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The November issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Tuesday morning, features the articles: "Money Funds Coming Back; Starting Hard Sell on Prime," which reviews the growing recovery of money funds; "Northern Trust AM's Peter Yi Talks Prime, Segmentation," which interviews Northern's Director of Short Duration Fixed Income; and, "MMFs Pressure Deposits; Banks, Brokers Raising Rates," which reviews the nascent shift in assets from banks back to money market funds. We've also updated our Money Fund Wisdom database with Oct. 31, 2017, statistics, and sent out our MFI XLS spreadsheet Tuesday a.m. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our November Money Fund Portfolio Holdings are scheduled to ship Thursday, November 9, and our November Bond Fund Intelligence is scheduled to go out Tuesday, November 14.

MFI's "Money Funds Coming Back" article says, "The gradual recovery in money market assets, rates and revenues continues, and appears to be poised to accelerate in the coming months. Prime money funds continue to build back their base, and asset managers are stepping up their push to get investors to reconsider moving some of their cash out of Government MMFs. Yields breaking over 1.0% along with noticeable spreads also appear to be drawing assets from the banking sector (see article below). While Barron's may be premature in saying that "Money-Market Funds Are Back" recently, the comeback is certainly real and appears to have legs."

MFI continues, "The Barron's piece discusses money fund yields moving over 1% and compares them with the dismal yields on brokerage sweep accounts. (See our Oct. 17 News.) It says, "It's not much, but as the Federal Reserve edges short-​term interest rates higher, money funds are finally starting to offer a yield -- sometimes even more than 1%. With a rate hike probable in December and three more expected in 2018, 'money market funds will become more attractive than they've been in a decade,' says Peter Crane, president of Crane Data."

Our Profile reads, "This month, Money Fund Intelligence again speaks with Northern Trust Asset Management's Director of Short Duration Fixed Income Peter Yi, who has steadily returned to work following a car accident last year. He tells us about Northern's pioneering role in cash "segmentation," the gradual recovery of prime fund assets and their views on differentiation in the ultra-short space."

MFI first asks about Northern's history, and Yi answers, "Sure. As you know, Northern Trust Asset Management has had a long, successful history managing cash and liquidity products. We've been managing liquidity products since the 1970's, when our trust department created our first cash sweep vehicle. Not only do we have the experience, but we're also one of the largest cash managers, whether you simply look at money market mutual fund assets or if you look at it comprehensively with our non-registered STIFs, separately managed accounts and security lending reinvestment collateral pools. This gives us a formidable presence in the liquidity business."

He continues, "Northern Trust thinks of cash management as a core capability and a product that really caters to both our institutional asset servicing business and our retail wealth management clients. Right now, we are managing about $240 billion across all of our money market and short duration strategies. As you know, having experience and leadership are critical in the money market business. This has served us well in successfully navigating not only challenging credit and interest-rate environments, but the changing landscape driven by regulatory reform."

Our "MMFs Pressure Deposits" article says, "While the data is still tentative, anecdotal and other evidence is growing that a shift in assets from banks back to money market funds is starting in earnest. Money fund assets grew faster in the third quarter than they have in years, and deposit totals are beginning to decline. Brokerage sweep rates and bank deposit rates are grudgingly moving higher as reports of high-end investors shifting cash appear in the popular press."

MFI continues, "We wrote earlier this year about the $1.0 trillion brokerage sweep cash sector and discussed how rates were finally inching higher after almost a decade stuck at virtually zero. As money fund yields, on average, approach 1.0%, the much lower-yielding brokerage sweep rates also continue to grind higher. The latest to bump rates up is Wells Fargo Advisors. Wells also announced an expansion of its available FDIC insurance, moving the total coverage limit from $1 million to $1.25 million. (See our Oct. 12 News, "Wells Bumps Up Brokerage Sweep Rates, Raises FDIC Insurance Coverage.")

A sidebar, "ICD Gets Cash;​ AFP Sessions," explains, "At last month's AFP Annual Conference, "portals" and "prime" were the big topics of discussion among cash professionals. Online trading portal ICD published a new white paper, and announced an outside investment. Their release, explains, "Institutional Cash Distributors (ICD) ... released their latest ICD Intelligencer. The whitepaper investigates various surveys on institutional short-term portfolio asset allocation, strengths and weaknesses of treasury investment options, yield comparisons on various products, and best practices for trading and investment risk management." (See our Oct. 16 News, "ICD Releases Treasury Options Paper, Announces Parthenon Investment.")"

Our November MFI XLS, with Oct. 31, 2017, data, shows total assets decreased $2.2 billion in October to $2.941 trillion after increasing $32.0 billion in September and $68 billion in August, but decreasing $32.6 billion in July. Our broad Crane Money Fund Average 7-Day Yield was up 1 basis points to 0.71% during the month, while our Crane 100 Money Fund Index (the 100 largest taxable funds) was up 3 bps to 0.90%.

On a Gross Yield Basis (7-Day) (before expenses were taken out), the Crane MFA rose 2 bps to 1.16% and the Crane 100 rose 2 bps to 1.17%. Charged Expenses averaged 0.45% and 0.28% for the Crane MFA and Crane 100, respectively. The average WAM (weighted average maturity) for the Crane MFA was 30 days (down two days from last month) and for the Crane 100 was 31 days (down one from last month). (See our Crane Index or craneindexes.xlsx history file for more on our averages.)

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Crane Data, which has been tracking money market mutual funds since 2006 and tracking bond funds since 2015, recently officially launched its high-end bond fund product "suite," Bond Fund Wisdom. Like its Money Fund Wisdom counterpart, Bond Fund Wisdom includes our Bond Fund Intelligence newsletter, our BFI XLS monthly performance spreadsheet and indexes, and our new Bond Fund Portfolio Holdings data set. Online access to our historical spreadsheets is included and a database query engine is planned for late 2018. We further describe our latest bond fund information service below. We also review our latest Weekly Money Fund Portfolio Holdings, and quote from a recent update on the ultra-short bond fund marketplace by J.P. Morgan Securities.

Our new Bond Fund Portfolio Holdings collection, which compiles, cleans and "tags" lists of securities held by bond mutual funds, includes data on Ultra-Short and Conservative Ultra-Short bond funds (the latest is as of Sept. 30, 2017). We're also producing a Short-Term bond fund holdings file, and we plan to add Intermediate-Term and other longer-term categories of bond funds in coming months. The release of our latest "live" issue file follows several months of "beta" tests. Our Bond Fund Holdings will be available only to Bond Fund Wisdom subscribers; our Bond Fund Wisdom sells for $2K a year. (Please let us know if you'd like to subscribe, or if you'd like to see our latest data set.)

Note that many bond mutual funds disclose holdings on a rolling quarterly basis, so, unlike our Money Fund Portfolio Holdings, this monthly file contains the most recent updates (and may contain holdings files with different dates -- e.g., many are 9/30 but some are 8/31, 7/31 or earlier). We'll be leaving the old holdings for funds in the file until they post, or until we receive, updated holdings. We'll also be changing this product substantially once the SEC's Form N-PORT disclosure mandates kick in during the summer of 2018. We've started to map the "Issuer" field, but our Category and Country "meta-tagging" are still a work in progress.

In related news, Crane Data also has begun publishing a Summary of our Weekly Money Fund Portfolio Holdings product. Our weekly holdings track a subset of our monthly Portfolio Holdings collection, and the latest cut (with data as of Oct. 20) includes Holdings information from over 90 money funds, representing $1.516 trillion of the $2.943 (51.5%) in total money fund assets tracked by Crane Data. (For our monthly Holdings recap, see our Oct. 11 News, "Oct. Money Fund Portfolio Holdings: Treasuries Rebound, FICC Grows.")

