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Money Fund Wisdom News

Mar 07

The March issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Wednesday morning, features the articles: "Friend or Foe to Cash? Money Markets Focus on Repatriation," which discusses the new hot topic in the money markets; "Guardians of Liquidity: SEI's Simko & Lac," which interviews SEI's Sean Simko and Daisy Lac; and, "Deposits Peak at $9 Trillion; MMFs Up, Drive Cash to $12T," which reviews the recent peak and slight decline in bank deposits. We've also updated our Money Fund Wisdom database with Feb. 28, 2018, statistics, and 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 March Money Fund Portfolio Holdings are scheduled to ship on Friday, March 9, and our March Bond Fund Intelligence is scheduled to go out Wednesday, March 14.

MFI's "Repatriation" article says, "Next to higher rates, repatriation has become the hottest topic of discussion among money marketeers so far in 2018. Strategists, PMs and market watchers are now guessing how much cash might shift from offshore to onshore, or from onshore to elsewhere. Because corporates keep making more, we think the total impact of repatriation will be minimal and overall a net positive for "cash" and money market funds. We review recent comments and the many moving parts below."

Our lead piece continues, "Invesco's Matt Bubriski, Joe Madrid and Robert Corner wrote recently, 'How will repatriation impact money markets?' Bubriski says, 'We estimate that US companies currently hold USD3 trillion in unremitted foreign earnings, but only half is held in liquid cash and investments.... [W]e estimate that money market instruments account for a relatively small portion of total cash, at about 8%."

MFI's latest Profile reads, "This month, MFI interviews SEI Managing Director and Senior Portfolio Manager Sean Simko and Portfolio Manager Daisy Lac. We discuss SEI's use of outside managers as subadvisors, their move to offer only Government MMFs, and their focus on separately managed accounts. Our latest Q&A follows."

MFI says, "Tell us about your history." Simko answers, "SEI debuted its money market offering back in 1981. The first funds were launched in our subadvisor program as our money funds are today. In this offering, we hire outside money managers and delegate security selection to take advantage of economies of scale. The program has continued to evolve over the years, with the most recent significant change taking place as a result of the Security & Exchange Commission's decision to require institutional prime money market funds to maintain a floating net asset value and the imposition of an option to impose liquidity fees and redemption gates under certain circumstances."

He continues, "As a result, we liquidated three prime obligation and two municipal money market funds and transitioned assets to other offerings in our subadvisory program. The program includes two sets of funds. The first is the SEI Daily Income Trust (SDIT) Government Money Market Fund. The complex includes four funds that act as the cash sweep component of accounts for institutional and high-net-worth clients and do not charge redemption gates or liquidity fees. The SDIT Funds have assets of just under $10 billion."

Simko adds, "The second is a pair of funds (one taxable and one tax free) in the SEI Institutional Managed Trust (SIMT) complex. These are meant to provide low-risk, highly liquid exposure in client portfolios. While the funds target short weighted-average maturities, they are not money market funds, and their NAVs will fluctuate.... These funds are able to purchase short-term securities at attractive valuations and offer yields above money market strategies. For those investors who do not need daily access to liquid strategies, these could be an attractive investment. The SIMT Fund has assets of $400 million."

Our "Deposits" article says, "The Federal Reserve's latest statistics show that bank deposits are finally starting to peak out and decline, while money market funds have begun to rise after years of being flat. Overall cash, including bank deposits (in banks and thrifts), money fund assets and small time deposits, broke above the $12 trillion level recently for the first time in history."

It continues, "Our chart on page 1 shows the growth of money market deposit accounts (MMDAs) in banks and thrifts vs. assets in money market funds. Below, we show the last 4 months of asset changes for MMMFs, MMDAs and Small TDs (time deposits), and we show changes over the past 1-, 5- and 10-years. We subtotal the three, calling this 'cash'. Our totals using Fed data show that cash, the combination of MMMFs, MMDAs, and Small TDs, broke over $12 trillion recently, in October 2017."

The recap adds, "Bank deposits (MMDAs) have more than doubled since September 2008, rising by over $5.0 trillion to $9.1 trillion as of January 2018. Money fund assets fell from $3.3 trillion to $2.6 trillion (according to the Fed's data) during this time, a drop of 20.9%. Small Time Deposits (or CDs) have withered from $1.3 trillion to $409 billion since Sept. 2008."

