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The Investment Company Institute released its latest monthly "Trends in Mutual Fund Investing" reports yesterday. Their numbers confirm a jump in money fund assets in December, following a jump in November and a dip in October. ICI's "December 2017 - Trends" shows a $51.8 billion increase in money market fund assets in December to $2.847 trillion. This follows a $57.9 billion increase in November, a $8.8 billion decrease in October, a $28.8 billion increase in Sept., a $71.8 billion increase in August, and a $13.6 billion increase in July. In the 12 months through December 31, money fund assets have increased by $119.2 billion, or 4.4%. We review ICI's latest reports below, and we also quote from a filing for a new money market fund, Semper U.S. Treasury Money Fund.

ICI's monthly report states, "The combined assets of the nation's mutual funds increased by $149.60 billion, or 0.8 percent, to $18.75 trillion in December, according to the Investment Company Institute’s official survey of the mutual fund industry. In the survey, mutual fund companies report actual assets, sales, and redemptions to ICI."

It explains, "Bond funds had an inflow of $13.40 billion in December, compared with an inflow of $14.97 billion in November…. Money market funds had an inflow of $49.40 billion in December, compared with an inflow of $55.44 billion in November. In December funds offered primarily to institutions had an inflow of $33.80 billion and funds offered primarily to individuals had an inflow of $15.59 billion."

The latest "Trends" shows that both Taxable and Tax Exempt MMFs gained assets again last month. Taxable MMFs increased by $49.3 billion in December, after increasing by $57.4 billion in November and decreasing $9.4 billion in October, but increasing $30.1 billion in September, $73.5 billion in August and $11.9 billion in July. Tax-Exempt MMFs increased $2.5 billion in December, after increasing $0.5 billion in November and $0.9 billion in October, but decreasing $1.3 billion in September and $1.7 billion in August. Over the past year through 12/31/17, Taxable MMF assets increased by $118.3 billion (4.6%) while Tax-Exempt funds rose by $0.8 billion over the past year (0.6%).

Money funds now represent 15.2% (up from 15.0% the previous month) of all mutual fund assets, while bond funds represent 21.7%, according to ICI. The total number of money market funds decreased by 9 to 382 in December, down from 421 a year ago. (Taxable money funds fell by 9 to 299 and Tax-exempt money funds were unchanged over the last month.)

ICI also released its latest "Month-End Portfolio Holdings of Taxable Money Funds," which confirmed a surge in Repo and a sharp drop in CDs in December. Repo remained the largest portfolio segment; it was up $51.9 billion, or 5.7%, to $956.4 billion or 35.2% of holdings. Repo has increased by $156.2 billion over the past 12 months, or 19.5%. (See our Jan. 11 News, "Jan. Money Fund Portfolio Holdings: Repo Jumps, Breaks 1.0 Trillion.")

Treasury Bills & Securities remained in second place among composition segments; they rose by $354 million, or 0.1%, to $702.2 billion, or 25.9% of holdings. Treasury holdings have fallen by $94.1 billion, or -11.8%, over the past year. U.S. Government Agency Securities remained in third place; they rose by $6.0 billion, or 0.9%, to $682.5 billion, or 25.1% of holdings. Agency holdings have risen by $4.7 billion, or 0.7%, over the past 12 months.

Certificates of Deposit (CDs) stood in fourth place; they decreased $35.5 billion, or -16.3%, to $182.4 billion (6.7% of assets). CDs held by money funds have risen by $34.6 billion, or 23.4%, over 12 months. Commercial Paper remained in fifth place, increasing $1.9B, or 1.3%, to $148.2 billion (5.5% of assets). CP has increased by $44.4 billion, or 42.7%, over one year. Notes (including Corporate and Bank) were down by $404 million, or -5.2%, to $7.4 billion (0.3% of assets), and Other holdings increased to $15.0 billion.

The Number of Accounts Outstanding in ICI's series for taxable money funds increased by 306.4 thousand to 26.885 million, while the Number of Funds declined by 9 to 299. Over the past 12 months, the number of accounts rose by 1.650 million and the number of funds decreased by 12. The Average Maturity of Portfolios was 32 days in December, up 2 days from November. Over the past 12 months, WAMs of Taxable money funds have shortened by 12 days.

In other news, a filing for the new Semper U.S. Treasury Money Fund tells us, "The Semper U.S. Treasury Money Market Fund (the “Fund”) seeks to provide current income while maintaining liquidity and a stable share price of $1.00." Run by Semper Capital Management, the fund will have an expense ratio of 0.30% (after a 0.12% waiver).

