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Money Fund Wisdom News

Jan 17

Crane's Money Fund Symposium, the largest gathering of money market fund managers and cash investors in the world, will take place June 24-26, 2019 at The Renaissance Boston Waterfront Hotel, in Boston, Mass. The preliminary agenda is now available and registrations are now being taken. Our previous MFS in Pittsburgh attracted 575 attendees, and we expect another record turnout for our 11th annual event in Boston this summer. Money Fund Symposium attracts money fund managers, marketers and servicers, cash investors, money market securities dealers, issuers, and regulators. We review the agenda, as well as Crane Data's 2019 conference calendar, below. (Welcome to those of you attending Crane's Money Fund University, which starts today in Stamford, Conn., and runs through Friday. Attendees and Crane Data subscribers may access our conference materials at the bottom of our "Content" page or our via our Money Fund University 2019 Download Center. Feel free to drop by!)

Our June 24 Symposium Opening (afternoon) Agenda kicks off with a "Welcome to Money Fund Symposium 2019" and keynote on "Money Funds, Cash Comeback" from Peter Crane, President of Crane Data. The rest of the Day 1 agenda includes: "The State of the Money Fund Industry & MMFs," with Crane, Yeng Butler of SSgA, and Alex Roever of J.P. Morgan Securities; "Risks & Ratings: Credit Liquidity, & NAV Moves," with Robert Callagy from Moody's Investors Service, Greg Fayvilevich from Fitch Ratings, and Guyna Johnson from S&P Global Ratings; and, a "Major Money Fund Issues 2019" panel with Tracy Hopkins of Dreyfus/BNY Mellon Cash Investment Strategies, Jeff Weaver of Wells Fargo Asset Management, and Peter Yi of Northern Trust Asset Management. (The evening's reception is sponsored by Bank of America Merrill Lynch.)

Day 2 of Money Fund Symposium 2019 begins with "Strategists Speak '18: Fed & Rates, Repo & SOFR," which features Mark Cabana of Bank of America, Joseph Abate of Barclays, and Chris Chadie of Credit Suisse, followed by a "Senior Portfolio Manager Perspectives" panel, including Laurie Brignac of Invesco, Deborah Cunningham of Federated Investors, and Nafis Smith of Vanguard Group. Next up is "Government & Treasury Money Fund Issues," with moderator Priya Misra of TD Securities, Adam Ackerman of J.P. Morgan Asset Management, and Ed Dombrowski of AB Funds. The morning concludes with "Muni & Tax Exempt Money Fund Update," featuring Colleen Meehan of Dreyfus, Sean Saroya of J.P. Morgan Securities, and John Vetter of Fidelity.

The Afternoon of Day 2 (after a Dreyfus-sponsored lunch) features the segments: "Dealer's Choice: Supply, New Securities & CP" with Stewart Cutler of Barclays, John Kodweis of J.P. Morgan Securities, and Nick Ro of Toyota Financial Services; "Analysts Roundtable: Concerns in Credit" with Jimmie Irby of J.P. Morgan AM, Keith Lawler of Bank of America Merrill Lynch, and Matthew Plomin of DWS; "SMA & Ultra-Short Update; Bond Fund Regs," with Dave Martucci of JPMAM, Kerry Pope of Fidelity, and Steve Cohen of Dechert. The day’s wrap-up presentation is "Corporate Liquidity & Investor Issues" involving Lance Pan of Capital Advisors and Tom Hunt from AFP. (The Day 2 reception is sponsored by Barclays.)

The third day of the Symposium features the sessions: "Treasury & NY Fed Update; Agency Issuance" with Tom Katzenbach from the U.S. Dept. of Treasury, Dave Messerly of the FHLBanks - Office of Finance, and Josh Frost of the Federal Reserve Bank of NY; "European Money Funds After Reforms," with Kim Hochfield of Morgan Stanley Investment Management and Dan Morrissey of William Fry; and concludes with "Brokerage Sweep: Deposits vs. Money Funds" with Rick Holland of Charles Schwab Investment Management, Joe Hooker of Promontory Interfinancial Network and Tuyen Tu of Raymond James; then "Technology, Software & Data in Money Funds" ends the program with Peter Crane and Greg Fortuna of State Street Fund Connect.

