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The March issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Friday morning, features the articles: "Liquidations, Changes Slowly Reshape Manager Landscape," which discusses the flurry of recent fund moves; "Ameriprise's Chris Melin on Brokerage Sweeps, Cash," which profiles the Director of Cash Products; and, "Deposits, Cash Soar in '20, Pause in '21; Banks vs. MMFs," which explores money fund vs. bank deposit growth. We also sent out our MFI XLS spreadsheet Friday a.m. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our March Money Fund Portfolio Holdings are scheduled to ship on Tuesday, March 9, and our March Bond Fund Intelligence is scheduled to go out Friday, March 12.

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The Bank For International Settlements released its latest BIS Quarterly Review, which includes two sections involving money market funds. The first article, entitled, "Investor size, liquidity and prime money market fund stress," explains, "Massive redemptions at money market funds (MMFs) investing primarily in high-quality short-term private debt securities were an important feature of the market dislocations in March 2020. Building on previous studies of the underlying drivers, we find that large investors’ withdrawals did not differentiate across prime institutional MMFs according to these funds' asset liquidity positions. We also find that, faced with large redemptions, the managers of these funds disposed of the less liquid securities in their portfolios, marking a departure from their behaviour in tranquil times. This is likely to have exacerbated market-wide liquidity shortages. After the Federal Reserve's announcement of the Money Market Mutual Fund Liquidity Facility, all funds strengthened their liquidity positions, with those hardest-hit by outflows attempting to catch up with peers."

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In early February, a release announced the "SEC Requests Comment on Potential Money Market Fund Reform Options Highlighted in President's Working Group Report." (See our Feb. 4 Link of the Day.) While interested parties have until the April 12 deadline to submit thoughts, the first real comment was posted by Jeffrey Gordon, a Professor at Columbia Law School. Gordon writes, "This letter is submitted by me personally in connection with the request for comments by the Securities Exchange Commission in response to its Request for Comments on Potential Money Market Fund Reform Measures in the President's Working Group Report of December 2010. I am the Richard Paul Richman Professor at Columbia Law School and co-director of the Millstein Center for Global Markets and Corporate Ownership. I participated extensively in two prior rounds of MMF reform proposals, including the rule-making that resulted in the present rules, commented on FSOC's proposed recommendations in 2102, and published an article that addresses MMF reform generally, 'Money Market Funds Run Risk: Will Floating Net Asset Value Fix the Problem?' (with Christopher M. Gandia). The conclusion of the article was that 'the best empirical evidence we have suggests that floating NAV will not reduce MMF run-risk during periods of financial distress.'" (See the comment letters to the SEC here.)

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The Federal Reserve Bank of New York published a "Staff Report," entitled, "Sophisticated and Unsophisticated Runs," which analyzes money fund outflows during last March's sudden coronavirus lockdown. Authors Marco Cipriani and Gabriele La Spada tell us, "In March 2020, at the beginning of the Covid-19 pandemic, investors redeemed en mass from prime money market funds (MMFs). At the height of the run, cumulative redemptions from US-dollar prime MMFs, both onshore and offshore, were 22% of industry's total net assets (TNA) as of the end of 2019. Outflows were significant for both institutional (32%) and retail investors (11%). This is the second time the industry has suffered a run over the last 20 years: in 2008, after Lehman bankruptcy, redemption pressures of similar magnitude buffeted the industry. In both cases, the Federal Reserve intervened to stem the outflows with the establishment of emergency lending facilities."

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Federated Hermes filed its latest "10-K Annual Report" with the SEC Friday, and CEO Chris Donahue also spoke last week to an investor conference. Both the filing and the presentation contained a number of statements involving money market mutual funds, and we excerpt from both the 10-K and Donahue's speech below. The annual report says about "Distribution Channels and Product Markets," "Federated Hermes' distribution strategy is to provide investment management products and services to more than 11,000 institutions and intermediaries, including, among others, banks, broker/dealers, registered investment advisors, government entities, corporations, insurance companies, foundations and endowments.... These markets and the relative percentage of managed assets at December 31, 2020 attributable to such markets are as follows: U.S. financial intermediary (63%); U.S. institutional (25%); and international (12%).... As of December 31, 2020, managed assets in the U.S. financial intermediary market included $286.2 billion in money market assets ... managed assets in the U.S. institutional market included $117.6 billion in money market assets [and] ... managed assets in the international market included ... $16.6 billion in money market assets."