It adds, "The Semper U.S. Treasury Money Market Fund (the "Fund") is a series of Forum Funds II (the "Trust"), an open-end, management investment company (mutual fund).... The Advisor receives an advisory fee from the Fund at an annual rate equal to 0.20% of the Fund's average annual daily net assets under the terms of the Advisory Agreement.... Thomas Mandel, CFA, has been the portfolio manager of the Fund since its inception in 2018 and is responsible for the day-to-day management of the Fund."


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Jul 11

Crane Data released its July Money Fund Portfolio Holdings Friday, and our most recent collection, with data as of June 30, 2020, shows another increase in Treasuries and big drops in Government Agency Debt and Repo last month. Money market securities held by Taxable U.S. money funds (tracked by Crane Data) decreased by $159.1 billion to $4.963 trillion last month, after increasing $31.6 billion in May, a staggering $529.4 billion in April and $725.6 billion in March (and $5.0 billion in February). Treasury securities broke the $2.5 trillion level, and remained the largest portfolio segment, followed by Repo, 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.)

Among taxable money funds, Treasury securities increased by $60.8 billion (2.5%) to $2.544 trillion, or 51.3% of holdings, after increasing $355.9 billion in May, $795.7 billion in April and $303.1 billion in March. Repurchase Agreements (repo) decreased by $124.3 billion (-11.6%) to $946.6 billion, or 19.1% of holdings, after decreasing $216.7 billion in May, $238.4 billion in April and increasing $225.1 billion in March. Government Agency Debt decreased by $65.2 billion (-6.9%) to $879.2 billion, or 17.7% of holdings, after decreasing $99.8 billion in May, increasing $6.9 billion in April and $292.5 billion in March. Repo, Treasuries and Agencies totaled $4.370 trillion, representing a massive 88.1% of all taxable holdings.

Money funds' holdings of CP, CDs, Other (mainly Time Deposits) and VDRNs all fell in June. Commercial Paper (CP) decreased $6.5 billion (-2.2%) to $286.8 billion, or 5.8% of holdings, after increasing $5.2 billion in May and decreasing $11.9 billion in April and $24.1 billion in March. Certificates of Deposit (CDs) fell by $9.1 billion (-4.2%) to $208.2 billion, or 4.2% of taxable assets, after decreasing $7.4 billion in May, increasing $12.6 billion in April and falling $74.3 billion in March. Other holdings, primarily Time Deposits, decreased $13.7 billion (-14.9%) to $78.0 billion, or 1.6% of holdings, after decreasing by $5.7 billion in May, $5.7 billion in April and $8.0 billion in March. VRDNs decreased to $19.4 billion, or 0.4% of assets, from $20.6 billion the previous month. (Note: This total is VRDNs for taxable funds only. We will publish Tax Exempt MMF holdings separately late Monday.)

Prime money fund assets tracked by Crane Data increased $19.0 billion to $1.154 trillion, or 23.3% of taxable money funds' $4.963 trillion total. Among Prime money funds, CDs represent 18.0% (down from 19.1% a month ago), while Commercial Paper accounted for 24.8% (down from 25.7%). The CP totals are comprised of: Financial Company CP, which makes up 14.2% of total holdings, Asset-Backed CP, which accounts for 6.0%, and Non-Financial Company CP, which makes up 4.6%. Prime funds also hold 6.7% in US Govt Agency Debt, 29.6% in US Treasury Debt, 3.4% in US Treasury Repo, 0.7% in Other Instruments, 3.7% in Non-Negotiable Time Deposits, 4.2% in Other Repo, 5.6% in US Government Agency Repo and 0.9% in VRDNs.

Government money fund portfolios totaled $2.558 trillion (51.5% of all MMF assets), down $98.0 billion from $2.656 trillion in June, while Treasury money fund assets totaled another $1.251 trillion (25.2%), down from $1.330 trillion the prior month. Government money fund portfolios were made up of 31.3% US Govt Agency Debt, 12.2% US Government Agency Repo, 44.3% US Treasury debt, 11.9% in US Treasury Repo, 0.2% in VRDNs and 0.1% in Investment Company. Treasury money funds were comprised of 85.6% US Treasury Debt, 14.3% in US Treasury Repo and 0.1% U.S. Government Agency Debt. Government and Treasury funds combined now total $3.809 trillion, or 76.7% of all taxable money fund assets.

