Press Releases Archives: January, 2008

Reserve Hosts "Cash Management Outlook" Media Advisory Event. Yesterday, The Reserve invited about 20 financial reporters to a talk in New York entitled "Cash Management Outlook: A recap of 2007 headlines and what it may mean to investors in 2008". The first-of-its-kind press event featured Reserve Founder & CEO Bruce Bent and Crane Data President Peter Crane discussing the market turmoil and SIV bailouts of 2007, the record growth of money market funds, and the outlook for money funds in 2008. Financial Week wrote on the event, "Investors flocking to money-market funds", and said, "Managers of money market mutual funds could see assets grow by 20% in 2008, Peter G. Crane, founder of money fund research firm Crane Data, said at a press briefing today. Mr. Crane expects increases of up to 15% in 2009.... Bruce Bent, father of the modern money-market fund and chairman of cash management company the Reserve, said a substantial portion of inflows at his firm were coming from institutional investors that were abandoning direct investments in securities in favor of money-market funds." E-mail Pete to request a copy of his "Money Funds in the Headlines & Cash Management Outlook '08" slides.

Reuters writes, "Money funds cut maturities despite rate cuts - Crane". The article says, "Managers of money market mutual funds normally lengthen maturities in their portfolios when interest rates fall, but in the current round of cuts they have been doing the opposite, Peter Crane, president and publisher of Crane Data LLC, said on Tuesday." It quotes Crane, "In this environment, because of the the asset-backed commercial paper crisis and concerns about potential redemptions, everybody has been getting shorter".

"Trade Groups Urge SEC to Scrutinize Money Funds" in Investment News. This week's Investment News features an article, "Trade groups urge the SEC to scrutinize money funds", which discusses the possibility of additional disclosure and regulation on money funds. (See Crane Data's 1/22 News brief, "Fund Democracy Wants SEC to Monitor Monthly Money Fund Holdings".) Several groups (FPA, NAPFA, AFL-CIO, Consumer Federation of America), most which have little to do with money market fund investors, have asked via gadfly Fund Democracy for funds to provide monthly portfolio holdings to the SEC. "The groups' concern over subprime exposure in money market funds may be a case of closing the barn door after the black sheep have departed," says the article. (Most funds also already post holdings on their websites.) The piece quotes Peter Crane, "You need a rocket scientist to analyze these securities. Money market securities are not traded on exchanges and have unique features and interest rates.... There's an awful lot of private placement and other issuance that just makes the sector extremely complex."

SmartMoney's "What Lower Rates Mean for You" says of "Money-Market Accounts, Money-Market Funds, CDs", "Yields on money-market funds are also sliding, as Fed rate cuts are typically passed down to investors within 35 days, says Peter Crane, publisher of Money Fund Intelligence, which tracks money-market funds. Average yields, already down to 4.14% from 4.35% before the rate cut, should drop to 3.5% in the next month -- and even further if the Fed cuts rates again at its meeting this week."

"Lifting the Lid: Auction-rate debt tying up corporate cash" writes Reuters. The piece updates the problems with auction-rate securities, "debt instruments once touted as a highly liquid cash management strategy". It says, "Some 60 auctions have failed in recent months, representing about $6 billion in tied-up assets, according to Peter Crane, president and CEO of Crane Data LLC. See also, Bloomberg's "Munis Poised for Year's First Weekly Drop on Insurer Concerns".

WSJ's "Market Drop, Fed Cut Create Opportunities For Cherry Pickers", says, "Money-market mutual funds, whose yields are currently averaging 4.32% for the 100 largest funds, are likely to fall to about 3.5% in about a month, says Peter Crane of Crane Data LLC. "If we get another cut, we may be on our way to 3%," he says. Also, USA Today's "Rate cut should help borrowers, ease credit tightness", says, "Expect money market mutual fund yields to fall three-quarters of a percentage point, to about 3.25%, within the next 30 days, says Peter Crane, president of Crane Data in Westboro, Mass. Money fund yields typically track the fed funds rate." Finally, Newsday's "Fed cut will help some, hurt some" quotes Pete Crane, "The Fed cuts are good news for everyone but savers."

Worries About Money Funds "Appear Quite Overblown" In New Barron's. In his second blow for sanity in 4 weeks, Barron's Jack Willoughby describes why money market mutual funds won't be "sunk by the mess" involving structured investment vehicles, or SIVs. The piece, "Staying Afloat in a Sea of Worry," says, "But worries about one important sector -- money market funds -- appear quite overblown.... [T]here's no evidence of a widespread or calamitous problem." He cites Bank of America Securities analyst Michael Hecht's recent reports on SIV exposure, "The major money-market funds are exposed far less to structured investment vehicles ... than some investors fear.... By August, the exposure will be nada." It also quotes our Peter Crane, "Money funds have come under some pressure, and there are still some more troubles to come, but they've fared quite well, compared with other investment vehicles. The losses, when they are finally tallied, will be in the millions, not in the billions that are predicted." Barron's recaps the nine protective actions by money fund advisors to date, and shares BoA's "SIV Wind-Down" exposure table. It cite's Hecht's call to buy asset managers with heavy money fund exposure, including Federated Investors (FII), BlackRock, Legg Mason, and Schwab.