Visit the MF Symposium website at for more details. Registration is $750, and discounted hotel reservations are available. We hope you'll join us in Boston this June! We'd like to encourage attendees, speakers and sponsors to register and make hotel reservations early. Note that a couple of our speakers have yet to confirm their participation, and the agenda is still in the process of being finalized. E-mail us at to request the full brochure, or click here to see the latest.

In other conference news, preparations are being made for the third annual Crane's Bond Fund Symposium, which will be held at the Loews Philadelphia Hotel March 25-26. (Click here to see the PDF agenda.) Bond Fund Symposium is the first conference devoted entirely to bond mutual funds, bringing together bond fund managers, marketers, and professionals with fixed-income issuers, investors and service providers. The majority of the content is aimed at the growing ultra-short and conservative ultra-short bond fund marketplace. (As a reminder, please register for BFS and make hotel reservations for BFS soon if you plan on attending!)

Crane Data, which recently celebrated the fourth anniversary of its Bond Fund Intelligence publication and BFI XLS bond fund information service and benchmarks, continues to expand its fixed income fund offerings with the recent launch of Bond Fund Wisdom product and Bond Fund Portfolio Holdings dataset. Bond Fund Symposium offers attendees a concentrated and affordable educational experience, as well as an excellent networking venue. Registration for Bond Fund Symposium is $750; exhibit space is $2,000 (includes 2 tickets); and sponsorship opportunities are $3K, $4K, $5K and $6K. Our mission is to deliver the best possible conference content at an affordable price to bond fund professionals and investors.

Finally, mark your calendars for Crane's 7th annual "offshore" money fund event, European Money Fund Symposium, which will be held in Dublin, Ireland, September 23-24, 2019. This website ( will be updated with the 2019 information soon. (Contact us to inquire about sponsoring or speaking.)

Dec 24

This month, BFI interviews Tracey Keenan, Portfolio Manager for Short Duration Strategies at GMO. GMO, also known as Grantham, Mayo, & van Otterloo, is a Boston-based institutional investment manager, which manages both mutual funds and separate accounts. We discuss their short-term strategies, and a number of other fixed-income topics, in our Q&A below. (Note: This profile is reprinted from the December issue of our Bond Fund Intelligence publication. Contact us if you'd like to see the full issue, or if you'd like to see our BFI XLS performance spreadsheet, our BFI Indexes and averages, or our most recent Bond Fund Portfolio Holdings data set, which was published Friday.)

BFI: Tell us about your history. Keenan: I've been at GMO since 2002, and GMO has been investing in short term bonds as part of their asset allocation strategies for many years.... In 2014, we started to expand our cash investing to more customizable solutions with dedicated internal portfolio managers.

BFI: Tell us about your strategies? Keenan: We invest in U.S. and non-U.S. governments and agencies, all currency hedged. We focus on high-quality liquid assets, so we really want minimal currency exposure, and tend to run one-year maximum weighted duration with a two-year max maturity. What we found coming out of money market reform in 2016 was that there was a supply and demand issue around Treasury bills because of the [huge demand from] government money market funds. We were basically competing with the government-only money market funds in the same space with limited supply. So there was a lot of supply and demand dynamics in the market that we didn't really need to compete with. We decided to try and focus outside of that money market space, while maintaining the same liquidity and capital preservation as the govt-only money markets.

BFI: How are you positioned? Keenan: We try to move dynamically.... Right now, we own more floaters than fixed rate notes, so more on the Treasuries floater side and the Federal Home Loan Bank floater side.... Then we do have an allocation to Japanese yen bills, currency hedged. As the basis has continued to stay negative this year, [during] quarter-end or the year-end turn, that position became much more attractive. So being a dollar lender into calendar effect issues in the space ... has been good for us. It's good to be able to move dynamically when those conditions in the market are changing.

BFI: Is there anything you don't own or you're avoiding? Keenan: We don't invest in any credit in the portfolio or any asset-backed securities. We've kept our strategy strictly focused on U.S. and non-U.S. governments and agencies.... We try to keep internal constraints on what the risk and the diversity in the strategy is, because we feel that liquidity and preservation of capital is still what's most important to us. While we want to be well-diversified, we don't want to take any credit risk with the cash that we're managing.