European-affiliated holdings (including repo) fell by $92.3 billion in June to $546.9 billion; their share of holdings fell to 11.0% from last month's 12.5%. Eurozone-affiliated holdings fell to $353.5 billion from last month's $435.3 billion; they account for 7.1% of overall taxable money fund holdings. Asia & Pacific related holdings decreased $17.8 billion to $272.5 billion (5.5% of the total). Americas related holdings fell $49.0 billion to $4.136 trillion and now represent 83.4% of holdings.

The overall taxable fund Repo totals were made up of: US Treasury Repurchase Agreements (down $93.7 billion, or -15.2%, to $521.8 billion, or 10.5% of assets); US Government Agency Repurchase Agreements (down $30.2 billion, or -7.4%, to $376.1 billion, or 7.6% of total holdings), and Other Repurchase Agreements (down $0.5 billion, or -1.0%, from last month to $48.7 billion, or 1.0% of holdings). The Commercial Paper totals were comprised of Financial Company Commercial Paper (up $25.7 billion to $163.6 billion, or 3.3% of assets), Asset Backed Commercial Paper (up $1.2 billion to $69.7 billion, or 1.4%), and Non-Financial Company Commercial Paper (down $33.4 billion to $53.5 billion, or 1.1%).

The 20 largest Issuers to taxable money market funds as of June 30, 2020, include: the US Treasury ($2,544.4 billion, or 51.3%), Federal Home Loan Bank ($542.3B, 10.9%), Federal National Mortgage Association ($124.9B, 2.5%), Fixed Income Clearing Co ($111.3B, 2.2%), RBC ($109.1B, 2.2%), BNP Paribas ($106.8B, 2.2%), Federal Home Loan Mortgage Co ($103.7B, 2.1%), Federal Farm Credit Bank ($102.5B, 2.1%), JP Morgan ($86.3B, 1.7%), Mitsubishi UFJ Financial Group Inc ($62.4B, 1.3%), Citi ($55.8B, 1.1%), Sumitomo Mitsui Banking Co ($53.2B, 1.1%), Barclays ($51.7B, 1.0%), Toronto-Dominion Bank ($44.4B, 0.9%), Credit Agricole ($43.4B, 0.9%), Bank of Montreal ($39.7B, 0.8%), Bank of America ($37.2B, 0.7%), Canadian Imperial Bank of Commerce ($35.1B, 0.7%), Bank of Nova Scotia ($34.5B, 0.7%) and Societe Generale ($33.8B, 0.7%).

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: Fixed Income Clearing Co ($111.1B, 11.7%), BNP Paribas ($95.3B, 10.1%), RBC ($78.9B, 8.3%), JP Morgan ($75.5B, 8.0%), Citi ($47.5B, 5.0%), Mitsubishi UFJ Financial Group ($41.9B, 4.4%), Barclays ($36.0B, 3.8%), Sumitomo Mitsui Banking Corp ($34.1B, 3.6%), Bank of America ($33.8B, 3.6%) and Credit Agricole ($32.1B, 3.4%). Fed Repo positions among MMFs on 6/30/20 still include only Franklin US Govt Money Market Fund ($1.0B).

The 10 largest issuers of "credit" -- CDs, CP and Other securities (including Time Deposits and Notes) combined -- include: RBC ($30.3B, 6.1%), Toronto-Dominion Bank ($29.2B, 5.9%), Mitsubishi UFJ Financial Group ($20.5B, 4.2%), Sumitomo Mitsui Banking Co ($19.1B, 3.9%), Canadian Imperial Bank of Commerce ($18.5B, 3.8%), Sumitomo Mitsui Trust Bank ($17.4B, 3.5%), Bank of Nova Scotia ($16.9B, 3.4%), Mizuho Corporate Bank Ltd ($16.7B, 3.4%), Barclays ($15.7B, 3.2%) and Credit Suisse ($13.3B, 2.7%).

The 10 largest CD issuers include: Sumitomo Mitsui Banking Co ($15.1B, 7.2%), Mitsubishi UFJ Financial Group Inc ($15.0B, 7.2%), Toronto-Dominion Bank ($13.1B, 6.3%), Sumitomo Mitsui Trust Bank ($12.3B, 5.9%) Bank of Montreal ($11.1B, 5.4%), Natixis ($9.4B, 4.5%), Bank of Nova Scotia ($9.2B, 4.4%), Mizuho Corporate Bank Ltd ($9.2B, 4.4%), Svenska Handelsbanken ($8.7B, 4.2%) and Canadian Imperial Bank of Commerce ($7.5B, 3.6%).

