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CNBC.​com writes "​Guess What Cash-​Flush Companies Are Doing With Their Money?" The article says, "US companies are still sitting on a trillion dollar plus cash mountain, but this hasn'​t changed the fact, some say, that they continue to squirrel away hundreds of billions of dollars in perhaps the least sexy of all places: the bank." The piece quotes Brian Kalish, head of the finance practice at the Association for Financial Professionals, "You'​re just not getting paid to do anything right now. You'​re in this ultra low-​yield environment ... leaving the money in the bank isn'​t costing you anything.... We are still in that conservative mode from two years ago ... safety still trumps. Here we are in late November -- nobody wants to be a hero." The article continues, "​If holding cash in the bank seems a bit ... pedestrian, that'​s because it kind of is. Many companies could be putting their short-​term portfolio to work through a range of strategies, including agency securities, munis and asset-​backed securities. But many are even passing on the king of low-​risk investments -- Treasury bills -- as rock-​bottom rates make tying up cash in short stints less attractive than the ease of having cash at hand.... This isn'​t to say companies aren'​t spending -- they are, but increasingly with new dollars snapped up by a '​surge' in debt issuance in the third quarter, according to research from Deutsche Bank. Per the firm'​s research, cash levels at S&​P 500 companies excluding financials neared $​1.​1 trillion in the third quarter. Cash acquisitions in this group are up 75 percent year over year, now touching 2006 levels. The cries of corporate cash hoarding, says Deutsche Bank'​s chief U.​S. equity strategist Binky Chadha, may be overstated, adding that he believes companies are '​clearly' spending and higher levels of cash accumulation is '​pretty typical cyclical behavior.' Besides, some believe a little liquidity might not be such a bad thing nowadays." Peter Crane, founder of money-​fund research firm Crane Data, adds, "​Levels of cash should always set records. After what we'​ve seen in the last few years, you'​d be crazy not to hold a higher liquidity buffer."

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Global Treasury news website and AFP company GTNews features several money market mutual fund related stories in its latest weekly edition. The pieces include: "The Future of MMFs: Preparing for the Second Wave of Regulation by Crane Data'​s Peter Crane, which "discusses the current state of money market funds (​MMFs) and weighs up the odds of the various possible future changes; "Potential Regulation and the Effect on Short-​term Fixed Income Markets" by Invesco'​s Karen Dunn Kelley, which asks, "​How will the Basel III proposals on large global banking institutions and the President'​s working group report on increasing the regulation of US 2a-​7 money market funds (​MMFs) affect the short-​term funding markets?"; and "Post-​credit Crisis Recovery: Leveraging Tools to Help Obtain Security, Liquidity and Yield" by SunGard'​s Vince Tolve, which says, "As a result of the credit crisis, the money market fund (​MMF) industry made some significant changes over the past several year."

Crane'​s article says, "​Last month, the US Treasury released a document entitled Report of the President'​s Working Group on Financial Markets: Money Market Fund Reform Options, which laid out '​a number of options for reforms related to money market funds' intended to '​address the vulnerabilities of money market funds that contributed to the financial crisis in 2008'. Though the report doesn'​t strongly endorse any option and most of the more radical changes discussed remain long-​shots, it is clear that further regulatory action is in store for US money market funds (​MMFs), and probably for European and '​offshore' funds too."

He continues, "​Of course, regulatory uncertainty isn’​t the only issue MMFs are faced with. Ultra-​low yields, fee waivers, consolidation, lack of supply and continued concerns over credits all have buffeted money funds and cash investors over the past year, and none of these appear to be going away any time soon. Nonetheless, MMFs in the US continue to hold US$​2.​8 trillion in assets, and worldwide money funds total almost US$​4.​9 trillion. While this is down over US$​1 trillion over the past 22 months, it is still an astounding total given the near-​zero yields."

Finally, Crane comments, "Almost all of the other options all also appear to have more drawbacks than benefits, according to the PWG report (​and according to industry and investor feedback to date). MMF insurance, or a shift to a banking regulatory regime, involves massive change. A dual system of stable and floating MMFs also would likely invite confusion and the risk of cross-​contamination. Thus, the idea of a '​private liquidity facility' or '​liquidity exchange bank' appears to have the highest odds of implementation, given its support by the mutual fund industry.... This option has issues too. But for now it'​s clearly the most palatable to fund groups and it'​s likely the least disruptive option to the broader economy.... [​T]​he betting is on a private liquidity backup facility being implemented to help prevent future runs on MMFs."

Dunn Kelly comments in her GT News piece, "As a result of the recent financial crises, financial regulators are seeking to design additional regulation to prevent excessive risk taking and illiquidity of the global financial system. Included in these efforts have been the Basel III proposals focusing on large global banking institutions.... The latest credit crisis has highlighted the interconnectivity between central governments and their financial institutions and while the bond market'​s apprehension of the European sovereign debt crisis has diminished, it certainly is not over."

GTNews also includes "Yield in the Post-​crisis World" by Jim Fuell of J.​P. Morgan and "The Chase for Yield" by Douglas McPhail of SWIP. The former says, "Corporate treasurers are slowly regaining the appetite for yield. But how can treasurers combine their desire for yield with their focus on liquidity and security? And where should they look for returns in this low-​rate environment without significantly increasing risk?" The latter article asks, "How have money market funds (​MMFs) changed in the wake of the financial crisis? And how can investors make the most of them?"