Our March MFI XLS, with Feb. 28, 2018, data, shows total assets increased $37.2 billion in February to $3.027 trillion, after decreasing $54.3 billion in January, but increasing $57.9 billion in December and $46.4 billion in November. Our broad Crane Money Fund Average 7-Day Yield was up 7 basis points to 1.05% during the month, while our Crane 100 Money Fund Index (the 100 largest taxable funds) was up 7 bps to 1.24%.

On a Gross Yield Basis (7-Day) (before expenses were taken out), the Crane MFA rose 7 bps to 1.50% and the Crane 100 rose 7 bps to 1.52%. Charged Expenses averaged 0.45% and 0.28% (unchanged), respectively for the Crane MFA and Crane 100. The average WAM (weighted average maturity) for the Crane MFA was 29 days (the same as last month) and for the Crane 100 was 29 days (up one bps from last month). (See our Crane Index or craneindexes.xlsx history file for more on our averages.)

Feb 14

The February issue of Crane Data's Bond Fund Intelligence, which will be sent out to subscribers Wednesday, features the lead story, "ICI Says Bond Fund Flows Remain Strong, Despite Rates," which reviews recent comments from ICI's new Chief Economist Sean Collins, and the profile, "JPMAM's McNerny, Crane Discuss Ultra-Shorts at MFU," which excepts highlights from the segment on Bond Funds at our recent Money Fund University. Also, we recap the latest Bond Fund News, including losses in January for most funds and the latest on the jump in rates. BFI also includes our Crane BFI Indexes, which showed decreases in January in most sectors except ultra-short, global and high yield. We excerpt from the latest BFI below. (Watch for more excerpts from our MFU profile later this month on, 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, "The Investment Company Institute published a video with Chief Economist Sean Collins late last week entitled, "Bond Fund Flows Remain Strong Despite Rising Interest Rates." When asked about the rising rate environment, Collins comments, "It looks like this time, it's for real. The Fed has raised short-term interest rates 1.5% since September of 2016 and, judging from Fed fund's future markets, it looks like they'll probably go about another 1.5% in the rest of 2018. That's likely to put upward pressure on longer-term interest rates, and downward pressure on bond prices -- and, in return, downward pressure on bond fund returns."

He explains, "Historically, what we've seen as interest rates rise, investors in bond funds tend to respond very modestly, pulling some money out -- but it's very modest. What we saw in 2017 was a little bit of a disconnect. We saw a very sharp rise in the stock market -- about 20%. Bond returns were about flat. And you would think that, in that environment, people wouldn't be putting money into the bond funds -- but just the reverse happened. We saw very strong inflows into bond funds, and that pretty much continued throughout the year."

BFI's McNerny and Crane Profile says, "Last month, Crane Data's Money Fund University conference included a segment entitled, "Ultra-Short Bond Funds & SMAs," which featured James McNerny, MD & Portfolio Manager at J.P. Morgan Asset Management, as well as Crane Data's Peter Crane. The two discussed the basics of the bond fund marketplace, recent trends in the conservative ultra-short bond fund space, and the status of the short-term separately managed account market. We excerpt some of their comments below."

JP Morgan's McNerny, who helps run almost $60 billion in "Managed Reserves" assets, tells us, "I've been in the industry now for 17 years.... [After the crisis, Managed Reserves] was a fledgling business. We one portfolio manager at the time, David Martucci, and we had few billion in assets. In the last seven years, we've grown the product to over 120 SMA accounts, two mutual funds, we just launched an ETF, and our total assets are just shy of $70 billion."

When asked how he learned the business, McNerny answered, "There's no better way to learn [than from working for experts].... Nobody really teaches ... about fixed income. It [takes] three to five years for you to completely wrap your head around everything you need to know about this job.... So I would just encourage anyone who is new and starting out to really push through and don't get frustrated. There are tons of acronyms and different ways to explain the same thing." He mentions "Bloomberg, The Wall Street Journal, The Financial Times, and economists" as information sources.