Our latest Weekly MFPH Composition summary shows Government assets dominating the holdings list with Repurchase Agreements (Repo) totaling $601.5 billion, or 39.7%, Treasury debt totaling $433.5 billion or 28.6%, and Government Agency securities totaling $319.1 billion, or 21.1%. Commercial Paper (CP) totaled $47.2 billion, or 3.1%, and Certificates of Deposit (CDs) totaled $46.9 billion, or 3.1%. A total of $38.4 billion or 2.53%, was listed in the Other category (primarily Time Deposits), and VRDNs accounted for $28.9 billion, or 1.91%.

The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $433.5 billion, Federal Home Loan Bank with $240.9 billion, BNP Paribas with $88.3 billion, Credit Agricole with $43.8 billion, Federal Farm Credit Bank with $41.7 billion, the Federal Reserve Bank of New York with $40.1 billion, Nomura with $34.4 billion, Societe Generale with $33.9 billion, RBC with $31.2 billion, and Wells Fargo with $30.7 billion.

The Ten Largest Funds tracked in our Weekly include: JP Morgan US Govt ($135.3B), Fidelity Inv MM: Govt Port ($98.7B), Goldman Sachs FS Govt ($87.4B), BlackRock Lq FedFund ($80.5B), Federated Govt Oblg ($70.9B), Wells Fargo Govt MMkt ($70.3B), Dreyfus Govt Cash Mgmt ($69.9B), BlackRock Lq T-Fund ($57.3B), State Street Inst US Govt ($49.8B), and Goldman Sachs FS Trs Instruments ($47.5B).

Returning to ultra-short bond funds, a recent J.P. Morgan "Short Duration Strategy Weekly" featured a "Low duration fund update." The piece explains, "The completion of MMF reform one year ago profoundly changed the structure of money markets for both investors and issuers. As institutional shareholders of MMFs were forced to choose between CNAV government MMF and VNAV prime MMF, there was some question if cash would leave MMF, particularly VNAV funds, and pursue low duration alternatives that offer slightly higher returns."

J.P. Morgan's Alex Roever, Teresa Ho and Ryan Lessing explain, "The data we have analyzed suggest there has not been a post reform move away from MMFs. Through 9/30/17, total taxable MMF outstandings have actually increased by a relatively small amount YTD (about $11bn relative to $2.5tn), although there has been a very modest rotation (about $70bn) from government to prime MMF, prompted by the roughly 30bp net yields advantage of the latter."

According to the update, "While the money fund data doesn't support this liquidity shifting hypothesis, mutual fund data show demand has grown for some low duration mutual funds and ETFs during the past year, and our own discussions with several managers of Separately Managed Liquidity Accounts (SMLAs) indicate demand for this product has also grown. We suspect the noise around MMF reform in recent years prompted liquidity-focused investors to consider other options, and as a consequence, new cash is being deployed to deposits, low duration funds and SMAs."

It continues, "We believe the beginning of Fed interest rate normalization in late 2015 also contributed to demand for these products. Among institutional investors choosing non-deposit alternatives, our conversations with many industry participants lead us to suspect SMLAs have attracted more money in recent years than ETFs or mutual funds, helped by SMLAs' greater ability to be customized and what is typically a lower fee structure. For these reasons we think SMLAs are the low investment vehicle of choice for many large corporations."

JPM's piece tells us, "Even so, the low duration fund space is large and transparent, and because many of the largest fund managers also manage SMAs with similar low-duration mandates, these funds shed light on the relative demand for various short duration asset classes. With roughly $550bn in AUM, low duration funds are now larger than prime MMF ($441bn)."

It says, "At a high level, low duration funds are typically marketed as "ultrashort" or "short term" with the former targeting portfolio duration between 0.5 and 1.5 years, and the latter 1.5 to 3.5 years. There are both ETF and open-end forms of each."

Finally, the piece adds, "At this point we should note that while there may be dozens of funds in each category and style, there are significant manager concentrations in the low duration fund space, with a few large funds tending to dominate each. Consequently, the behavior and composition of these funds can sometimes distort summary statistics. For example, funds and ETFs managed by Vanguard account for about 3% of all ultrashort AUM but 37% of short term AUM. As an aside, since a significant percentage of Vanguard's clients are non-institutional, its scale speaks to the concentration of retail demand in some of these fund categories."

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Crane Data released its October Money Fund Portfolio Holdings Tuesday, and our latest collection of taxable money market securities, with data as of Sept. 30, 2017, shows a strong rebound in Treasuries (after a big drop last month), but most other segments were flat. Money market securities held by Taxable U.S. money funds overall (tracked by Crane Data) increased by $8.5 billion to $2.759 trillion last month, after increasing $58.6 billion in August and $61.5 billion in July. Repo remained the largest portfolio segment, while Treasuries reclaimed the No. 2 spot from Agencies. CDs remained in fourth place, followed by Commercial Paper, 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 if you'd like to see a sample of our latest Money Fund Portfolio Holdings reports.)

Among all taxable money funds, Repurchase Agreements (repo) decreased $4.4 billion (-0.5%) to $959.5 billion, or 34.8% of holdings, after increasing $65.1 billion in August, falling $55.6 billion in July, and rising $12.4 billion in June. Treasury securities rose $27.8 billion (4.3%) to $673.3 billion, or 24.4% of holdings, after falling $32.7 billion in August and rising $36.7 billion in July. Government Agency Debt increased $1.2 billion (0.2%) to $667.0 billion, or 24.2% of all holdings, after falling $11.2 billion in August and increasing $48.4 billion in July. Repo, Treasuries and Agencies total $2.300 trillion, representing a massive 83.3% of all taxable holdings.

CDs and CPs decreased slightly last month, along with Other (mainly Time Deposits) securities. Certificates of Deposits (CDs) decreased $7.3 billion (-4.1%) to $170.5 billion, or 6.2% of taxable assets, after increasing $3.4 billion in August, after increasing $13.6 billion in July. Commercial Paper (CP) was down $4.4 billion (-2.4%) to $178.5 billion, or 6.5% of holdings (after increasing $16.2 in August and $8.0 billion in July. Other holdings, primarily Time Deposits, fell by $5.5 billion (-5.2%) to $100.8 billion, or 3.7% of holdings. VRDNs held by taxable funds increased by $1.1 billion (12.2%) to $9.8 billion (0.4% of assets).

Prime money fund assets tracked by Crane Data increased to $625 billion (up from $610 billion last month), or 22.7% (up from 22.2%) of taxable money fund holdings' total of $2.759 trillion. Among Prime money funds, CDs represent just under a third of holdings at 27.3% (down from 29.2% a month ago), followed by Commercial Paper at 28.6% (down from 29.9%). The CP totals are comprised of: Financial Company CP, which makes up 17.8% of total holdings, Asset-Backed CP, which accounts for 6.1%, and Non-Financial Company CP, which makes up 4.7%. Prime funds also hold 4.8% in US Govt Agency Debt, 6.4% in US Treasury Debt, 8.0% in US Treasury Repo, 1.8% in Other Instruments, 13.3% in Non-Negotiable Time Deposits, 4.3% in Other Repo, 1.8% in US Government Agency Repo, and 1.1% in VRDNs.

Government money fund portfolios totaled $1.498 trillion (54.3% of all MMF assets), up from $1.497 trillion in August, while Treasury money fund assets totaled another $636 billion (23.1%), up from $644 billion the prior month. Government money fund portfolios were made up of 43.0% US Govt Agency Debt, 18.1% US Government Agency Repo, 12.7% US Treasury debt, and 26.0% in US Treasury Repo. Treasury money funds were comprised of 69.8% US Treasury debt, 29.9% in US Treasury Repo, and 0.3% in Government agency repo, Other Instrument, and Investment Company shares. Government and Treasury funds combined now total $2.134 trillion, or 77.3% of all taxable money fund assets, down from 77.8% last month.