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Crane Data has released the full final agenda for our new Crane'​s Money Fund University, which will be held Jan. 13-​14, 2011, at the Westin Jersey City Newport. Money Fund University will offer attendees an affordable and comprehensive two day, "​basic training" course on money market mutual funds. We'​ll cover the history of money funds, interest rates, Rule 2a-​7, ratings, rankings, money market instruments such as commercial paper and repo, and portfolio construction and credit analysis. New portfolio managers, analysts, investors, issuers, service providers, and anyone interested in expanding their knowledge of "​cash" investing should benefit from our comprehensive program. Even experienced professionals should enjoy a refresher course and the opportunity to interact with peers in an informal setting. Visit http://​www.​moneyfunduniversity.​com for the latest details or e-​mail Pete Crane for a copy of the full brochure. Note that our discounted early registration rate of $​500 goes up to $​600 starting December 1. We'​d like to especially thank our MFU Sponsors -- BofA Global Capital Management, Fidelity Investments, Fitch Ratings, Morgan Stanley, Citibank Online Investments, Invesco, and G.​X. Clarke & Co. -- for supporting our new program. Also, mark your calendars for our next Crane'​s Money Fund Symposium, which will be held June 22-​24, 2011, at the Philadelphia Marriott. We'​re preparing to release the preliminary agenda in early December, so watch www.​cranedata.​com, www.​moneyfundsymposium.​com and Money Fund Intelligence for more details.

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The November issue of Crane Data'​s flagship Money Fund Intelligence newsletter, which was e-​mailed to subscribers Friday morning, contains the articles, "PWG Report Discounts Radical Reform Options," which reviews the MMF Reform Options Report and feedback to date; "Still Loving Liquidity: Invesco Cash Turns 30," our monthly fund manager interview; and "Guzman to Launch MF Portal; More AFP News," which features a new entrant in the online money market fund trading "​portal" marketplace. The issue also includes News on fee waivers, DWS'​s Variable NAV Money Fund, recent CFTC proposals, the new class of ultra-​short money funds, and more.

We also have updated our Money Fund Wisdom database software and our MFI XLS performance rankings spreadsheet. Our latest monthly data and Crane Indexes show that yields and assets both declined slightly during October. Both our MFI and MFI XLS products have added WAL, or weighted average life, to our data tables this month, and we continue to expand our collection of liquidity information and portfolio holdings.

Our lead piece says, "​The U.​S. Treasury finally released its 'Report of the President'​s Working Group on Financial Markets: Money Market Fund Reform Options,' which briefly explores 7 possible paths regulators may take to decrease systematic risk. While the report doesn'​t endorse any option, it appears to discount the possibility of a floating NAV and to support the concept of a private liquidity facility." We cite comments and feedback from industry participants and observers to date, most of which are favorable towards the report.

MFI also profiles Invesco, which is commemorating its 30th anniversary in the cash management business. Its STIC Prime Fund was launched on Nov. 18, 1980, and it remains one of the industry'​s largest institutional money market funds. The company, which manages over $​69 billion in '​cash' assets, has since expanded its lineup to 19 money funds in four currencies. We discuss the investment manager'​s current efforts, and we look back at money fund history with Karen Dunn Kelley, CEO of Invesco Fixed Income, Lyman Missimer, Head of Global Cash Management and Municipals, Tony Wong, Head of Short-​Term Investment Grade Credit Research, and Bill Hoppe, Executive VP of Invesco Distributors.

Finally, starting Sunday, thousands of corporate treasurers will gather in San Antonio for the Association of Financial Professionals annual conference. Many of the largest institutional money fund managers will be exhibiting, and several online money market trading '​portals' and technology companies will be announcing new products or features. Among these is the first new entrant to the portal market in years, Guzman & Company'​s TreasuryHelm. We review these and more in the November issue.

Note that Crane Data will be exhibiting at AFP, which is November 7-​10 in San Antonio. Our Peter Crane will present along with The Mosaic Company'​s Ken Bodell on "Money Market Mutual Funds & Cash Investments: Doing More Due Diligence" on Tuesday morning, Nov. 9 at 10:​30am. (​E-​mail Diana to request a copy of our Powerpoint slides.) Stop by Booth #​1313 to say "​Hello" if you'​re at the show!

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Yesterday'​s Bond Buyer wrote "​Low Yields Prompt Money Market Funds to Keep Waiving". It said, "Money market funds continue to waive big chunks of their management fees as yields on cash instruments remain too low to charge the full amount. A spike in certain short-​term interest rates in the second and third quarters allowed money funds to reclaim a few basis points of the fees they had been waiving. It didn'​t last. Now that those interest rates have slipped back down, money market fund managers expect to continue reimbursing most of their fees to shareholders.... The industry is on pace to collect about $​7.​5 billion in fees this year, about half what it collected last year. Not all funds are waiving fees -- some are closing down altogether. There were more than 2,​000 money funds at the end of 2008, according to the Investment Company Institute. Today, there are 1,​775. If money fund complexes wanted to blame someone, it would be Ben Bernanke. The Federal Reserve chairman has pinned his target for short-​term interest rates to zero since late 2008, and has repeatedly pledged to keep it there indefinitely. The Fed'​s overnight lending rate is officially in a range between 0% and 0.​25%." Bond Buyer adds, "​The average expense ratio for the 10 biggest tax-​free money funds is 0.​32%, according to Crane Data, compared with 0.​22% for the biggest taxable funds. Peter Crane, founder of the firm, cited two reasons tax-​free funds charge higher fees. The most important is that taxable funds are used principally by institutional investors, while tax-​free funds are a retail phenomenon. That means taxable funds are ­​executing more big-​block transactions, while tax-​free funds are dealing with smaller shareholders with smaller transactions."

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