A Bond Fund News brief entitled, "Returns Down For Most in January," explains, "Most bond fund categories showed losses except Ultra-Short, Global and High Yield. Yields rose for all but High Yield funds last month. The BFI Total Index averaged a 1-month return of -0.35% and the 12-month gain fell to 3.15%. The BFI 100 returned -0.44% in Jan. and 3.12% over 1 year. The BFI Conservative Ultra-Short Index returned 0.11% over 1 month and 1.31% over 1-year; the BFI Ultra-Short Index averaged 0.06% in Jan. and 1.24% over 12 mos. Our BFI Short-Term Index returned -0.15% and 1.36%, and our BFI Intm-Term Index returned -0.85% and 2.42% for the month and year. The BFI High Yield Index rose 0.60% in Jan. and 5.70% for 1 year."

Another brief, entitled, "Barron's Comments, 'As Rates Jolt Market, Bond Strategy Finally Shines,' says, "Go-anywhere bond funds didn't go anywhere for several years. But with interest-rate fears roiling the markets, they've starting to look a lot better. As of Thursday, prominent unconstrained funds were beating the Bloomberg Barclay's Aggregate Bond handily. While the index was down 1.15% for the year, BlackRock's $32.8-billion Strategic Income Opportunities Portfolio (BASIX) was up a whopping 1.35%. The $3.4 billion Pimco Unconstrained Bond Fund (PUBAX) was up .36% year to date. And former Pimco bond guru Bill Gross, now at Janus Henderson, has steered his $2.2 Global Unconstrained Bond Fund (JUCAX) to a .56% gain for the year."

Yet another brief comments, "BlackRock's Jeff Rosenberg Blogs '4 themes key for fixed income investing in 2018'" He writes, "We see four key themes likely to shape fixed income investing in 2018, as I write in my new Fixed income strategy Fuel for (over)heating and more of my favorite themes.... Fiscal stimulus from tax cuts and spending plans -- on top of a U.S. economy operating at full employment and both the U.S. and a handful of other developed economies operating above capacity -- may provide fuel for an overheating debate in 2018."

A sidebar entitled, "Best Days Behind Us Says Columbia in 2018 Playbook," tells us, "Columbia Threadneedle writes in "The 2018 fixed-income playbook: less risk, more diversification," "On the heels of two good years in the bond market, the best days for fixed income are likely behind us. In 2016, there were strong returns in most sectors -- especially high-yield corporate bonds, which generated double digit gains. It was more of the same in 2017: The year was driven by strong global demand and scarce inflation. Returns will likely struggle to match a similar pace in 2018 based on a lower starting point for yields and expectations for low inflation and rising interest rates."

Global Head of Fixed Income Colin Lundgren explains, "And there's no extra risk premium to compensate investors for any negative surprises. The temptation is to extrapolate recent returns and suggest another good year for bonds, but our analysis suggests something less. A lower starting point in bond yields reduces the total return opportunity in fixed income.... To put it simply: Low starting yields mean less cushion for being wrong and less upside for being right."

Finally, we'd like to remind you about our second annual Bond Fund Symposium conference, which will be held March 22-23, 2018 at the InterContinental Los Angeles Downtown. Our first bond fund event last year in Boston attracted 150 bond fund managers, marketers, fixed-income issuers, investors and service providers, and we expect our LA show to be even bigger. For those planning on attending, please register and make hotel reservations soon, and we hope to see you in LA next month!

Feb 12

Crane Data released its February Money Fund Portfolio Holdings Friday, and our most recent collection of taxable money market securities, with data as of Jan. 31, 2018, shows a huge drop in Repo, and a jump in Time Deposits (Other), CP and CDs. Money market securities held by Taxable U.S. money funds overall (tracked by Crane Data) increased by $3.2 billion to $2.896 trillion last month, after increasing $37.2 billion in December, $18.4 billion in November, and $77.7 billion in October. Repo remained the largest portfolio segment, though it plummeted following its quarter-end spike to over $1.0 trillion. It was followed by Treasuries and Agencies. CP remained a distant 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 Money Fund Portfolio Holdings reports.)