We've done pretty well [this year].... A lot of the short-duration bond funds have been hurt this year with their longer duration with rates selling off. We keep it pretty clean. We're investment grade or higher, so it's essentially the G10. Our duration is really short; it's inside of a quarter of a year. We just want to be able to be positioned to capture the Fed hiking cycle. The Fed has indicated that they may be close to the end of their cycle, but we're not sure where that that neutral rate lies. So we want to keep it short while the Fed continues to hike rates. [But] we'll re-evaluate that once we know for sure when the Fed is going to be done.

BFI: Do you have any sector or diversity limits? Keenan: Right now we don't in the strategy, but we do look at how quickly we could liquidate.... So in that Japanese yen bill trade for example, there [may be] timing delays between the U.S. open [or if] Asia is closed for the day. We want to make sure that we still have enough of the strategy to be able to liquidate T-0.... That's really what we're looking at -- being well diversified there and not having all of our eggs in one basket.

BFI: What are the other big, liquid "bill" markets? Keenan: We look at ... anything that has safety, liquidity and preservation of capital, something that's well supported by the government. Germany would be an area that we would look at, but the ECB is still involved in their quantitative easing program.... We'd be looking at more opportunities like that -- higher credit quality government markets like Germany, possibly France, and the U.K. But there's just not the availability of bills ... as there are in the U.S. and Japan.

BFI: Who are the investors in the funds? Keenan: Right now, we are more institutional. So we're concentrating the strategy in our traditional client space.... We're always looking for ways to help our clients around the world. So we work closely with our asset allocation team, working with clients and making sure that we can offer customizable cash solutions to them. One really interesting thing that we've seen in the ultra-short space or in the cash space this year is this phenomenon, which I know you've seen before, called 'inside-out' and 'outside-in.'

So we've seen money market investors who have their operating cash in a money market or custodial sweep, now looking for more yield with similar liquidity to their govt-only money funds. Then you have the short duration bond fund investors, who have really gotten hurt this year performance-wise, that are looking to bring some of that [in]. They're willing to forgo that higher yield to make sure that they have that preservation of capital. So we've seen this migration into this ultra-short space from investors on both side of the cash spectrum.

BFI: What about your Fed outlook? Keenan: We're following what the Fed's been saying closely, because it's really important to how we're investing. We're not exactly sure where the neutral rate is going to actually end up resting. While the Fed is still in play, we're still positioned to capture higher rates with an allocation to floating over fixed.... We also continue to be a dollar lender while borrowing still remains so expensive. We expect the Fed to over communicate, as they have done in the past, and in 2019 they're set to have press conferences after every single meeting.

I think Powell potentially got caught off guard [by market reactions]. I'm not sure he's used to having every word he changes in his statement having that kind of market impact. I think he's going to really be conscious of his language going forward, because two words make a huge difference in the cash space. The other big news is the curve inversion. Now you have the short end (2s/5s, 3s/5s) inverted. We're following that and trying to understand the implications on the business cycle and where we are, though that's still outside of the space that we're investing in. So again we are really conscious of the Fed and when they will be done with their hiking cycle.

BFI: What is your biggest challenge? Keenan: I think the biggest challenge in the ultra-short space is that there needs to be more disclosure around what the funds are invested in, because the space is really broad and not well defined. That requires working with clients and making sure they understand what's in their portfolio or strategy. I think there is the availability of assets in the space. There's plenty out there, and the Treasury is set to increase issuance.... Going into the end of 2018 [and] definitely in 2019, the Treasury has some bills to pay. So we'll be looking for more issuance there, which will move rates higher. We think that we're well positioned for higher rates going into 2019.

BFI: What about the future? Keenan: This year, there has been so much attention given to the cash space. I think after years of earning zero on cash, investors were forced out on the curve to get any sort of yield. So I do think that clients will be [bringing] some of their allocations back into cash, specifically [cash] above their operating cash for that yield enhancement with safety, liquidity, preservation of capital. Getting that extra yield and being able to have that safety and liquidity in cash I think will be really important to investors in 2019.