European-affiliated holdings decreased $101.2 billion in September to $491.0 billion among all taxable funds (and including repos); their share of holdings decreased to 17.8% from 21.5% the previous month. Eurozone-affiliated holdings decreased $76.3 billion to $325.1 billion in September; they account for 11.8% of overall taxable money fund holdings. Asia & Pacific related holdings decreased by $7.8 billion to $210 billion (7.6% of the total). Americas related holdings increased $115 billion to $2.055 trillion and now represent 74.5% of holdings.

The overall taxable fund Repo totals were made up of: US Treasury Repurchase Agreements, which decreased $12.5 billion, or -2.0%, to $628.7 billion, or 22.8% of assets; US Government Agency Repurchase Agreements (up $10.1 billion to $303.5 billion, or 11.0% of total holdings), and Other Repurchase Agreements ($27.4 billion, or 1.0% of holdings, down $1.9 billion from last month). The Commercial Paper totals were comprised of Financial Company Commercial Paper (down $1.4 billion to $111.0 billion, or 4.0% of assets), Asset Backed Commercial Paper (down $2.8 billion to $38.1 billion, or 1.4%), and Non-Financial Company Commercial Paper (down $0.1 billion to $29.4 billion, or 1.1%).

The 20 largest Issuers to taxable money market funds as of Sept. 30, 2017, include: the US Treasury ($673.3 billion, or 24.4%), Federal Home Loan Bank ($520.7B, 18.9%), Federal Reserve Bank of New York ($294.3B, 10.7%), BNP Paribas ($115.6B, 4.2%), RBC ($68.9B, 2.5%), Federal Farm Credit Bank ($64.9B, 2.4%), Wells Fargo ($54.5B, 2.0%), Nomura ($44.4B, 1.6%), Mitsubishi UFJ Financial Group Inc ($39.7B, 1.4%), Societe Generale ($38.1B, 1.4%), Bank of America ($35.3B, 1.3%), Bank of Nova Scotia ($33.2B, 1.2%), HSBC ($33.1B, 1.2%), Bank of Montreal ($32.8B, 1.2%), Credit Agricole ($32.4B, 1.2%), Toronto-Dominion Bank ($31.1B, 1.1%), Barclays PLC ($29.4B, 1.1%), Citi ($28.0B, 1.0%), and Federal National Mortgage Association ($27.8B, 1.0%).

In the repo space, the 10 largest Repo counterparties (dealers) with the amount of repo outstanding and market share (among the money funds we track) include: Federal Reserve Bank of New York ($294.3B, 30.7%), BNP Paribas ($99.5B, 10.4%), RBC ($50.2B, 5.2%), Nomura ($44.4B, 4.6%), Wells Fargo ($42.0B, 4.4%), Societe Generale ($33.4B, 3.5%), Bank of America ($29.9B, 3.1%), HSBC ($27.7B, 2.9%), Mitsubishi UFJ Financial Group Inc ($24.1B, 2.5%), and Citi ($22.0B, 2.3%).

The 10 largest Fed Repo positions among MMFs on 9/30 include: JP Morgan US Govt ($30.0B in Fed Repo), Fidelity Cash Central Fund ($21.4B), Goldman Sachs FS Gvt ($16.9B), Northern Trust Trs MMkt ($15.1B), Federated Govt Oblg ($13.0B), Vanguard Market Liquidity Fund ($12.8B), Fidelity Sec Lending Cash Central ($11.4B), Morgan Stanley Inst Lq Govt ($10.3B), Vanguard Prime MMkt Fund ($9.9B), and BlackRock Lq T-Fund ($9.7B).

The 10 largest issuers of "credit" -- CDs, CP and Other securities (including Time Deposits and Notes) combined -- include: RBC ($18.7B, 4.8%), BNP Paribas ($16.1B, 4.1%), Mitsubishi UFJ Financial Group Inc. ($15.7B, 4.0%), Skandinaviska Enskilda Banken AB ($15.4B, 3.9%), Toronto-Dominion Bank ($15.1B, 3.9%), Canadian Imperial Bank of Commerce ($14.4B, 3.7%), Svenska Handelsbanken ($13.3B, 3.4%), Bank of Montreal ($12.9, 3.3%), Wells Fargo ($12.4B, 3.2%), and Sumitomo Mitsui Banking Co ($12.4B, 3.2%).

The 10 largest CD issuers include: Bank of Montreal ($12.4B, 7.3%), Wells Fargo ($12.4B, 7.3%), Mitsubishi UFJ Financial Group Inc ($11.2B, 6.6%), Sumitomo Mitsui Banking Co ($11.1B, 6.5%), Toronto-Dominion Bank ($10.9B, 6.5%), RBC ($10.4B, 6.1%), Sumitomo Mitsui Trust Bank ($8.7B, 5.1%), Mizuho Corporate Bank Ltd ($7.2B, 4.3%), Canadian Imperial Bank of Commerce ($7.2B, 4.3%), and Landesbank Baden-Wurttemberg ($6.3B, 3.7%).

The 10 largest CP issuers (we include affiliated ABCP programs) include: Commonwealth Bank of Australia ($8.4B, 5.4%), Westpac Banking Co ($7.9B, 5.1%), BNP Paribas ($7.2B, 4.6%), JP Morgan ($7.0B, 4.5%), Bank Nederlandse Gemeenten ($6.5B, 4.2%), Bank of Nova Scotia ($6.0B, 3.9%), National Australia Bank Ltd ($6.0B, 3.9%), RBC ($5.5B, 3.6%) UBS AG ($5.0B, 3.3%), and Australia & New Zealand Banking Group Ltd ($4.7B, 3.0%).

The largest increases among Issuers include: Federal Reserve Bank of New York (up $93.3B to $294.3B), US Treasury (up $27.8B to $673.3B), Fixed Income Clearing Co (up $5.9B to $15.6B), RBC (up $5.4B to $68.9B), Svenska Handelsbanken (up $3.4B to $13.3B), Canadian Imperial Bank of Commerce (up $3.3B to $26.3B), Skandinaviska Enskilda Banken AB (up $3.2B to $15.4B), Federal Home Loan Mortgage Co (up $2.8B to $48.2B), and Norinchukin Bank (up $2.4B to $11.1B).

The largest decreases among Issuers of money market securities (including Repo) in September were shown by: Credit Agricole (down $36.9B to $32.4B), Credit Suisse (down $15.2B to $9.4B), Natixis (down $11.2B to $21.2B), Nomura (down $10.9B to $44.4B), JP Morgan (down $10.2B to $24.7B), Barclays PLC (down $8.5B to $29.4B), Societe Generale (down $8.1B to $31.1B), ING Bank (down $7.8B to $25.1B), HSBC (down $7.3B to $33.1B), and Mizuho Corporate Bank Ltd (down $4.5B to $14.9B).

The United States remained the largest segment of country-affiliations; it represents 67.2% of holdings, or $1.854 trillion. France (7.9%, $217.4B) remained in second place ahead of Canada (7.3%, $200.7B) in third. Japan (5.5%, $152.8B) stayed in fourth, while the United Kingdom (3.0%, $83.6B) remained in fifth place. The Netherlands (1.9%, $51.4B) remained in sixth place ahead of Germany (1.8%, $48.7B), while Sweden (1.7%, $48.0B) remained ahead of Australia (1.6%, $43.3B). Switzerland (0.8%, $21.2B) ranked tenth. (Note: Crane Data attributes Treasury and Government repo to the dealer's parent country of origin, though money funds themselves "look-through" and consider these U.S. government securities. All money market securities must be U.S. dollar-denominated.)

