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This month, Bond Fund Intelligence interviews Fort Washington Investment Advisors' Senior Portfolio Manager Brent Miller and Portfolio Manager Laura Mayfield, who manage investments for the Touchstone Ultra Short Duration Fixed Income Fund. We discuss their focus and policies, why spread duration is an underappreciated metric and how the pair navigate the 'flat relative value landscape.' Our Q&A follows. (Note: The following is reprinted from the February issue of our Bond Fund Intelligence, which was published on Feb. 14. Contact us at info@cranedata.com to request the full issue or to subscribe. Note too that we published our latest Bond Fund Portfolio Holdings last Friday; let us know if you'd like to see our latest "cut".)

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The Securities and Exchange Commission released its latest "Money Market Fund Statistics" summary yesterday, which confirmed that total money fund assets decreased by $4.3 billion in January to $4.017 trillion, after hitting a record $4.021 trillion in December. This is the first decrease in MMF assets following 18 straight months of gains. Prime MMFs increased $28.1 billion in January to close at $1.123 trillion, while Govt & Treasury funds dropped by $31.4 billion to $2.752 trillion. Tax Exempt funds fell by $1.0 billion to $141.8 billion. Yields were mixed for Prime MMFs while Govt MMFs and Tax-Exempt MMF yields decreased 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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This past weekend, both The Wall Street Journal and Barron's discussed the news that Morgan Stanley would buy E*Trade, citing sweep cash as one of the major reasons behind the move. The Journal's Jason Zweig writes in, "What the E*Trade Deal Tells You About the New Investing Game," that, "Morgan Stanley's takeover of E*Trade Financial Corp. for $13 billion shows how drastically the brokerage industry's business model has changed. Firms no longer want to offer investment products from all sources. Instead, they want to milk their customers' cash and manage all of the assets themselves. Investors need to understand the rules of the new game." We review this merger, as well as the latest statistics on the brokerage sweep sector, below.

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Federated Hermes, the recently renamed Federated Investors, released its latest "10-K Annual Report" Friday, which discusses a number of issues involving money funds and risks to the business. The report says, "Of the 135 Federated Funds as of December 31, 2019, Federated's investment advisory subsidiaries managed 27 money market funds totaling $286.6 billion in AUM, 49 fixed-income funds with $44.2 billion in AUM, 43 equity funds with $48.1 billion in AUM, 11 alternative/private markets funds with $11.4 billion in AUM and five multi-asset funds with $4.0 billion in AUM. As of December 31, 2019, Federated provided investment advisory services to $181.5 billion in Separate Account assets. These Separate Accounts represent assets of government entities, high-net-worth individuals, pension and other employee benefit plans, corporations, trusts, foundations, endowments, sub-advised funds and other accounts or products owned or sponsored by third parties." (See also our Feb. 3 News, "Newly Renamed Federated Hermes Earnings Call Light on Money Funds," which quotes from Federated's most recent quarterly earnings call.)

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Dan Wiener, Editor of The Independent Advisor for Vanguard Investors newsletter, published a news brief entitled "In the Land of One (Basis point, that is)," which discusses the zero-yield era for money market mutual funds. He writes, "[T]here are ... anniversaries that you'd rather forget -- forever. Here's one: Feb. 18, 2010. I'd love to forget that day but there are some important lessons Vanguard investors can learn from at least acknowledging the 10-year anniversary just a few weeks ago. On Feb. 18, 2010, all three of Vanguard's taxable money market funds' yields hit 0.01%. That's one one-hundredth of one percent."

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Last year, we saw Federated take over PNC's fund business and Invesco absorb OppenheimerFunds, and now it appears we'll see more fund consolidation in 2020. A press release entitled, "Franklin Templeton to Acquire Legg Mason, Creating $1.5 Trillion AUM Global Investment Manager," tells us, "Franklin Resources ... operating as Franklin Templeton ... announced that it has entered into a definitive agreement to acquire Legg Mason, Inc.... The acquisition of Legg Mason and its multiple investment affiliates ... will establish Franklin Templeton as one of the world's largest independent, specialized global investment managers with a combined $1.5 trillion in assets.... The combined footprint of the organization will significantly deepen Franklin Templeton's presence in key geographies and create an expansive investment platform that is well balanced between institutional and retail client AUM."