To sum everything up, what we're looking to do here is provide our clients with customizable solutions around their cash investing and make sure that they have that liquidity and preservation of capital by keeping the investments in U.S. government and non-U.S. government [securities], all currency hedged. So what's really important to us is the quality of the investments in the cash that we're running.

Oct 05

The October issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Friday morning, features the articles: "Prime MFs Clawing Back Two Years After Reform's 'Big Sort'," which looks at how Prime assets have fared of late; "Highlights from European MFS: Irish Funds' Rooney," which quotes a recent presentation from Irish Funds' Pat Rooney; and, "China, Ireland Still Dominate Global Money Fund Ranks," which reviews the latest statistics on money fund markets outside the U.S. We've also updated our Money Fund Wisdom database with Sept. 30 statistics, and sent out our MFI XLS spreadsheet Monday a.m. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our October Money Fund Portfolio Holdings are scheduled to ship on Wednesday, October 10, and our Oct. Bond Fund Intelligence is scheduled to go out Monday, October 15.

MFI's "Prime MFs Clawing Back" article says, "Two years after the SEC's Money Fund Reforms triggered a $1.1 trillion shift out of Prime money market funds and into Govt, Prime assets continue to extend a slow and steady recovery. While assets dipped in the latest month (Sept.), Prime MMFs are up $170 billion, or 30.3%, since hitting their low of $562 billion on 10/31/16."

It continues, "Year-to-date through Aug. 31, the SEC shows Prime MMF assets up $66 billion, or 10.0%, to $733 billion, and up $91 billion, or 14.2%, over 12 months. Govt MMF assets are down $49 billion, or -2.1%, YTD and up just $62 billion, or 2.8% over 12 months."

Our "EMFS Highlights" excerpt reads, "Crane Data hosted its 6th annual European Money Fund Symposium two weeks ago in London, and European Money Market Fund Reforms took center stage. Below, we highlight from one the sessions, 'Irish & European Fund Issues' featuring Pat Rooney, Senior Regulatory Affairs Manager at Irish Funds. He presented a number of statistics on money funds domiciled in Ireland, the largest segment of the European money fund industry, and gave an Irish take on the new regulations and the fate of the RDM, reverse distribution mechanism."

Rooney says, "Firstly, the MMF industry in Ireland is one of very significant scale.... We're talking about E490 billion in terms of assets ... the largest domicile by quite some margin in Europe, followed by France and Luxembourg. There has been significant growth ... in the past 5 years dating back to 2013, with 77% growth since then. So it is a very strong and growing industry in Ireland."

He continues, "The number of funds stands at 115 today; that is down slightly from 122 in 2012. So while the assets have been growing, there has been a slight amount of consolidation in the industry. This is an industry of scale.... We have quite a few big players with very big funds, so there is a lot of concentration. But also there is also still broad diversity, too. We've counted 48 MMF managers ... from 11 countries."

Rooney tells us, "Predominantly the managers in funds of scale are coming from the U.S., the U.K. and Germany. This industry accounts for 20% of our [overall fund] assets. So it is an industry that is vital to Irish Funds and one that we have fought vigorously to defend throughout the MMF reform, which hasn't been easy, in order to ensure that this is a sector that can continue to thrive." (Watch for more Rooney and European Money Fund Symposium excerpts in coming weeks, or see the latest issue of MFI for the full article.)

MFI's "China, Ireland" piece says, "The Investment Company Institute's 'Worldwide Regulated Open-Fund Assets and Flows, Second Quarter 2018' shows that money fund assets globally fell by $135.6 billion, or -2.2%, in Q2'18, led by big drops in Chinese and French money funds. Money funds in the U.S. and India rose substantially. MMF assets worldwide have increased by $632.8 billion, or 11.9%, the past 12 months."

ICI's release says, "On a US dollar denominated basis, ... bond fund assets decreased by 2.9 percent to $10.25 trillion in the second quarter ..., while money market fund assets decreased by 2.3% globally to $5.96 trillion."

Also, MFI includes a sidebar, "ESMA Seeks Feedback on European MF Stress Testing," which says "A statement posted Friday and entitled, 'ESMA consults on stress testing rules for money market funds,' tells us, 'The European Securities and Markets Authority (ESMA) has today opened a public consultation on how European money market funds (MMFs) should conduct their internal stress testing."