The 10 largest CP issuers (we include affiliated ABCP programs) include: RBC ($18.0B, 7.3%), Toronto-Dominion Bank ($15.7B, 6.3%), JP Morgan ($10.8B, 4.4%), Societe Generale ($9.9B, 4.0%), Canadian Imperial Bank of Commerce ($9.8B, 3.9%), Caisse des Depots et Consignations ($8.9B, 3.6%), ING Bank ($7.3B, 2.9%), Barclays PLC ($7.2B, 2.9%), Credit Suisse ($7.2B, 2.9%) and Credit Suisse ($7.0B, 2.8%).

The largest increases among Issuers include: the US Treasury (up $60.8B to $2.544 trillion), Toronto-Dominion Bank (up $5.2B to $44.4B), Citi (up $4.9B to $55.8B), Bank of Montreal (up $4.4B to $39.7B), Sumitomo Mitsui Trust Bank (up $4.1B to $23.0B), Federal Home Loan Mortgage Corp (up $2.2B to $103.7B), Skandinaviska Enskilda Banken AB (up $1.5B to $9.6B), Wells Fargo (up $1.4B to $29.2B), UBS AG (up $1.3B to $9.5B) and Caisse des Depots et Consignations (up $1.3B to $9.1B).

The largest decreases among Issuers of money market securities (including Repo) in June were shown by: Federal Home Loan Bank (down $64.1B to $542.3B), Fixed Income Clearing Corp (down $24.9B to $111.3B), BNP Paribas (down $21.5B to $106.8B), JP Morgan (down $13.5B to $86.3B), Societe Generale (down $12.4B to $33.8B), Credit Agricole (down $11.3B to $43.4B), Barclays PLC (down $8.3B to $51.7B), Natixis (down $7.4B to $26.6B), Deutsche Bank AG (down $7.0B to $13.7B) and RBC (down $6.6B to $109.1B).

The United States remained the largest segment of country-affiliations; it represents 77.7% of holdings, or $3.856 trillion. Canada (5.6%, $279.5B) was number two, and France (4.8%, $236.7B) was third. Japan (4.5%, $222.5B) occupied fourth place. The United Kingdom (2.3%, $114.7B) remained in fifth place. Germany (1.2%, $58.0B) was in sixth place, followed by The Netherlands (1.1%, $52.5B), Sweden (0.7%, $35.9B), Australia (0.7%, $32.2B) and Switzerland (0.6%, $30.2B). (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 June 30, 2020, Taxable money funds held 28.7% (down from 32.4%) of their assets in securities maturing Overnight, and another 9.2% maturing in 2-7 days (down from 10.3% last month). Thus, 37.9% in total matures in 1-7 days. Another 18.1% matures in 8-30 days, while 14.7% matures in 31-60 days. Note that over three-quarters, or 70.0% of securities, mature in 60 days or less (down slightly from last month), the dividing line for use of amortized cost accounting under SEC regulations. The next bucket, 61-90 days, holds 11.8% of taxable securities, while 14.9% matures in 91-180 days, and just 2.7% matures beyond 181 days.

Jul 08

The July issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Wednesday morning, features the articles: "Fidelity Exits Prime Inst Space, Though Assets Growing Nicely," which focuses on the closing of some institutional prime money market funds; "T. Rowe Price's Lynagh Says Stay True to MMF Mandate," which profiles the VP and leader of TRP's cash business; and, "AFP Liquidity Survey: Safety, Bank Relationships Still Key," which reviews the latest preferences of corporate treasurers. We've also updated our Money Fund Wisdom database with June 30 statistics, and we sent out our MFI XLS spreadsheet Wednesday a.m. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our July Money Fund Portfolio Holdings are scheduled to ship on Friday, July 10, and our July Bond Fund Intelligence is scheduled to go out Wednesday, July 15.