Among all taxable money funds, Repurchase Agreements (repo) plunged $80.9 billion (-8.0%) to $928.8 billion, or 32.1% of holdings, after jumping $70.5 billion in December, but decreasing $16.4 billion in November and $3.9 billion in October. Treasury securities fell $1.5 billion (-0.2%) to $738.6 billion, or 25.5% of holdings, after rising $3.8 billion in December, falling $3.0 billion in November, and rising $66.0 billion in October. Government Agency Debt jumped $25.3 billion (3.6%) to $722.1 billion, or 24.9% of all holdings, after rising $21.5 billion in December and $10.5 billion in November, but falling $2.2 billion in October. Repo, Treasuries and Agencies total $2.390 trillion, representing a massive 82.5% of all taxable holdings.

CP, CDs and Other (mainly Time Deposits) securities all jumped in the first month of the year. Commercial Paper (CP) was up $23.1 billion (12.3%) to $211.7 billion, or 7.3% of holdings (after decreasing $8.1 billion in December, and increasing $14.9 billion in November and $3.3 billion in October). Certificates of Deposits (CDs) rose by $13.3 billion (7.8%) to $183.5 billion, or 6.3% of taxable assets (after decreasing $23.4 billion in December, and increasing $8.9 billion in November and $14.1 billion in October). Other holdings, primarily Time Deposits, jumped $27.6 billion (36.7%) to $102.8 billion, or 3.6% of holdings. VRDNs held by taxable funds decreased by $3.8 billion (-30.6%) to $8.5 billion (0.3% of assets).

Prime money fund assets tracked by Crane Data rose to $650 billion (up from $637 billion last month), or 22.4% (up from 22.0%) of taxable money fund holdings' total of $2.896 trillion. Among Prime money funds, CDs represent under a third of holdings at 28.2% (up from 26.7% a month ago), followed by Commercial Paper at 32.5% (up from 29.6%). The CP totals are comprised of: Financial Company CP, which makes up 21.2% of total holdings, Asset-Backed CP, which accounts for 6.3%, and Non-Financial Company CP, which makes up 5.0%. Prime funds also hold 6.3% in US Govt Agency Debt, 5.7% in US Treasury Debt, 3.2% in US Treasury Repo, 2.0% in Other Instruments, 12.2% in Non-Negotiable Time Deposits, 5.2% in Other Repo, 2.4% in US Government Agency Repo, and 1.1% in VRDNs.

Government money fund portfolios totaled $1.546 trillion (53.7% of all MMF assets), down from $1.583 trillion in December, while Treasury money fund assets totaled another $700 billion (24.2%), up from $673 billion the prior month. Government money fund portfolios were made up of 44.1% US Govt Agency Debt, 20.0% US Government Agency Repo, 15.3% US Treasury debt, and 20.3% in US Treasury Repo. Treasury money funds were comprised of 66.4% US Treasury debt, 33.5% in US Treasury Repo, and 0.0% in Government agency repo, Other Instrument, and Investment Company shares. Government and Treasury funds combined now total $2.246 trillion, or 77.6% of all taxable money fund assets, down from 78.0% last month.

European-affiliated holdings jumped $238.2 billion in January to $654.0 billion among all taxable funds (and including repos); their share of holdings soared to 22.6% from 14.4% the previous month. Eurozone-affiliated holdings jumped $180.0 billion to $428.4 billion in January; they account for 14.8% of overall taxable money fund holdings. Asia & Pacific related holdings decreased by $10.1 billion to $227.6 billion (7.9% of the total). Americas related holdings fell $224.8 billion to $2.013 trillion and now represent 69.5% of holdings.

The overall taxable fund Repo totals were made up of: US Treasury Repurchase Agreements, which decreased $104.2 billion, or -15.5%, to $569.6 billion, or 19.7% of assets; US Government Agency Repurchase Agreements (up $28.6 billion to $325.2 billion, or 11.2% of total holdings), and Other Repurchase Agreements ($33.9 billion, or 1.2% of holdings, down $5.3 billion from last month). The Commercial Paper totals were comprised of Financial Company Commercial Paper (up $16.2 billion to $137.8 billion, or 4.8% of assets), Asset Backed Commercial Paper (down $0.4 billion to $41.0 billion, or 1.4%), and Non-Financial Company Commercial Paper (up $7.3 billion to $32.8 billion, or 1.1%).