Our October MFI XLS, with Sept. 30, 2018, data, shows total assets inched up by $1.6 billion in September to $3.072 trillion, after increasing $29.2 billion in August, increasing $36.3 billion in July, and decreasing $49.9 billion in June. Our broad Crane Money Fund Average 7-Day Yield rose 8 bps to 1.69% during the month, while our Crane 100 Money Fund Index (the 100 largest taxable funds) was also up 8 bps to 1.88% (its highest level since Oct. 2008).

On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA rose 7 bps to 2.13% and the Crane 100 rose to 2.16%. Charged Expenses averaged 0.44% (unchanged) and 0.28% (unchanged), respectively for the Crane MFA and Crane 100. The average WAM (weighted average maturity) for the Crane MFA and Crane 100 was 30 and 31 days, respectively (up 1 day). (See our Crane Index or craneindexes.xlsx history file for more on our averages.)

Sep 20

This month, Money Fund Intelligence speaks with Kim Hochfeld, the new Chair of IMMFA, the London-based Institutional Money Market Funds Association ( Hochfeld, who is also Managing Director at Morgan Stanley Investment Management, gives us the latest on European Money Market Fund Reforms and talks about what's next for money funds in Europe. Our Q&A follows. (Note: Hochfeld and IMMFA MD Jane Lowe will keynote our European Money Fund Symposium, which starts Thursday morning in London. For those in attendance, welcome to London! Note too that this article is reprinted from the September issue of our Money Fund Intelligence newsletter. Contact us at to request the full issue.)

MFI: When did you become Chair? Hochfeld: I was elected Chair for a three year term at the beginning of July by members at our Annual General Meeting. Our former Chair, Reyer Kooy, was re-elected to the Board, which is a positive for IMMFA as it allows a level of continuity. Kathleen Hughes from GSAM and Ian Lloyd from LGIM are still on the Board too, and we have been joined by Beccy Milchem from BlackRock. So it's a team with plenty of experience.

MFI: What's been IMMFA's main focus? Hochfeld: European Money Market Reform has absolutely been a key focus for us, especially over the last 18 months. It has been a long time coming. We have been focused on defining our LVNAV structure and working with clients to make sure they understand how LVNAV works, and then obviously there are challenges for our members as to how they position their Euro funds. There's still much work to do, by the vendors, the money fund managers, the transfer agents, the fund administrators, the portal providers, their trading systems, etc., in order to be ready for the coming changes.

One of the challenges is the clarity around Euro MMFs. For example, there is still an element of uncertainty as to whether share cancellation as a mechanism for handling negative yield will be permitted under new Regulations. This is the so-called RDM [reverse distribution mechanism]. It seems that most providers have built for different outcomes, although the market has different viewpoints as to which scenario will prevail.

MFI: What happens after reforms? Hochfeld: I think where IMMFA can really add value is around education and marketing, particularly if RDM does not continue … and managers have to make choices about what they will offer instead. IMMFA's expectation is that over time the membership will offer most types of short-term money funds, both VNAV and CNAV.

It will therefore be important to educate our existing and any prospective investors about the difference in running short-term VNAV Euro funds vs. how some of the existing short-term Euro VNAV funds are managed. There will be big differences in the old IMMFA-style universe of short-term money funds that are all AAA-rated, compared to some of the VNAV funds that are out there at the moment, which generally don’t have a rating and have a lot more flexibility to take more risk to generate a higher return.

Over the next year, the IMMFA will be focused on broadening our investor base globally and tackling challenges related to accounting treatment, to see if we can achieve more consistency and certainty on the accounting treatment of short-term money funds in the European Regulation, much as the S.E.C. offered for U.S. 2a-7 money funds.

MFI: Does IMMFA only deal with short-term money market funds? Hochfeld: Not any more. Historically IMMFA only represented CNAV short-term money funds. Yes, we had accumulating share classes, but they still use amortized cost accounting. However the Association always viewed the European Regulation as a game changer, because it codified the regime for money funds across the whole of the European Union. So IMMFA responded to it by changing its constitution effective 1 January 2018 to cover all types of money market fund permitted under the Regulation. It means that now we cover CNAV and VNAV short term MMFs, and also VNAV standard MMFs. To put it in context, the VNAV standard MMFs in Europe are essentially the same product as U.S. ultra-short bond funds.