As of Sept. 30, 2017, Taxable money funds held 35.3% (up from 33.8%) of their assets in securities maturing Overnight, and another 15.1% maturing in 2-7 days (down from 16.2%). Thus, 50.4% in total matures in 1-7 days. Another 19.4% matures in 8-30 days, while 11.0% matures in 31-60 days. Note that over three-quarters, or 80.8% of securities, mature in 60 days or less (up slightly from last month), the dividing line for use of amortized cost accounting under the new pending SEC regulations. The next bucket, 61-90 days, holds 9.9% of taxable securities, while 8.2% matures in 91-180 days, and just 1.2% matures beyond 181 days.

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BNY Mellon CIS posted the second entry its new "Dreyfus Podcast Series" this week. The latest "Invested in cash" interview, entitled, "Money Market Trends Post Reform," features our very own Peter Crane. The session's description says, "Peter Crane talks about trends his firm is noticing with cash managers so far this year, the level of NAV volatility on FNAV funds, fee or gate potentials, alternatives to money funds and the implications the political landscape has on money market funds." We review Dreyfus' latest Q&A below

The podcast says, "Welcome to our second Dreyfus Podcast: Invested in Cash. Today we're talking about money market trends post reform in 2016. My name is Sue Anne Cormack. As director of sales at Dreyfus, I'm really grateful to be joined today by Pete Crane, Founder, President & CEO of Crane Data, which is money market and mutual fund information firm."

Cormack continues, "Peter is recognized as an incredible industry expert in the institutional money market fund space, and has more than 23 years of experience. Pete, thank you so much for joining us today. As you know we're fielding more and more questions about prime funds and flows and people getting in the ready position. Can you please share your observations with us about how prime funds have behaved post-reform. In other words, how might investors might think about the use of Prime funds in their investment plan?"

Crane answers, "Sure, thanks so much for having me today, Sue Ann. I think the important thing about looking at Prime funds currently is that they have begun recovering since the October 2016 reforms went in to effect. People are arguing over how much they've risen since then; it's $20, $30 billion, about 5 or 6%. The important thing is that assets have been clawing their way higher. They’ve been recovering, and you've barely seen any down weeks or months during that time. So money is slowly but surely moving back to Prime. Whether you as an investor want to join that slow trend is a decision you have to look at, but the spreads are growing, prime is slowly recovering, and going forward we do expect prime assets to continue this recovery."

When asked, "Will assets in prime funds ever equal what they once were before reform?" Crane responds, "That would be a bold prediction and a contrarian prediction. It will be a long time.... I think eventually assets may rival the trillion and a half that they were. But at this pace it would take decades. And it all depends on spreads, it all depends on if investors get comfortable with the new emergency gates and fees, which I think we'll talk about at the moment here. So prime is recovering. It's about to break back over $400 billion, it had dipped to the lowest [n years] which is $375 billion. Whether we ever reach a trillion and a half? It will be a very long time <b:>`_."

Cormack also asks, "Have you seen much movement in the NAVs within the floating NAV funds? Have any funds that you're watching been close to triggering a fee or a gate? Crane tells her, "No is the short answer. That's an equally important thing to note: in addition to the slow asset recovery, the NAV's have been stable. The average NAV for prime and institutional funds is over 1.0000, its 1.0003. So there's a little bit of leeway there. The daily liquid assets are 30%, the weekly liquid assets are about 50%, well above that 30% weekly threshold that they would first have to trigger to even consider a gate and fee. So it's clear that funds are running more conservative, they're running with more liquidity, they're trying to inch out and get a little investment yield here. But I think investors have been watching and are growing more comfortable with the concept that the floating NAV money fund will float very little."

Next, Cormack asks Crane, "We also noticed that some investors are looking at alternatives to money market funds.... What are some of your observations? Do you see investors doing anything different with the concept of segmenting their cash or operating cash in various buckets?" He explains, "Yeah, I mean there's a lot of smoke, and a little fire. But there is growing [interest]. There are a number of experiments going on in the ultra-, ultra-short bond segment [and] with private funds, [and interest with] separately managed accounts. Money is moving into those alternate sectors, but at a slow pace. They're gradually building the volume that they would need to take larger batches of assets."

Crane continues, "Investors are looking at segmenting and starting to look at running transactions through government money funds to allocate a little bit to prime, a little bit more to yield. In the past, you got your safety liquidity and yield all in one place. In the future, you're going to have to get your safety and liquidity in one place and your yield someplace else.... I think that prime money funds are still the best alternative for these secondary cash segmentation slices that are going on out there. But a lot of people are looking at ultra-shorts and looking at other options and whether they succeed or hit or not remains to be seen."

Dreyfus also asks, "What about the political landscape or other regulatory [developments] like Basel III?" Crane comments, "Some of the money fund managers out there have been just thrilled that the regulations for money funds are passed [over with] now. There's an outside chance that you could have the SEC or Congress or someone come in and tweak that again. But that's a long-shot. In general [with] the banking regulations, a lot of people expect bank assets to be pressured back into money market funds. We're not seeing that to a large degree yet. But I think yield's going to be the dominant force there. As money fund yields continue pushing towards 1.0%, as the Fed keeps hiking rates here as we go through the year, the yield attraction of money funds should begin to bring some of those banking assets in."

Cormack adds, "That's really consistent with what we're hearing as well. So with all of this in mind are there other high-level observations that you would like to share?" Finally, Crane comments, "I think my advice and comments are always the same. You really want to stay diversified. You want to keep your options open. Back during the massive shift to Government, shutting down your prime fund or banning different investments just doesn't make sense with the landscape that we are in. You can see these [potential] big shifts, where if the debt ceiling all of a sudden becomes an issue ... you may have to shift assets from a Government fund. So keeping your options open and of course watching the market develop here as it recovers from reforms is your best bet going forward."

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The New York Times writes "Money Market Funds and C.D.s Show Signs of Life." The article explains, "Benign neglect has been a rational approach to managing cash since the financial crisis. It made little sense to apply any elbow grease searching for yields when options ranged from earning nothing to earning next to nothing. But with last month's rise in the Federal Reserve's target interest rate and the expectation that there could be three rate increases this year, money market mutual funds are showing signs of life. "We are heading to 1 percent yields, and the bleeding edge of cash could touch 2 percent in 2017," said Peter G. Crane, the publisher of Money Fund Intelligence. Modest, you say? Well, modest gains may be especially appealing given recent bond losses. In the fourth quarter, core bond funds, the go-to diversification tool for most investors, fell 3 percent, as rising yields pushed down bond prices. If you're inclined to seek out even more stability in a money market mutual fund now that yields are resuscitating, make sure you understand recent changes in the rules that govern how some funds operate." It adds, "Shareholders may find these fees and gates quite unappealing; the fund industry certainly does. It is afraid that the changes will scare off investors. That's why most fund companies and brokerages have switched their default money market fund for retail clients from a prime fund to a government fund. Government funds invest in extremely liquid government debt, adding safety and liquidity, and these funds don't have redemption fees or gates. But government money market funds have a downside: lower yields. The largest retail money market fund, now called Fidelity Government Cash Reserves (it was a prime money market fund known as Fidelity Cash Reserves until the company changed the fund's mandate), yielded just 0.13 percent in early January."

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The January issue of Crane Data's Bond Fund Intelligence, which was sent out to subscribers Monday, features the lead story, "BFI Turns 2; Top Stories & Funds in '16; Outlook for '17," which reviews the top stories and funds of 2016, and it features the profile, "Invesco's Tony Wong Talks Credit, Bond Fund Lineup," an interview with Invesco Fixed Income's Head of Global Credit Research & Liquidity. Also, we recap the latest Bond Fund News, including yield increases in December and a rebound in flows in late December and January. BFI also includes our Crane BFI Indexes, which showed increases in December. We excerpt from the latest BFI below. (Watch for more excerpts from our Invesco profile later this month on www.cranedata.com, and contact us if you'd like to see a copy of our latest Bond Fund Intelligence and BFI XLS.)