The 20 largest Issuers to taxable money market funds as of Jan. 31, 2018, include: the US Treasury ($738.6 billion, or 25.5%), Federal Home Loan Bank ($579.5B, 20.0%), BNP Paribas ($122.8B, 4.2%), RBC ($85.6B, 3.0%), Federal Farm Credit Bank ($74.2B, 2.6%), Credit Agricole ($62.4B, 2.2%), Wells Fargo ($61.8B, 2.1%), Barclays PLC ($55.8B, 1.9%), Federal Reserve Bank of New York ($55.0B, 1.9%), Societe Generale ($47.9B, 1.7%), HSBC ($45.0B, 1.6%), Nomura ($44.3B, 1.5%), Federal Home Loan Mortgage Co ($42.6B, 1.5%), JP Morgan ($40.3B, 1.4%), Natixis ($39.2B, 1.4%), Mitsubishi UFJ Financial Group Inc ($36.7B, 1.3%), Deutsche Bank AG ( $34.2B, 1.2%), Bank of Nova Scotia ($34.1B, 1.2%), Bank of America ($33.9B, 1.2%), and Citi ($33.4B, 1.2%).

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 ($286.0B, 28.3%), RBC ($74.8B, 7.4%), BNP Paribas ($62.9B, 6.2%), Wells Fargo ($49.4B, 4.9%), Nomura ($45.0B, 4.5%), Barclays PLC ($34.6B, 3.4%), Fixed Income Clearing Co ($33.9B, 3.4%), Bank of America ($29.8B, 2.9%), HSBC ($28.2B, 2.8%), and Deutsche Bank AG ($27.5B, 2.7%).

The 10 largest Fed Repo positions among MMFs on 1/31/18 include: Northern Trust Trs MMkt ($5.0B), Fidelity Cash Central Fund ($4.9B), ` Franklin IFT US Govt MM <b:>`_ ($4.8B), JP Morgan US Govt ($4.8B in Fed Repo), Goldman Sachs FS Treas Sol ($4.7B), BlackRock Lq T-Fund ($4.6B), Morgan Stanley Inst Liq Govt Sec ($4.0B), UBS Select Treas ($3.2B), Fidelity Sec Lending Cash Central ($3.1B), and Northern Inst Govt Select ($3.1B).

The 10 largest issuers of "credit" -- CDs, CP and Other securities (including Time Deposits and Notes) combined -- include: RBC ($20.4B, 4.7%), Toronto-Dominion Bank ($16.7B, 3.9%), Credit Agricole ($15.6, 3.6%), Wells Fargo ($14.7B, 3.4%), BNP Paribas ($14.7B, 3.4%), Mitsubishi UFJ Financial Group Inc. ($14.3B, 3.3%), Australia & New Zealand Banking Group Ltd ($13.7, 3.2%), Bank of Nova Scotia ($13.7B, 3.2%), Canadian Imperial Bank of Commerce ($12.8B, 3.0%), and Swedbank AB ($12.7B, 3.0%).

The 10 largest CD issuers include: Wells Fargo ($14.6B, 4.0%), RBC ($12.2, 6.7%), Bank of Montreal ($12.1B, 6.7%), Sumitomo Mitsui Banking Co ($9.5B, 5.2%), Mitsubishi UFJ Financial Group Inc ($8.3B, 4.6%), Mizuho Corporate Bank Ltd ($7.8B, 4.3%), Toronto-Dominion Bank ($7.4B, 4.1%), Sumitomo Mitsui Trust Bank ($7.2B, 4.0%), Svenska Handelsbanken ($6.9B, 3.8%), and KBC Group NV ($6.7B, 3.7%).

The 10 largest CP issuers (we include affiliated ABCP programs) include: Toronto-Dominion Bank ($8.6B, 4.7%), Commonwealth Bank of Australia ($8.5B, 4.7%), Bank of Nova Scotia ($7.8B, 4.3%), Westpac Banking Co ($7.7B, 4.2%), Bank Nederlandse Gemeenten ($7.6B, 4.2%), BNP Paribas ($7.5B, 4.2%), JP Morgan ($7.3B, 4.0%), Credit Agricole ($6.2B, 3.4%), UBS AG ($6.0B, 3.3%), RBC ($5.6B, 3.1%).