MFI's "Fidelity Exits" article says, 'Fidelity Investments recently announced its 'Fidelity Institutional Prime Money Market Funds Liquidation,' telling us, 'We have decided to liquidate our two institutional prime money market funds: Fidelity Investments Money Market (FIMM) Prime Money Market Portfolio and Fidelity Investments Money Market (FIMM) Prime Reserves Portfolio. Both funds will remain fully accessible to investors until their liquidation on or about August 14, 2020.... It is important to note that this decision does not affect any of our other money market funds -- institutional or retail -- and there is no need to take immediate action. We are committed to working with our institutional clients to determine alternative liquidity investment products that best suit their needs by August 12.'"

The announcement continues, "Our decision to liquidate these two funds was made after thoughtful review and consideration of our experience with investor behavior in institutional prime money market funds during periods of market stress, evolving institutional investor preferences, and our broader money market business. We are choosing to exit the institutional prime segment of the marketplace because we believe we can better meet institutional investors' needs with other cash management products."

Our "Profile" reads, "This month, MFI interviews T. Rowe Price Group Vice President Joseph Lynagh, who runs T. Rowe's cash management operation, and also its ultra-short bond strategies. Lynagh will be retiring early next year after three decades at the Baltimore-based fund manager. We ask him about the recent market turmoil (and past episodes), and he tells us about the firm's history, the latest crisis, fee waivers and a number of other issues. He says we'll have to 'buckle down' again to make it through the latest zero yield environment. Our Q&A follows."

MFI says, "Give us some history." Lynagh tells us, "T. Rowe has been involved in money funds since 1976.... The Prime Reserve Fund was our flagship fund. It was in place ... when interest rates really spiked and money funds were quite the story, posting yields of 10-11 percent. Against the context of today, that sounds like a completely different universe.... We later launched the Tax-Exempt Money Fund to give us a presence in the muni space.... We added a U.S. Treasury Money Fund [and] state-specific funds on the muni side, California, New York and later Maryland. We then introduced what at the time was a low-fee product in our 'Summit' line of funds."

The "Survey" article tells readers, "The Association for Financial Professionals recently released its 'AFP Liquidity Survey,’ and a press release entitled, 'Companies Turn to Bank Deposits as COVID-19 Crisis Continues.' The latter says, 'Companies are holding their short-term investments in banks due to concerns over the economy, according to the 2020 AFP Liquidity Survey, underwritten by Invesco.' It shows that '51% of respondents revealed that they increased their short-term investments in banks. This is the highest percentage in three years and a reversal of a downward trend that began in 2015. Although the survey was taken before the full effect of liquidity preservation efforts had set in due to the COVID-19 outbreak, this flight to caution likely reflects concerns that the pandemic poses a critical threat to the global economy.'"

AFP, which just cancelled its October conference in Las Vegas (see here), explains, "Safety continues to be the most-valued short-term investment objective for 62% of organizations, followed by liquidity at 34% and yield at a distant third with 4%. Given the current recession, we should probably expect larger shares of companies opting for safety in the future. As the crisis surrounding the pandemic unfolds, trust in banking partners will be paramount as the survey reflects. Ninety-three percent of respondents consider the overall relationship with their banks to be the primary driver in bank deposit selection. Seventy-three percent indicated that the credit quality of a bank is a deciding factor in determining where to maintain balances."

The latest MFI also includes the News brief, "Money Fund Assets Plunge in June," which says, "Assets fell by $113.0 billion in June to $5.050 trillion, but they're still up $1.092 trillion YTD. ICI also shows assets falling for 6 straight weeks after 15 straight weeks of inflows. (Assets have rebounded this week though, according to our MFI Daily.)

A second News piece titled, "Money Fund Yields Bottoming," says, "Our flagship Crane 100 inched down by 3 basis points to 0.11% last month, and expense ratios continue to inch lower as fee waivers increase. Watch for our revised MFI XLS and craneindexes.xlsx with updated expense info on 7/9."

Our July MFI XLS, with June 30 data, shows total assets decreased by $113.0 billion in June to $5.050 trillion, after increasing $31.6 billion in May, jumping $417.9 billion in April and skyrocketing $688.1 billion in March. Our broad Crane Money Fund Average 7-Day Yield fell 2 bps to 0.07% during the month, while our Crane 100 Money Fund Index (the 100 largest taxable funds) was down 3 bps to 0.11%.