Our lead Bond Fund Intelligence story says, "Bond Fund Intelligence officially launched two years ago, and our monthly newsletter on bond mutual funds continues to expand its coverage and content While our initial focus was, and continues to be, on ultra-short and short-term bond funds, we've expanded our news and performance tracking to include the entire spectrum of fixed-income funds. Below, we review BFI's mission, the major events and top-performers of the past year, and the outlook for 2017."

It continues, "BFI's mission is to bring affordable and comprehensive news and statistics coverage to the bond fund investment community. In our first issue, we began tracking about 200 bond funds, but by December 2015 we were tracking 359 funds, totaling $1.663 trillion in assets -- about half the market. Over the past year, we've grown our collection to 489 funds and $2.096 trillion in assets. We'll continue to gradually add funds, refine and expand our collection of data points, and move towards launching a database and daily product in the coming year. We'll also launch our first Crane's Bond Fund Symposium, March 23-24, 2017, in Boston."

BFI's Invesco Profile says, "This month, Bond Fund Intelligence interviews Tony Wong, Invesco's Head of Global Credit Research & Liquidity. Invesco manages over $201.7 billion in bond fund assets and another $78.3 billion in money markets. We ask Wong about the manager's latest challenges and strategies, and he explains why recent concerns over the bond market are overstated. Our Q&A follows."

The profile asks about Invesco's history, and Wong responds, "We've been in the U.S. bond mutual fund business since the '70's and liquidity since the '80's. As a global fixed income house, we have a broad range of asset class solutions and capabilities for both institutional and retail markets.... Personally I've been with the firm for 20 years now. I started as a research analyst ... and eventually moved into my current role of overseeing our global credit research platform as well as business oversight of our global liquidity franchise."

A Bond Fund News brief entitled, "Bond Fund Returns Rebound in December; Yields Rise on Fed Hike," explains, "Returns rose across most of the Crane BFI Indexes. Our BFI Total Index averaged a 1-month return of 0.51% and gained 3.71% in 2016. The BFI 100 had a return of 0.50% in Dec. and rose 4.55% for the year. The BFI Conservative Ultra-Short Index returned 0.07% and was up 1.09% in '16; the BFI Ultra-Short Index had a 1-month return of 0.14% and 1.37% for the year. Our BFI Short-Term Index returned 1.80% and 2.41% for the month and year. The BFI High Yield Index increased 1.56% in Dec. and is up 12.19% in 2016. (See p. 8+ or BFI XLS for more return data.)"

Another brief, entitled, "WSJ on Active vs. Passive & Fee Cuts," explains, "`The Wall Street Journal writes, "Investors Leave Active Funds Despite Fee Cuts." It says, "Those stock and bond pickers that cut mutual-fund fees most aggressively in 2016 are the ones that continue to lose clients to lower-cost rivals. The average asset-weighted fee for actively managed stock mutual funds fell by 4.8% in 2016 ... according to Morningstar. Meanwhile the average asset-weighted fee for actively managed bond funds fell more than 6%."

Yet another brief comments, "Bank of America Merrill Lynch Strategist Hans Mikkelsen writes, "The return of bond inflows. Last week (ending on January 4th) saw the first inflow to rate-sensitive fixed-income funds and ETFs since the US election. Flows follow returns, and the jump higher in interest rates following the elections in November has generated seven consecutive weeks of outflow from fixed income.... Similarly, the decline in interest rates from the peak reached in mid-December has allowed for inflows to return this past week."

A sidebar entitled, "World Bond Funds Up in Q3," tells us, "The U.S., by far the world's largest bond fund market, and the others in the five largest markets -- Luxembourg, Brazil, Germany and Ireland -- all showed gains in the latest quarter (Q3'16) according to the Investment Company Institute's "Worldwide Open-End Fund Assets and Flows, Third Quarter 2016." ICI's report shows worldwide bond fund assets increased $402.7 billion, or 4.6%, to $9.210 trillion in the third quarter. Bond funds represent 22.5% of the $40.85 trillion in worldwide mutual fund assets. Globally, bond funds posted inflow of $281 billion in Q3 of 2016, after inflows of $147B in Q2 and $80 billion in Q1'16."

It adds, "According to Crane Data's analysis of ICI data, the U.S. had $4.166 trillion in bond fund assets as of Sept. 30, 2016, representing 45.2% of the worldwide market. US bond fund assets were up $134.5.7 billion in the quarter, or 3.3%. Luxembourg remained the second largest bond fund market with $1.262 trillion, or 13.7%, after a $63.1 billion, or 5.3% jump. Brazil remained in third place with $598.8 billion, or 6.5% of worldwide bond fund assets. Germany ranked fourth with $562.8 billion, or 5.7%. Ireland remained in 5th place with $458.3 billion, or 5.0%. (Luxembourg and Ireland are the most popular domiciles for funds marketed across Europe.)"

Finally, Bond Fund Intelligence features the "Top Performers for 2016," stating, "The table below lists the No.-1 performing bond funds based on total return for through 12/31/16 in each of our 7 bond fund categories. Federated Ultra Short Bond Inst (FULIX) was the top-performing fund in our Conservative Ultra-Short category, Fidelity New Markets Income Fund (FNMIX) won in the Global category, AllianceBernstein High Income A (AGDAX) returned the most in our High Yield category, PIMCO Income Inst (PIMIX) was No. 1 among IntmTerm BFs, PIMCO Long-Term Credit Inst (PTCIX) was No. 1 among Long Term Bond Funds, Oppenheimer Ro High Yield Muni A (ORNAX) was No. 1 among Muni Bond Funds, Eaton Vance Short Dur Strategic Inc I (ESIIX) was No. 1 among Short Term BFs, and BBH Limited Duration I (BBBIX) placed first among Ultra-Short Bond Funds. Congratulations to the winners! Note that we continue to tweak our collections and categorizations, so watch for more changes in 2017."

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Bloomberg writes, "Bank Strains Emerge as Brexit Collides With Money-Fund Overhaul." It says, "For U.S. banks, Brexit couldn't have come at a worse time, raising funding costs just as changes to the $2.7 trillion money-fund industry threaten to sap demand for the lenders' short-term debt.... Ripple effects from the British vote to leave the European Union are compounding strains that have been building for months as a result of efforts to make the financial system safer. Wall Street strategists predict investors will pull as much as $400 billion from U.S. prime money funds before an overhaul of the industry is completed in October. Those investors are key buyers of banks' commercial paper. With prime money funds facing possible outflows, "they aren't chomping at the bit" for commercial paper, said Priya Misra, head of global interest-rates strategy at TD Securities in New York." The piece adds, "The exodus from prime funds started last year as some investment companies converted prime funds into those that only buy government debt -- exempting them from rules beginning in mid-October that require daily net asset values to fluctuate. Now investors are leaving prime funds, to avoid floating NAVs as well as restrictions such as redemption fees. The funds’ assets have declined about 20 percent this year, or $252 billion, while government-related funds gained $245 billion, or about 21 percent, according to Crane Data LLC figures through June. Banks' reliance on commercial paper leaves them in the crosshairs during the money-fund overhaul. The potential for weaker demand from prime funds is contributing to lift financing costs. Three-month commercial paper rates have risen to about 0.63 percent, from 0.24 percent a year ago. "June is the first month that we've seen noticeable outflow from prime money funds that weren't conversions-related," said Peter Crane, president of Westborough, Massachusetts-based Crane Data. "No doubt we will see more."" In other news, Reuters posted "Floating NAVs: SEC money market fund compliance risk looms on the horizon." It reads, "With the deadline for new valuation rules on certain money market funds only months away, compliance and risk professionals at fund management firms need to confirm they have taken the necessary steps to ensure that their systems are ready, as well as having communicated how such changes will impact their clients.... Of all the changes put forward, perhaps the most difficult will be the transition to floating NAV for client sales and redemptions. "The main crux of the new reforms ... from a prime and municipal perspective in the institutional funds is that those funds have to float their NAVs," Tracy Hopkins, executive vice president at BNY Mellon Fixed Income, told a recent Thomson Reuters webinar on the SEC's impending rules. Part of the challenge for funds in calculating and posting up-to-date NAVs for their funds is the timing and frequency of intraday updates, or so-called "snaps." According to Hopkins, an industry consensus seems to be forming around three updates: 9 a.m., 12 noon, and 3 p.m., but some funds are considering an 8 a.m., 12 noon and 2 p.m. schedule."