The largest increases among Issuers include: BNP Paribas (up $52.0B to $122.8B, Credit Agricole (up $38.4B to $62.4B), Federal Home Loan Bank (up $38.1B to $579.5B), Credit Suisse (up $21.1B to $31.7B), Natixis (up $19.3B to $39.2B), Societe Generale (up $16.3B to $47.9B), ING Bank (up $14.4B to $33.0B), Barclays PLC (up $12.0B to $55.8B), JP Morgan (up $11.5B to $40.3B), and HSBC (up $10.8B to $45.0B).

The largest decreases among Issuers of money market securities (including Repo) in January were shown by: Federal Reserve Bank of New York (down $231.0B to $55.0B), Fixed Income Clearing Co (down $12.5B to $21.4B), RBC (down $12.2B to $85.6B), Federal Home Loan Mortgage Co (down $9.8B to $42.6B), Toronto-Dominion Bank (down $7.2B to 30.7B), Canadian Imperial Bank of Commerce (down $6.6B to $28.4B), Bank of Nova Scotia (down $5.1B to $34.1B), Federal National Mortgage Association (down $3.8B to $19.5B), Mitsubishi UFJ Financial Group Inc (down $2.2B to $36.7B), and Australia & New Zealand Banking Group Ltd (down $1.9B to $13.7B).

The United States remained the largest segment of country-affiliations; it represents 62.0% of holdings, or $1.795 trillion. France (9.9%, $285.7B) moved into the No. 2 spot and Canada (7.5%, $218.0B) dropped down to No. 3. Japan (5.9%, $171.0B) dropped down to fourth place, while the United Kingdom (4.4%, $127.2B) remained in fifth place. Germany (2.3%, $66.6B) remained in sixth place, and The Netherlands (2.2%, $63.6B) moved ahead of Australia (1.6%, $45.5B) to take seventh place. Switzerland (1.4%, $39.0B) moved up to No. 9 ahead of Sweden (1.4%, $39.0B) in tenth place. (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 Jan. 31, 2017, Taxable money funds held 32.1% (down from 36.1%) of their assets in securities maturing Overnight, and another 15.1% maturing in 2-7 days (up from 12.1%). Thus, 47.2% in total matures in 1-7 days. Another 25.2% matures in 8-30 days, while 11.3% matures in 31-60 days. Note that over three-quarters, or 83.7% of securities, mature in 60 days or less (up slightly from last month), the dividing line for use of amortized cost accounting under SEC regulations. The next bucket, 61-90 days, holds 6.2% of taxable securities, while 7.9% matures in 91-180 days, and just 2.2% matures beyond 181 days.

Feb 07

The February issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Wednesday morning, features the articles: "Battle to Repeal Floating NAV Regs Not Over; H.R. 2319 Lives," which reviews the legislative effort to undo the floating NAV reforms; "Morgan Stanley's McMullen & Kolk on Global, Ultrashort," which interviews MSIM's Fred McMullen and Jonas Kolk; and, "MF University '18 Highlights Asset Recovery, Rising Rates," which reviews highlights from our recent "basic training" conference. We've also updated our Money Fund Wisdom database with Jan. 31, 2018, statistics, and also 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 February Money Fund Portfolio Holdings are scheduled to ship on Friday, February 10, and our February Bond Fund Intelligence is scheduled to go out Wednesday, February 15.

MFI's "Battle to Repeal" article says, "While recent press coverage indicates that it has stalled, the push continues to pass H.R. 2319, a bill that would bring back the $1.00 'stable' share price for Prime Institutional and Muni Inst MMFs. The most recent skirmish took place on the Editorial page of The Wall Street Journal. Bill sponsor Rep. Keith Rothfus (R., Pa.) wrote a letter to the editor in response to a recent editorial."

It continues, "His missive, entitled, "Keep Money-Market Funds Safe and Sensible," says, "The SEC unfairly picked winners and losers at the expense of state and local governments, affordable housing, schools, hospitals and Main Street businesses. Your editorial "The Next Money-Fund Bailout" (Jan. 29) omits key facts about my legislation as well as the effects of the SEC's 2014 rule affecting money-market funds. I agree that investors should be aware of the risks ... and that the federal government should not bail out failing businesses. That's why my bill prohibits federal bailouts and requires that this be disclosed."

