and MMFs should also continue to favor the latter asset class.... [T]he spread between bank deposits and MMFs remains wide, with MMFs yielding 60bp above online bank savings accounts and 425bp above national bank deposit accounts. With a Fed that is expected to bring rates back down to neutral, we suspect banks are not going to be increasing their deposit yields anytime soon, particularly on non-operational deposits which banks still do not necessarily want. And while cuts will push MMF yields incrementally lower, the spread over deposits will remain large enough for MMFs to continue to attract incremental cash."
Finally, the piece summarizes, "All told, combination of a flat front-end yield curve and low deposit rates should keep taxable MMF balances relatively elevated. AUMs around $7tn are here to stay, which means steady demand for money market instruments."
In other news, a press release titled, "Archax Provides Access to abrdn Money Market Fund on the XRP Ledger in Collaboration With Ripple," tells us, "Archax, the first FCA regulated digital asset exchange, broker and custodian, has provided access to a money market fund from UK asset manager abrdn in tokenized form on the XRP Ledger (XRPL), a decentralized blockchain. The fund comprises part of abrdn's £3.8 billion US dollar Liquidity Fund (Lux) and represents the first tokenized money market fund on the XRPL, further establishing it as one of the leading blockchains for real-world asset (RWA) tokenization and institutional decentralized finance (DeFi)."
The release continues, "This milestone is the result of an ongoing collaboration between Archax and Ripple, the leader in enterprise blockchain and crypto solutions. It marks an important step towards unlocking operational cost savings and settlement efficiencies by deploying capital markets infrastructure on the XRPL. According to McKinsey, tokenized money market funds already exceed USD$1 billion in assets under management, and some projections estimate the value of tokenized assets could reach $16 trillion by 2030.... Ripple will allocate USD$5 million into tokens on abrdn's Lux fund."
Markus Infanger, Senior Vice President of RippleX, comments, "The arrival of abrdn's money market fund on XRPL demonstrates how real-world assets are being tokenized to enhance operational efficiencies, while further reinforcing the XRPL as one of the leading blockchains for real-world asset tokenization. There is no question that the on-chain economy is gaining traction. By working with companies like Archax, we are excited to help financial institutions like abrdn to seize the incredible opportunity represented by blockchain and digital assets technology to deliver utility at scale."
Graham Rodford, CEO of Archax, adds, "Financial institutions are understanding the value of adopting digital assets for real world use cases. There is now real momentum building for tokenized real-world assets, and Archax is at the forefront of tokenizing assets such as equities, debt instruments and money market funds. In collaboration with Ripple, we are excited to help our clients such as abrdn, which manages over half a trillion pounds in assets (as at Q2 2024), to bring them to the XRPL using Archax's tokenization engine. Institutional buyers can now purchase abrdn's Lux fund directly from Archax in token form."