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Two of the most popular sessions at our 2016 Money Fund Symposium in Philadelphia last week were "Major Money Fund Issues 2016" and "Senior Portfolio Manager Perspectives," which featured some of the leading authorities from some of the largest players in the money fund industry. During the first session, panelists were asked about the questions they're getting most frequently of late. Fitch Ratings' Ian Rasmussen replied, "The questions usually fall within 3 main categories: They want to know about liquidity, they want to know about asset flows, and they want to know about yield." Indeed, these three topics dominated not just the conversations in these sessions, but the entire conference. (Note: Next year's Money Fund Symposium is scheduled for June 21-23 in Atlanta. Mark your calendars and watch for details late this fall. Also, see our "Money Fund Symposium 2016 Download Center" page for recordings and Powerpoints from the show.)

In the "Major Issues" session, Crane Data's Peter Crane asked, "How much is going to flow out of Prime?" Federated Investors' Deborah Cunningham said that, to date, there hasn't been a lot of movement by investors -- but she expects that to pick up over the next few months. She explained, "As we flipped the calendar into June we started to see some customers start to take action -- not many, but a few. We saw a few customers choose to leave prime and go into Govies. Government funds are actually picking up a lot of assets that are not necessarily coming from our prime funds, or others' Prime funds. I think they are coming from other market vehicles that are no longer as attractive or no longer open to them in the form they were before.... I would expect that in July we'll see a little pick up, then a lull in August, and then September [is] where everybody is making sure they're positioned properly."

Cunningham added, "Customers want to see what other customers are doing, and there is some herd mentality, if you will, to this industry. I think that will, to some degree, at least initially, solidify in people's mind where they want to be on October 14. It doesn't necessarily solidify where they want to be on October 17. `But on October 14 when the change occurs, they often want to be with others that are similar to themselves."

Panelist John Donohue of JP Morgan Asset Management concurs with the estimates floated by others that between $400 and $500 billion will move out of Prime by reform implementation. He stated, "But as long as we get through day one, the real thing is what happens on days 2, 3, and beyond. The opportunity for us is to work with them [clients] to segment their cash ... do an asset allocation around that liquidity, and hopefully they can decide what levers they want to pull to put the cash across a full spectrum of liquidity type solutions -- everything from a Govie fund to a Short Duration bond fund."

Regarding flows into Government funds, Cunningham said, "There are 4 main categories of Government funds -- Treasury only, Treasury with Repo, Government only, and Government with Repo. The Government with repo product is the one that's gaining the most." She also said it helps to have some yield now in Government funds, after having been near zero or 1 basis point for so long. "No more zero. That happened pretty much immediately with Fed lift off."

As for the trend of sweep funds going Government, she said it's an easy choice right now because Government funds have no fees and gates and they are actually earning a little yield. "But if we start to see spreads between Prime and Govie -- now about 20 basis points -- go to 30, 40, 50 basis points, there will be some solutions to figure out how to deal with the gates and fees side of that equation for even the sweep options."

On the yield differential between Prime and Government funds, Donohue explained, "The conundrum right now is, we keep talking about that yield differential between Prime and Govie being more attractive than ever at between 20-40 basis points. But over the next couple of months, that yield is going to compress. If you look at maturity profiles right now, all of the large players have anywhere from 95-100% of their fund maturing at the end of September in anticipation of large outflows. And given that the Fed is in the market giving a natural floor on Govie funds, that spread is going to collapse right on top of each other."

He added, "Some clients are going to look at that yield differential and say, 'Let me take a wait and see approach and just go into Govie <b:>`_.' So, we're going to spend a lot of time working with clients, telling them, 'If you're comfortable in Prime, stay in it, because that yield differential is going to snap back very quickly.' But that's the risk to the overall industry and the challenge we're all going to be facing."

That led to a discussion of liquidity. Said Cunningham, "For our institutional Prime funds, weekly liquid assets at this point are about 50%, and our WAMs are 35 days or less depending on the products." Rasmussen said that is on par with the trends across the industry. (Note: Our MFI Daily currently shows Prime Inst MMFs with 49.4% in WLA, or weekly liquid assets.) Added Rasmussen, "What we're concerned about are the outliers. There are certain funds that aren't building the same type of liquidity that we have seen across the industry.... Investors want to see a higher cushion." Donohue added, "Everyone is going to err on the side of having more than enough liquidity to meet even their worst case redemption analysis."

Donohue discussed the two major elements of the October reforms: fees & gates, and the floating NAV. "The gates and fees are something clients are very concerned about. It's important for everyone to educate our clients, our collective client base, on what that actually means. I believe there's a very little probability of that, but when and if it does happen, maybe it's not the worst thing that could happen. If there were gates and fees back in 2008, maybe Reserve would have survived it, and we wouldn't all be here right now."

On FNAVs, he added, "Once clients get comfortable with the FNAV concept, I personally believe they are going to look at the Ultra-Short bond fund space." Donohue continued, "If you accept the floating NAV, you go a step out of money market funds, and maybe the NAV is a little more volatile, but still very low, and you get a very attractive return, historically, versus what you have gotten. And prime funds are going to hold a ton of liquidity, so that will cause yields to not be as high as they otherwise may be. This is why I think the Ultra-Short space is the opportunity coming out of reform."

Many of the same themes were explored in the "Senior Portfolio Manager" session, moderated by Barclays' Stewart Cutler and featuring Kevin Gaffney of Fidelity Investments; Laurie Brignac of Invesco; and Peter Yi of Northern Trust Asset Management. Cutler began the conversation with the overarching trend in the industry the past two years. "Since the beginning of 2015, Prime portfolios, which had been a little over $1.4 trillion, have slid down towards about $1.1 trillion and Government funds have increased from approximately $1 trillion to $1.4 trillion."

As the reform deadline approaches, panelists discussed how they are positioning their portfolios for the likelihood of Prime outflows. All three said they were being cautious and conservative with their Prime funds, bringing in their durations, shortening WAMs, shortening WALs, and running higher weekly liquid assets. Brignac said the WLA of her funds is in the mid-40% range, which is on par with the industry average for institutional prime funds." Later in the session, Brignac said she expects those weekly liquid asset averages to go even higher. "I would think it would be closer to 60% to 70% in September."

An audience member asked, "If WLA is at 70% in September, what does that mean for the yield differential?" Answered Yi, "That's the predicament we're in. We're going to be part of this unilateral liquidity in these next few months, and it's going to destroy where yields potentially could be. We, like many in this room, believe there will be a meaningful spread between credit strategy and Government strategy. But the next 3 months, it's going to be hard to see."

Fidelity's Gaffney was asked about communicating with clients. "They know the deadline is in October, and they know they have until then to make a decision. One of the reasons why it's difficult to pin down the number of how much is going to be moving out of institutional Prime is a lot of these institutional investors have not made that decision yet. They are still thinking about their alternatives: What other options are out there? What the funds are going to look like in October? [And, what will be] the spreads between Prime and Government funds? So there are a lot of variables to think about."