On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA was down 2 bps at 0.33% and the Crane 100 also fell to 0.32%. Charged Expenses averaged 0.26% (unchanged from last month) and 0.21% (unchanged from the previous month), respectively for the Crane MFA and Crane 100. The average WAM (weighted average maturity) for the Crane MFA and Crane 100 was 40 (down 1 day) and 43 days (down 2 days) respectively. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)

Jun 05

The June issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Friday morning, features the articles: "MFs Begin Waiving Expenses to Avoid Negative Yields," which focuses on fee waivers as money fund yields approach zero; "Invesco's Brignac on Time-Tested Process, Client Care," which profiles the CIO for Invesco Global Liquidity; and, "NY Fed Blog Reviews MMLF, CPFF, PDCF Fed Support Plans," which looks at the Fed's lending facilities. We've also updated our Money Fund Wisdom database with May 31 statistics, and was 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 June Money Fund Portfolio Holdings are scheduled to ship on Tuesday, June 9, and our June Bond Fund Intelligence is scheduled to go out Friday, June 12.

MFI's "Waiving Expenses" article says, "Money funds have stabilized at a record $5.2 trillion following a harrowing March and a surprisingly robust recovery in April and May. While CP market turmoil, the Prime asset drop and recovery and the Government MMF asset bonanza are still stories, the big issue facing funds is now zero and perhaps negative yields, along with fee waivers and reduced expenses. Yields have fallen to 0.15% on average and over 25% of assets (and 50% of funds) are now on the 0.00%-0.01% floor."

It continues, "During the last zero yield era (2009-2015), funds basically waived half of their fees, cutting expenses from roughly 0.35% to 0.17%. While it's difficult to get timely and accurate expense and waiver data, it's clear that waivers are starting to bite and expenses are moving downwards. (We update ours using the SEC's Form N-MFP info, but we don't update until the 6th business day -- so see our June MFI XLS and craneindexes.xlsx file on the website on Monday for the latest.)"

Our "Profile" reads, "This month, Money Fund Intelligence interviews Laurie Brignac, Chief Investment Officer for Invesco Global Liquidity, which will celebrate its 40th birthday this year. (Money funds will celebrate their 50th this October.) Brignac tells us about Invesco's history, about the events of the last several months and the issues facing money fund managers for the remainder of 2020. Our Q&A follows."

MFI says, "Give us a little history. Brignac tells us, "We launched our first money market fund back in 1980 and at that time we were known as AIM Investments. AIM merged with Invesco in the late '90s, but we're proud of the fact that we have the same investment process that we used on that first day in 1980. I don't know if many people can say that. The process has stood the test of time and worked very well for our clients over multiple interest rate and credit cycles. We're very proud of the fact that we have never had to buy securities or support any of our money market funds, even through the financial crisis. We've been able to honor all purchases and redemptions on T-0 basis."

The "NY Fed Blog" article tells readers, "The Federal Reserve Bank of New York posted a series of 'Liberty Street Economics' blogs reviewing the Fed's recent support facilities, including 'The Money Market Mutual Fund Liquidity Facility,' 'The Primary Dealer Credit Facility' and 'The Commercial Paper Funding Facility.' The MMLF piece tells us, 'Over the first three weeks of March, as uncertainty surrounding the COVID19 pandemic increased, prime and municipal (muni) money market funds (MMFs) faced large redemption pressures. Similarly to past episodes of industry dislocation, such as the 2008 financial crisis and the 2011 European bank crisis, outflows from prime and muni MMFs were mirrored by large inflows into govt MMFs.'"

The post explains, "To prevent outflows from prime and muni MMFs from turning into an industry-wide run, as happened in September 2008 when one prime MMF 'broke the buck,' the Federal Reserve announced the establishment of the Money Market Mutual Fund Liquidity Facility, or MMLF, on March 18. Under this facility, the Federal Reserve Bank of Boston provides loans to eligible borrowers ... taking as collateral eligible securities purchased from prime and muni MMFs. The U.S. Treasury provides $10 billion of credit protection to the Federal Reserve from the Treasury's Exchange Stabilization Fund."

The latest MFI also includes the News brief, "Money Fund Assets Up in May But Down in June," which writes, "MMF assets increased by $31.6 billion in May to a record $5.163 trillion according to Crane's MFI XLS. ICI's latest weekly shows assets falling by $36.3 billion in the latest week to $4.752 trillion."

A second News piece titled, "Northern Liquidating Prime Obligs," says, "Northern Institutional Funds filed to liquidate its $1.7 billion Northern Prime Obligations Portfolio. The filing says, 'The Board ... has determined ... that the Portfolio be liquidated and terminated on or about July 10, 2020.' See Bloomberg's 'Northern Trust to Shutter Money-Market Fund After Redemptions.'"