MFI's latest Profile reads, "This month, MFI interviews Morgan Stanley Investment Management Managing Directors and Co-Heads of Global Liquidity Fred McMullen and Jonas Kolk. MSIM is the 5th largest manager of global institutional money funds, overseeing $169.0 billion. We discuss the latest issues involving U.S. money market funds, and also talk about pending European money fund reforms, the state of conservative ultra-short bond funds, and a number of other issues in the cash investment space. Our Q&A follows."

MFI says, "Tell us about your history." McMullen tells us, "The genesis of the business was designed for our brokerage and private wealth platforms. In the early 2000s, we made a push into the institutional funds market, both in the U.S. and offshore. Then for our ultrashort fund, which is approaching its two-year anniversary, that history coincides with the recent regulatory changes here in the U.S.... I joined Morgan Stanley in 2010 and took over the distribution and product functions in 2011. I've been in the industry approximately 30 years."

Kolk comments, "We launched our first money fund in 1975, so it was one of the first funds in existence in the industry.... I joined 14 years ago [and] was hired as someone with experience on the institutional side of portfolio management."

MFI asks, "What's your biggest priority now? McMullen says, "We have a lineup of U.S. institutional funds and retail funds in both the taxable and tax-exempt spaces, and we also have our offshore funds across three major currencies - U.S. dollar, euro and sterling. The money market funds are complemented by our Ultra Short Income Bond Fund [where] the AUM is a little over $7 billion.... We also manage liquidity separate accounts."

He adds, "I would say that EU money market fund reform is right on top of our priorities list, and where we're spending a lot of time engaging clients and firming up our product line decisions. On the offshore side, we've experienced a lot of growth.... [We're now] number six in the offshore league tables, so we want to preserve this part of the franchise as much as we can. In terms of our response to the EU regulations, we're finalizing what our product lineup will look like." (Watch for more excerpts from this "profile" later this month, or ask us to see the latest MFI.)

Our "Money Fund University" article says, "Crane Data recently hosted its 8th annual Money Fund University, which took place Jan. 18-19 in Boston. The "basic training" event, targeted at those new to the money fund industry, featured primers on interest rates, money market securities, the Federal Reserve, ratings, portfolio management, and money fund regulations. The big themes this year were the reality of rising rates, the gradual recovery in assets, and the focus on repatriation and pending regulatory reform in Europe."

It continues, "As always, host Peter Crane kicked off the event with a session called, "History and Current State of Money Funds," commenting, "As rates went to zero, assets went down by about 15% per year, then you see this 6-7 year period where assets were basically flat. It certainly was a minor miracle that money funds were able to keep the $2.6 trillion-2.7 trillion with virtually zero rates. Fund companies were waiving most of their fees ... to keep yields positive and that crushed the profits of money fund providers.... [But] they were able to soldier on and the money stayed put, which was a minor miracle."

The recap adds, "He continued, "[Then] we saw an uptick in 2017, when assets increased by about 4%. This was the first bump up we've seen in almost 10 years, and 2018 looks even better, as yields are breaking 1.0%. There is a little bit of interest again in cash, so you came at a good time. You survived the 'death watch' and presumably things are brighter than they've been in a decade in this space."

Our February MFI XLS, with Jan. 31, 2018, data, shows total assets decreased $54.3 billion in January to $2.988 trillion, after increasing $57.9 billion in December, $46.4 billion in November, and decreasing $2.2 billion in October. Our broad Crane Money Fund Average 7-Day Yield was up 6 basis points to 0.98% during the month, while our Crane 100 Money Fund Index (the 100 largest taxable funds) was up 5 bps to 1.17%.

On a Gross Yield Basis (7-Day) (before expenses were taken out), the Crane MFA rose 8 bps to 1.43% and the Crane 100 rose 7 bps to 1.45%. Charged Expenses averaged 0.45% and 0.28% (up one bps and unchanged, respectively) for the Crane MFA and Crane 100. The average WAM (weighted average maturity) for the Crane MFA was 29 days (down one day from last month) and for the Crane 100 was 28 days (down two from last month). (See our Crane Index or craneindexes.xlsx history file for more on our averages.)