On the floating NAV, Yi said, "I don't think a variable NAV is going to move very often -- when it does, it's going to be pretty small. Interest rate movements, movements from the Fed, getting caught off-sides from the Fed. You'll see some movement in the NAV, but we don't think it's going to be meaningful. Now, if there's a credit event -- an impaired asset, a distressed asset, that’s where you're going to see movements that are meaningful -- even in a constant NAV. We need to step a step back sometimes and say, 'What are the big factors that are going to move an NAV?' ... It always ends up being a credit event."

On new product launches, Brignac said one of the outcomes of reforms is that it has "changed the cash discussion that we're having with clients. We're talking about bucketing different types of cash, what is the right vehicle -- and it's going to be different for different clients. The panel yesterday was talking about ultra-short bond funds, and this is a strategy that's gaining a lot of traction and a lot of attention. Initially, a lot of clients will hit that 'easy' button and probably just move into Government funds. But I think we'll see a lot more pickup in some of these other products going into next year."

Finally, Yi added, "Ultra-Short is the real opportunity here. We have the full product suite within the money market fund space. But outside of that, we think there will be a lot of new flavors, depending on where there is investor need. We have an ultra-short fixed income business that's really been growing exponentially in this low interest rate environment... It's a great opportunity to talk about cash segmentation strategies, and we think that's resonated very well."

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As we make final preparations for next month's Crane's Money Fund Symposium in Philadelphia (June 22-24), we are also preparing for our 4th Annual European Money Fund Symposium, the largest money market event in Europe. The preliminary agenda is set for this year's show, scheduled for Sept. 20-21 in London, England. Read on for details. But first, if you haven't already registered for Money Fund Symposium, you can still do so via www.moneyfundsymposium.com. (We look forward to seeing many of you in Philadelphia next month and in London this fall!)

While the Agenda is still being tweaked for Crane's European Money Fund Symposium, registrations are now being accepted. Last year's event in Dublin attracted 120 attendees, sponsors and speakers, our largest ever, and we expect our return to London to be even bigger and better.

"European Money Fund Symposium offers European, Asian and "offshore" money market portfolio managers, investors, issuers, dealers and service providers a concentrated and affordable educational experience, as well as an excellent and informal networking venue," says Crane Data President Peter Crane. "Our mission is to deliver the best possible conference content at an affordable price to money market fund professionals," he added.

EMFS will be held at the Hilton London Tower Bridge hotel. Book your hotel room before Monday August 1 and receive the discounted room rate of L289. Registration for our 2016 Crane's European Money Fund Symposium is $1,000. Visit www.euromfs.com to register or contact us to request the PDF brochure, for Sponsorship pricing and info, and for more details.

The EMFS agenda features sessions led by many of the leading authorities on money funds in Europe and worldwide. The Day One Agenda for Crane's European Money Fund Symposium includes: "Welcome to European Money Fund Symposium" with Peter Crane of Crane Data; followed by "IMMFA Update: The State of MMFs in Europe" with Reyer Kooy and Jane Lowe of IMMFA; "Beyond MMFs: Enhanced Cash Strategies" with Jason Granet of Goldman Sachs AM and Peter Yi of Northern Trust; "Senior Portfolio Manager Perspectives," with Joe McConnell of JP Morgan AM, Jonathan Curry, of HSBC Global AM, and Deborah Cunningham of Federated Investors; and "French Money Funds, VNAV & Negative Rates," with Charlotte Quiniou of Fitch Ratings and Vanessa Robert of Moody's Investors Service.

Day One also includes: "MMFs in Asia: China, Japan, and Beyond" with Andrew Paranthoiene of Standard & Poor's and Fitch Rating's Charlotte Quiniou; "US Money Funds: Adapting to Reforms" with Charlie Cordona of BNY Mellon Cash Investment Strategies and Peter Crane; and "UK Sterling MMF Issues" with Dennis Gepp of Federated UK and Jennifer Gillespie of Legal & General IM.”

The Day Two Agenda includes: "The Changing Face of European MMFs" with Rudolf Siebel of BVI (and an additional presenter to be named later); "New Regulations: Devil in the Details" with Jane Heinrichs of ICI and Dan Morrissey of William Fry; "Strategists Speak: Negative Rates and Reforms" with Giuseppe Maraffino of Barclays and Vikram Rai of Citi.

The afternoon of Day Two features: "Repo & ABCP in Europe: MM Securities" with Kieran Davis of Barclays and David Hynes of Northcross Capital LLP; "Dueling Domiciles: Ireland vs Luxembourg; "Risks and Ratings: Areas of Concern and Changes" with Marc Pinto of Moody's and Greg Fayvilevich of Fitch Ratings; "Client Concerns & MMF Investor Issues" with James Finch of UBS Global AM, Jim Fuell of JP Morgan AM, and Kevin Thompson of SSGA <i:http://www.ssga.com>`_; and "Offshore Money Fund Data, Holdings, and Portals with Peter Crane and Ryan Kipp of Cachematrix.

In other news, Robert Pozen, former Fidelity and MFS executive and current Senior Fellow at the Brookings Institution and Senior Lecturer at MIT Sloan School of Management, penned an article for Real Clear Markets called, "Money Market Funds in China Become Less Systemically Risky. He writes, "Last year, China's stock market took a tumble, which sent shock waves through the global securities markets. Now, money market funds are booming in China and could present the next systemic risk. While Chinese regulators have taken steps to reduce that risk, the question is whether they have gone far enough."

He continues, "Assets of Chinese money market funds have doubled in the last year -- from approximately $350 billion at the end of 2014 to over $700 billion at the end of 2015. These funds are primarily sold online to individual investors by Internet giants like Alibaba and Baidu. Money market funds have become so popular in China because they offer higher interest rates than retail bank deposits. But these funds achieve higher rates by investing in a much riskier array of debt securities than U.S. money market funds -- and the average Chinese investor may not be aware of the level of risk involved. If there were significant defaults in the debt securities held by Chinese money market funds, investors would likely run for the exits, just as they did last summer in the Chinese stock market."

Pozen explains, "To prevent these potential problems, the Chinese Securities Regulatory Commission has adopted rules, which became effective in February of this year. These rules are designed to decrease the riskiness and increase the liquidity of Chinese money market funds, although the rules are still looser than the regulations for U.S. money market funds. Since Chinese money market funds are not backed by the government, they can approach bank-like levels of risk only by holding high-quality debt securities with very short maturities. Such maturities reduce the fund's exposure to defaults and other adverse events that can happen between the purchase date and the payment date."

He adds, "The new regulations move in this direction by shortening the holding period until payment of a Chinese money market fund (the weighted average maturity of its debt securities) from 180 to 120 days. But this time limit is still twice as high as the time limit in the U.S., where the weighted average maturity is 60 days for a money market fund. U.S. money market funds are also not allowed to use any leverage -- borrowing monies and investing these monies in additional securities.... Again, the Chinese regulations move in the right direction, though not as far as the safer U.S. standard. They reduce the maximum leverage of a Chinese money market fund from 40 to 20 percent of its assets."

Pozen writes, "To cope with turbulent markets, the new regulations give Chinese money market funds, like their American counterparts, more tools to meet heavy redemptions. When the liquidity of a Chinese money market fund is thin, it must impose a 1 percent redemption fee on anyone redeeming more than 1 percent of the fund. And if someone tries to redeem more than 10 percent of any Chinese money market fund, it may delay the transaction or postpone payment of the proceeds. More broadly, the regulations mandate an array of disclosures designed to educate investors about the risks of Chinese money market funds."