Our June MFI XLS, with May 31 data, shows total assets increased by $31.6 billion in May to $5.163 trillion, after jumping $417.9 billion in April, $688.1 billion in March and $23.4 billion in February. Our broad Crane Money Fund Average 7-Day Yield fell 8 bps to 0.11% during the month, while our Crane 100 Money Fund Index (the 100 largest taxable funds) was down 11 bps to 0.15%.

On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA was down 8 bps at 0.41% and the Crane 100 fell to 0.38%. Charged Expenses averaged 0.30% (down 4 bps from last month) and 0.23% (down two from the previous month), respectively for the Crane MFA and Crane 100. The average WAM (weighted average maturity) for the Crane MFA and Crane 100 was 41 (up 2 days) and 44 days (up 3 days) respectively. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)

May 22

This month, MFI interviews Paul Schott Stevens, President & CEO of the Investment Company Institute (ICI). Stevens has been with the mutual fund trade association for 20 years and has been involved in the fund industry for even longer. We discuss his storied career, and ICI's crucial involvement in the development of money fund regulations. Our Q&A follows. (Note: The following is reprinted from the May issue of Money Fund Intelligence, which was published on May 7. Contact us at to request the full issue or to subscribe.)

MFI: Tell us about your background and history. Stevens: The ICI is 80 years old this year. We started in 1940 at the time that the Investment Company Act was passed, and the SEC needed an industry group to work with as it began to develop implementing regulations. If you look at what our mission is, it's been the same over those 80 years.... It's to advance the interests of funds and their investors and the constituencies that make fund investing possible, the advisers and boards. Funds are complicated financial instruments in many respects for people and so, trying to provide public information about them has always been a part of our mission.... The third part is, trying to promote high ethical standards. That is incredibly important in an industry that serves 100 million individual investors here in the United States.

Outside of ICI, I've spent 15 years in private law practice.... I had my first money market fund related assignment, I think probably in 1979. So, my involvement with this industry goes back -- can it possibly be that long? -- over 40 years.... It has been an interesting and varied career. But I'll tell you, no challenge of that career, no position that I'd ever held, has been quite as satisfying as leading the ICI. Very few lawyers actually get the chance to move out of the law and into a CEO role. I found meeting the challenges of our organization, working with our members and the incredible staff we have to be among the most gratifying things that I've done.

It has been a pretty challenging period.... When I came in in 2004, we were in the midst of our late trading and market timing situation. No sooner did we get out of that when we entered the phase of the great financial crisis, with a preoccupation about money fund issues lasting over five years and two cycles of SEC rulemaking. In 2011, our board said we want you to refashion the ICI as a global organization. We’ve been working on that ever since.... And now, dealing with this global pandemic and having to adopt completely new ways of working. It has been one extraordinary challenge after another.

MFI: What is your biggest priority? Stevens: The recent issues have been unlike the issues that we saw in many respects during the financial crisis. The issues then were at their heart credit problems. The ones that we've been seeing now are really the result of the government ordering the economy shut down and the demands of investors of all kinds for safe haven assets and ready liquidity to meet unexpected needs.

Early on our focus was clearly on trying to make sure that we could respond to the problems caused by markets that just simply froze up. The good news is that in fairly short order, the Federal Reserve began to establish programs that have greatly, I think, helped markets recover. In just a matter of days, they put together the Primary Dealer Credit Facility, the Commercial Paper Funding Facility, the Money Market Mutual Fund Liquidity Facility, followed by a whole bunch of others. And if you look at the amounts that have actually been utilized in those facilities to date, they're small by comparison to the size of, say, the money market fund industry. But just the fact that they’re there provided a sense of renewed confidence to the markets. I think that the Federal Reserve, the SEC and the Treasury Department deserve very high marks for what they did.

The other thing that's different this time around is that we didn't have money flowing as much out of prime funds into government funds. What we had was money coming from other sources, hugely into government funds.... People are looking to these funds as safe haven assets ... at a time when that liquidity is absolutely essential.

Our focus has been also on continuing with ordinary business, and that’s one of the important things to emphasize. The SEC, very much to its credit, has not just simply stopped everything to focus on coronavirus issues, it's continuing with other very, very important work. It just issued a rule proposal concerning fair valuation of securities held by funds. They're continuing to do work on the derivatives proposal, on proxy voting proposals, on a whole raft of other things. So our normal work process is very much continuing even against the background of the implications of the pandemic.