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HSBC Global Asset Management is the latest money market mutual fund manager to enter the ESG space, filing a Form N-1A (485APOS) to launch HSBC ESG Prime Money Market Fund. The new fund will include the following share classes: Class D (HEDXX), Class I (HEIXX), Intermediary Class (HEGXX), Intermediary Service Class (HETXX) and Class Y (HEYXX). The filing explains, "The Fund is a money market fund. The Fund seeks to achieve its investment objective by investing in a portfolio of high quality debt obligations with maturities of (or deemed maturities of) 397 days or less and repurchase agreements collateralized by these types of obligations. The Fund will maintain a dollar-weighted average portfolio maturity of 60 days or less and a dollar-weighted average portfolio life of 120 days or less."

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Crane Data's latest MFI International shows assets in European or "offshore" money market mutual assets falling in US Dollar and GBP funds but rising in Euro funds in the latest month. These U.S.-style funds, domiciled in Ireland or Luxemburg and denominated in US Dollars, Pound Sterling and Euros, increased by $8.3 billion over the last 30 days to $897.6 billion; they're up by $21.0 billion year-to-date. Offshore USD money funds, which hit a record $500 billion on Jan. 2, are down $3.3 billion over 30 days but up $3.1 billion YTD. Euro funds are up E11.4 billion over the previous 30 days, and YTD they're up E10.3 billion. GBP funds have fallen by L756 million over 30 days, but are up by L5.3 billion YTD. U.S. Dollar (USD) money funds (189, unchanged from the previous month) account for over half ($497.6 billion, or 55.4%) of our "European" money fund total, while Euro (EUR) money funds (92, up 5 from the previous month) total E109.0 billion (12.1%) and Pound Sterling (GBP) funds (123, up 3 from the previous month) total L230.2 billion (25.6%). We summarize our latest "offshore" money fund statistics and our Money Fund Intelligence International Portfolio Holdings (which went out to subscribers Friday), below.

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The February issue of our Bond Fund Intelligence, which was sent to subscribers Friday morning, features the lead story, "Too Hot To Handle: Bond Funds in Bubble. Burst in '20?," which reviews the latest flows and signs of a market top, and, "Touchstone Ultra Short Hits $1 Billion; Miller & Mayfield," which interviews Fort Washington Investment Advisors' Brent Miller and Laura Mayfield. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show bond fund yields fell sharply and returns surged in January. We excerpt from the new issue below. (Contact us if you'd like to see our Bond Fund Intelligence and BFI XLS spreadsheet, or our Bond Fund Portfolio Holdings data.)

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The SEC recently released its latest quarterly "Private Funds Statistics report, which summarizes Form PF reporting and includes some data on "Liquidity Funds." The publication shows that overall Liquidity fund assets rebounded in the latest reported quarter to $580 billion (up from $573 billion in Q1). 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 2017 through Second Calendar Quarter 2019 as reported by Form PF filers." (Note: Crane Data believes many of the liquidity funds are securities lending reinvestment pools and other short-term investment funds; these are not the "3c-7" private liquidity funds being offered to institutional clients by Federated, JPMorgan and some others.)

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Crane Data released its February Money Fund Portfolio Holdings yesterday, and our most recent collection, with data as of Jan. 31, 2020, shows a jump in Repo, Other (Time Deposits) and CDs, and a sharp drop in Treasuries and Agencies. Money market securities held by Taxable U.S. money funds (tracked by Crane Data) increased by $19.0 billion to $3.830 trillion last month, after increasing $24.7 billion in December, $20.8 billion in November and $75.8 billion in October. Repo continues to be the largest portfolio segment, followed by Treasury securities, then Agencies. CP remained fourth, ahead of CDs, Other/Time Deposits and VRDNs. Below, we review our latest Money Fund Portfolio Holdings statistics. (Visit our Content center to download the latest files, or contact us to see our latest Portfolio Holdings reports.)

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Crane Data's latest monthly Money Fund Portfolio Holdings statistics will be released later today, and we'll be writing our normal monthly update on the Jan. 31 data for Wednesday's News. But we also generate a separate and broader Portfolio Holdings data set based on the SEC's Form N-MFP filings, and we posted these to the website yesterday. (We continue to merge the two series, and the N-MFP version is now available via Holding file listings to Money Fund Wisdom subscribers.) Our new N-MFP summary, with data as of Jan. 31, 2020, includes holdings information from 1,082 money funds, representing assets of a record $4.031 trillion (up from $4.016 trillion last month). MMFs totaled over $4.0 trillion for the first time ever last month. We review the latest N-MFP data below.

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