He concludes, "Yet, the new regulations make one potentially significant change in the credit rating of fund investments, which may not be readily apparent to retail investors. Specifically, the regulations lower the minimum rating for fund investments in non-financial bonds from AAA to AA+. These are ratings from Chinese rating agencies, which some experts already view as using less rigorous standards than international rating agencies.... `In short, the recent regulations have generally reduced the risks associated with Chinese money market funds, although they do not yet meet international best practice standards. Over the next few years, we will see whether the new restrictions will be adequately enforced by the Chinese securities regulators, and even if so, if they are enough to make this booming investment safe for individual Chinese investors."

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The May issue of our flagship Money Fund Intelligence newsletter, which was sent to subscribers Friday morning, features the articles: "Crane Data Celebrates 10th Birthday; Happy to Be Here," which looks at where Crane Data has been, where we are, and where we are going; "Goldman's Fishman Talks MMF Reforms, Growth," which profiles Dave Fishman, Head of Liquidity Solutions at Goldman Sachs Asset Management; and "ICI Fact Book Shows Money Funds Hung Tough in 2015," which reviews trends from the just-released "2016 Investment Company Fact Book." We have updated our Money Fund Wisdom database query system with April 30, 2016, performance statistics, and also sent out our MFI XLS spreadsheet Friday morning. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our May Money Fund Portfolio Holdings are scheduled to ship Tuesday, May 10, and our May Bond Fund Intelligence is scheduled to go out Friday, May 13. Below, we also review a release entitled, "First American Funds Announce Strike Times For Prime Fund, Share Class Name Changes."

MFI's lead "10th Birthday" article says, "Crane Data hits a milestone this month, celebrating our 10th birthday. Given the wild and crazy events of the past decade in the money markets, we consider ourselves lucky to have made it this far. As we've done in past May issues, we'd like to take a moment to review our progress and update you on our efforts, which include expanding the types of data we track and extending our coverage beyond money market funds. Our company, run by money fund expert Peter Crane and technology guru Shaun Cutts, was launched in May 2006 to bring faster, cheaper and cleaner information to the money fund space. We began by publishing our flagship Money Fund Intelligence newsletter, and we've grown to offer a full range of daily and monthly spreadsheets, news, database query systems and reports on U.S. and "offshore" money funds."

It continues, "Just as money market fund complexes have been busy the past year preparing for the 2016 MMF reform deadlines, so have we at Crane Data. In reaction to the new rules on website disclosure that went into effect April 14, we’ve begun publishing Daily Liquid Assets, Weekly Liquid Assets, and Daily MNAVs -- all of which money fund firms are now required to post on their websites to comply with the new regulations. Given the stresses of the zero yield environment and massive regulatory changes, we have evolved and expanded our coverage beyond money funds. In early 2015, we officially launched our Bond Fund Intelligence monthly newsletter, which tracks the bond fund universe with a focus on the ultra-short and short-term bond fund sector."

Our profile of GSAM's Dave Fishman reads, "This month, MFI profiles Dave Fishman, Head of Liquidity Solutions at Goldman Sachs Asset Management. Fishman discusses GSAM's reform plans, its fund lineup, and the industry shift from Prime to Government. Says Fishman on their recent growth, "For the past several years, we've been investing in our business, and we've been staying in front of clients, working to educate them on the coming regulatory reforms and their investment options. I think clients have responded, and our growth is simply the result of staying in front of people and investing in a business we believe in."

Responding to the question, What is your biggest priority? Fishman answers, "Our biggest priority is meeting or exceeding our clients' needs. Obviously, money fund reform has made that a bigger job compared to the past. Reform is creating significant change in a product that was basically unchanged for 40 years and has offered many features and functions that people came to rely on. So our priority is to make sure we offer the right mix of products to meet clients' needs. With this in mind, we have made some significant changes to our product line-up over the last two years, which we think set us up well for October of this year when we'll implement the final changes."

The article on the "Fact Book" explains, "ICI's just-released "2016 Investment Company Fact Book" reports that while equity and bond funds experienced outflows in 2015, money market funds had modest inflows last year. The annual guide looks at institutional and retail money fund demand and the effects of the SEC's money market fund reforms. Overall, money funds assets were $2.755 trillion at year-end, comprising 18% of the $15.7 trillion in mutual fund assets."

On "Demand for Money Market Funds," ICI says, "In 2015, money market funds received a modest $21 billion in net inflows. Money market funds experienced outflows in the first four months of 2015, with investors redeeming $162 billion, on net. Tax payments by corporations in mid-March and individuals in mid-April were likely key drivers behind these redemptions. Outflows abated and money market funds received net inflows of $183 billion over the last 8 months of the year."

In a sidebar, we discuss, "More Changes Afoot." This brief says, "The latest month-end saw 23 funds, totaling $28.4 billion, converted from Prime to Government. With these changes, $242.1 billion has now already shifted from Prime to Govt, 83.6% of the $289.7 billion slated to convert by October 14. Deutsche was by far the largest chunk of it, converting 8 funds totaling $18.8 billion on May 2."

Also, we do a sidebar on "Fee Waivers Keep Dropping," which says, "Federated, Schwab, BNY Mellon, T. Rowe Price, and Northern Trust all released their Q1 earnings this month and a common thread throughout was reduced MMF fee waivers.... BNY Mellon said in its earnings release that "roughly half of money market fee waivers have been recovered following the Fed's December rate increase." Finally, as we do every month, we review all the important "Money Fund News."

Our May MFI XLS, with April 30, 2016, data, shows total assets decreased $42.0 billion in April to $2.636 trillion, after decreasing $20.3 billion in March, increasing $37.4 billion in February, and decreasing $22.4 billion in January. Our broad Crane Money Fund Average 7-Day Yield dropped by 1 bps to 0.11% for the month, while our Crane 100 Money Fund Index (the 100 largest taxable funds) decreased 1 basis point to 0.21% (7-day). It is the first time since the beginning of the year that these indexes have declined.

On a Gross Yield Basis (before expenses were taken out), the Crane MFA was up 3 bps to 0.43% and the Crane 100 was down 1 bps to 0.46%. Charged Expenses averaged 0.31% (up 2 bps) and 0.29% (up 4 bps) for the Crane MFA and Crane 100, respectively. The average WAM (weighted average maturity) for the Crane MFA was 35 days (down 1 day from last month) and for the Crane 100 was 35 days (down 2 days). (See our Crane Index or craneindexes.xlsx history file for more on our averages.)

In other news, First American Funds' release says, "The First American family of mutual funds today announced that it intends to offer intraday liquidity for shareholders in its planned institutional prime obligations fund. As previously announced, the current First American Prime Obligations Fund will be renamed First American Institutional Prime Obligations Fund (Institutional Prime). First American plans to offer three intraday pricings for Institutional Prime at 9:00 a.m., 12:00 p.m. and 3:00 p.m. (Eastern Time) beginning October 14, 2016. Institutional Prime will be subject to a floating net asset value and the possibility of liquidity fees and redemption gates beginning October 14, 2016."

It adds, "Also as previously announced, on July 18, 2016 First American plans to launch a new fund for retail investors only, First American Retail Prime Obligations Fund (Retail Prime). Retail Prime will seek to maintain a stable $1.00 per share NAV and will price once daily at 4:30 p.m. (Eastern Time). Beginning October 14, 2016, Retail Prime will be subject to the possibility of liquidity fees and redemption gates. First American also announced today that it intends to change several share class names across its family of funds ... effective October 14, 2016."

The share class name changes are as follows: First American Govt Obligs Institutional Investor Share will be V shares; FA Inst Prime Obligs I Shares will be T shares and Institutional Investor shares will be V shares; FA Treasury Obligs Reserve Shares will be G shares and Institutional Investor shares will be V shares; FA Tax Free Obligs Institutional Investor shares will be V shares; and FA US Treasury MMF Institutional Investor Shares will be V shares.

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