MFI: Your proudest accomplishment? Stevens: Well, I'll mention a couple of things that I'm particularly proud of. After the great financial crisis, there was an inclination on the part of bank regulators, both the United States and elsewhere, to want to fasten on our business, the regulated fund business, a regulatory model which was completely inappropriate, to treat us like banks, and to have the central bankers begin managing us in a prudential fashion, the way they manage banks. Fighting that off, I think was one of the most important challenges that we met during my time at the ICI.

We have always welcomed effective regulation, and we were as deeply committed to maintaining financial stability as any other part of the system. What the bank regulators saw is that asset management, the regulated fund business, was growing in importance at the same time that the banking business was decreasing, relatively speaking, in importance. So, they wanted to begin regulating us. But the capital markets form of regulation is far more appropriate, so we fought to try to sustain an appropriate model of regulation for the industry, and I think we largely succeeded in doing that.

Now, that's a battle that continues. And in a sense, it's a conversation that's been going on with our industry and central bankers for probably generations.... We had to fight that battle not only domestically here in the United States with the FSOC and the Federal Reserve, but we had to do it with the Financial Stability Board and central bankers and finance ministry officials on a global basis as well.

The second accomplishment, as I mentioned earlier, is leading the charge to refashion the ICI as a global trade organization. That was a completely new organizational challenge for us. And I think it's one that we've risen to very, very effectively. That global dimension now informs everything that we do.

MFI: Talk about the ICI Money Market Working Group. ICI didn't wait for regulators last time, right? Stevens: That’s absolutely correct. It's very consistent with the way the ICI has conducted itself.... We knew when the Reserve Primary Fund broke a buck and the Treasury Department chose to introduce a guarantee program that our world had changed overnight. I suggested and the board and leadership, like Jack Brennan of Vanguard, readily agreed that we had to turn to and think about what was appropriate and necessary by way of reforms. We worked very, very hard at that working group. I think we came up with a report and recommendations for the SEC that were substantial. I know that [the SEC's] Mary Shapiro appreciated them at the time, although she concluded at a later point that more needed to be done.

In truth, money market funds were the very first part of the financial system to be reformed in the aftermath of the crisis, and that was largely because of the initiative that we took at ICI. So that was a very proud moment for us, and it's not much different from other things that we've done. I could name governance standards for the fund business that we helped to raise on our own initiative, standards on personal investments by portfolio managers and a variety of other things as well.

MFI: Talk about investors. Stevens: Well, if you think about our investors in the retail space, they’ve reacted in this crisis more or less the way they have historically. There have not been precipitous outflows from our funds and we follow those trends on a daily and weekly basis. You did not see the same reaction in the retail prime funds that you saw in the institutional prime funds.... That's just been our experience with one of these market events after the other. It suggests that people look at these funds as long-term propositions.... They look at money market funds ... as a store of liquidity that's there available for them should they need it.

MFI: Can you talk about expenses, waivers and consolidation? Stevens: I think that the wildcard here to some degree is what happens with interest rates. Negative interest rates will be a challenge for the money market fund business. I think the fee waivers are something that have become commonplace over the years. There's obviously this very, very strong commitment by fund sponsors to continue their money market fund offerings because they’re such an important arrow in the quiver for their clients.

The general trends in fees and expenses that we've documented now for a generation are very clear. They are declining. The other trend is that distribution and other costs, the cost of help and advice, are being separated from the costs of the funds.... You don't see classes or shares with loads or 12b-1 fees and that sort of thing. Those share classes that have those associated expenses are really dwindling in the industry. Those costs are being externalized and charged separately.

The other great trend that you see across the industry is consolidation. And again, this is something that we've followed closely. The flows into the industry have been strong, but they’re not shared equally by all the players. Some are getting much bigger. I think it’s a tougher proposition for smaller and medium sized enterprises. Scale is an extraordinarily important thing. That certainly would be the case in the money market fund world. So those dynamics are ones, I think, that are very clear and likely to continue into the future.

MFI: What about the future? Stevens: I've been ICI president for 16 years. If you cast your mind forward 16 years further to 2036, what will the fund investing world look like? I suspect that it will be an even more distinctly global phenomenon, and you’ll have major centers of fund investing in China and elsewhere that will go through a period of growth and maturity similar to what our domestic fund sector has gone through during my lifetime. I think the future is bright.