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The Investment Company Institute released its latest weekly "Money Market Fund Assets" report, as well as its monthly "Trends in Mutual Fund Investing" and "Month-End Portfolio Holdings of Taxable Money Funds" for January 2021 yesterday. The first release shows money fund assets rising again, the 6th increase in the past 7 weeks. Money fund assets are up $47 billion, or 1.3%, year-to-date in 2021. Inst MMFs up $59 billion (2.6%), while Retail MMFs down $12 billion (-0.9%). Over the past 52 weeks, money fund assets have increased by $710 billion, or 20.2%, with Retail MMFs rising by $119 billion (8.9%) and Inst MMFs rising by $591 billion (27.2%).

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A press release, "Wells Fargo Enters Agreement with GTCR and Reverence Capital Partners to Sell Wells Fargo Asset Management," tells us, "Wells Fargo & Company (WFC) today announced that it has entered into a definitive agreement to sell Wells Fargo Asset Management to GTCR LLC and Reverence Capital Partners, L.P. This sale includes Wells Fargo Bank N.A.'s business of acting as trustee to its collective investment trusts and all related WFAM legal entities. Under the terms of the agreement, the purchase price is $2.1 billion. The transaction is expected to close in the second half of 2021, subject to customary closing conditions. As part of the transaction, Wells Fargo will own a 9.9% equity interest and will continue to serve as an important client and distribution partner."

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J.P. Morgan Asset Management unveiled another offering in the "ESG and Social" money fund space, launching new "Empower" share classes to support minority banks and institutions. A press release entitled, "JPMorgan Chase Announces Initiatives to Support Minority-Owned and Diverse-Led Financial Institutions," tells us, "JPMorgan Chase today announced initiatives to further support Minority Depository Institutions (MDIs) and diverse-led Community Development Financial Institutions (CDFIs), as part of the firm's recently announced $30 billion commitment to advancing racial equity. MDIs and CDFIs provide vital financial services in communities that are often underserved. In order to provide this necessary funding to underrepresented communities, many MDIs and CDFIs need additional capital themselves."

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Even more minor money market funds are falling by the wayside both in the U.S. and Europe. A Prospectus Supplement filing for BBH U.S Government Money Market Fund says the manager will merge its $78 million "`Regular Shares" (BBMXX) into its $3.8 billion "Institutional Shares" (BBSXX). Regarding the "Conversion and Re-Designation of Regular Shares to Institutional Shares and Closure of Regular Share Class," they state, "The BBH Trust's Board of Trustee's has approved a one-time conversion of the BBH U.S. Government Money Market Fund's Regular Share Class to the Fund's Institutional Share Class to occur on February 26, 2021. On the Effective Date, the Fund's Regular Share Class will be converted, re-designated and renamed 'Institutional Share Class.'" (For more on liquidations, see our Feb. 18 Crane Data News, "SunAmerica Liquidating AIG Govt MMF" and additional hotlinks at the end of the article.)

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Late last week, staffers from both the U.S. Securities & Exchange Commission and the Federal Reserve Bank of New York published papers on the repurchase agreement market. The SEC's piece was a primer entitled, "Money Market Funds and the Repo Market," which was written by Viktoria Baklanova, Isaax Kuznits and Trevor Tatum. They explain, "This primer discusses the use of repurchase agreements (repos) by money market funds (MMFs) and provides a quantitative view of key repo metrics using data from the U.S. Securities and Exchange Commission (SEC) and the Federal Reserve. The metrics cover historical trends in repo assets and liabilities, repo holdings by MMFs, counterparty types, settlement arrangements, collateral securities, and margining practices." We quote from both briefs below.

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The Securities and Exchange Commission's latest monthly "Money Market Fund Statistics" summary shows that total money fund assets increased by $35.4 billion in January to $4.817 trillion. (Month-to-date in February through 2/17, assets have increased by $24.3 billion according to our MFI Daily.) The SEC shows that Prime MMFs rose by $36.4 billion in January to $949.9 billion, Govt & Treasury funds fell by $2.0 billion to $3.752 trillion and Tax Exempt funds increased $1.0 billion to $114.8 billion. Yields were flat or lower in January. 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.

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SunAmerica is the latest asset manager to exit the money market fund space, bringing the total of U.S. MMF managers down to 64. A Prospectus Supplement for its AIG Government Money Market Fund explains, "SunAmerica Asset Management, LLC, the Fund's investment adviser, and Touchstone Advisors, Inc. announced that they have entered into a definitive agreement for Touchstone to acquire certain assets related to SunAmerica's retail mutual fund management business. Under the terms of the agreement, twelve AIG Funds are expected to be reorganized into existing or newly created series of trusts in the Touchstone fund complex. Certain AIG Funds not covered by the agreement, including the Fund, will be liquidated."

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