Also, once the Regulation came into force, the need for the IMMFA Code of Practice diminished, as much of what is in the Code now appears in the Regulation. The Code still applies to members, but from January 2019 it will be replaced entirely by the IMMFA Principles of Best Practice. Details are available on the IMMFA website. All IMMFA members are bound by the Principles of Best Practice. In replacing the Code, IMMFA sets out what the Principles would do instead.

To quote: "The Principles have two purposes, both of which are intended to support investor confidence in the industry: To describe in plain English the key requirements that apply to money market funds and that operate to protect investors and markets; and to describe additional practices beyond the applicable regulatory requirements where these are considered necessary for the good governance of the funds."

MFI: Accumulating funds are different than VNAV, right? Hochfeld: They're very different. Today's accumulating share classes are share classes whereby the accrued interest is rolled up into the NAV every day. The capital portion, the part which would otherwise be 1.00 in a CNAV share class, does not change in an accumulating share class. That is stable, because accumulating share classes today still use amortized cost accounting to value the underlying assets. So, the change in the price is merely reflective of the accrued income. For a VNAV fund, the change in the price is reflective of both the accrued income and the mark-to-market on the underlying assets.

MFI: What are some of the main differences with U.S. reforms? Hochfeld: There are aspects of European reforms which are more complex than the U.S. 2a-7 reforms, although the new product types are arguably better aligned to existing funds. The LVNAV product is a new fund type, so the market is having to come to grips with its complexities. It is much easier to understand the public debt CNAV product, as this is ... like today's government funds.

Another difference is that we do not have trigger-based fees and gates on our VNAV funds but we do have them on our treasury fund equivalent. For VNAV, we still have the provision for fees and gates at board discretion under UCITS rules, which is what we have at the moment on our existing CNAV funds.

MFI: Can you talk about investors? Hochfeld: I speak to investors all the time, and from a relative value perspective `our euro funds still offer great value to clients that are holding cash in euros. From a risk-return perspective, the funds still represent the gold standard.

There is a wide variety of different investors types in our European funds, including corporations and financial institutions, [and] it is specific to different currencies. [For example], local authorities in the U.K. are able to use money funds, as are pension funds in the Netherlands. It's not that money funds are more attractive to one market or another, it's that they're more attractive to one investor type specific to one market or another.... A big chunk of investment also comes from financial institutions, whether they're funds or third-party, sweep money or insurers. [Recent IMMFA statistics show corporates, funds, third parties, financials, insurers, and the public sector as the largest investor segments.]

I'd say a major theme that the industry is working on through IMMFA, as well as on a fund by fund basis, is getting money funds accepted as collateral at clearing houses. Money market funds do qualify for holding client monies in Europe, but it has to be implemented on a country by country basis (because of the link into insolvency law). So at the moment we have mostly focused on the U.K. Getting a wider acceptance of the use of money funds for that cash would be a great boon in assets for the industry.

MFI: Is there fee pressure? What about MMF competitors? Hochfeld: Fee pressures come from within the industry and from competing products.... In terms of our competitors, bank deposits are clearly a big competitor, but it's not just depo. It's repo, ultra-short or short duration strategies, whether those are pooled funds or separately managed accounts. Structured deposits are also competing for short term cash, as are other funds, for example, that invest in supply-chain receivables. There are a lot of options out there.

MFI: What's your outlook overall? Hochfeld: I'm optimistic about the future. These reforms will bring substantial change to our industry and we will work with investors to ensure they understand the implications. But longer-term, we think they're a real positive for money funds. They're designed to make the product more robust and more transparent, and that in turn should incentivize cash rich investors to use money funds to manage excess liquidity rather than using a bank account or a repo.

We think that along with new markets and new technology platforms that are being developed, money funds are going to become more attractive and more prolific for cash investors. I don't think that Basel III and bank appetite for short-dated deposits are going to go away any time soon. So along with a more attractive yield environment in dollars and sterling, and hopefully euro in the not too distant future, IMMFA and its member firms firmly believe that money funds remain an attractive yield and risk diversification play for short-term cash investors.