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Money Fund Wisdom News

Jul 12
 

Crane Data released its July Money Fund Portfolio Holdings Wednesday, and our most recent collection of taxable money market securities, with data as of June 30, 2018, shows a drop in Repo overall but a sharp rebound in Fed Repo. Money market securities held by Taxable U.S. money funds (tracked by Crane Data) decreased by $53.8 billion to $2.871 trillion last month, after increasing by $16.7 billion in May and $46.4 billion in April, but decreasing $105.0 billion in March. Repo continued to be the largest portfolio segment, followed by Treasury securities then Agencies. CP remained fourth ahead of CDs, Other/Time Deposits and VRDNs. Below, we review our latest Money Fund Portfolio Holdings statistics. (Visit our Content center to download the latest files, or contact us to see our latest Portfolio Holdings reports.)

Among taxable money funds, Repurchase Agreements (repo) fell $31.4 billion (-3.2%) to $952.8 billion, or 33.2% of holdings, after jumping $67.1 billion in May and $99.9 in April, but dropping $89.6 billion in March. Treasury securities fell again, down $6.3 billion (-0.8%) to $773.0 billion, or 26.9% of holdings, after dropping $50.9 billion in May and $108.3 billion in April, but jumping $95.3 billion in March. Government Agency Debt fell by $9.3 billion (-1.4%) to $674.2 billion, or 23.5% of all holdings, after rising by $5.5 billion in May, rising $23.4 in April, and falling $58.1 billion in March. Repo, Treasuries and Agencies total $2.400 trillion, representing a massive 83.6% of all taxable holdings.

CP fell in the sixth month of the year, while CDs and Other (mainly Time Deposits) securities increased. Commercial Paper (CP) was down $10.0 billion (-4.5%) to $213.9 billion, or 7.5% of holdings, after rising $13.2 billion in May, rising $8.8 billion in April and falling $16.2 billion in March. Certificates of Deposits (CDs) rose by $1.6 billion (0.9%) to $169.3 billion, or 5.9% of taxable assets (after dropping by $1.2 billion in May and rising $1.7 billion in April). Other holdings, primarily Time Deposits, rose by $1.6 billion (2.1%) to $79.3 billion, or 2.8% of holdings. VRDNs held by taxable funds fell by $0.0B (-0.4%) (0.3% of assets).

Prime money fund assets tracked by Crane Data dipped again to $651 billion (down from $662 billion last month), or 22.7% (up from 22.6%) of taxable money fund holdings' total of $2.871 trillion. Among Prime money funds, CDs represent over a quarter of holdings at 26.0% (up from 25.3% a month ago), followed by Commercial Paper at 33.0% (down from 33.8%). The CP totals are comprised of: Financial Company CP, which makes up 21.5% of total holdings, Asset-Backed CP, which accounts for 6.5%, and Non-Financial Company CP, which makes up 5.0%. Prime funds also hold 5.5% in US Govt Agency Debt, 6.9% in US Treasury Debt, 7.2% in US Treasury Repo, 1.6% in Other Instruments, 8.9% in Non-Negotiable Time Deposits, 5.1% in Other Repo, 3.5% in US Government Agency Repo, and 1.0% in VRDNs.

Government money fund portfolios totaled $1.539 trillion (53.6% of all MMF assets), down from $1.589 trillion in May, while Treasury money fund assets totaled another $681 billion (23.7%), up from $673 billion the prior month. Government money fund portfolios were made up of 41.5% US Govt Agency Debt, 19.8% US Government Agency Repo, 16.4% US Treasury debt, and 22.0% in US Treasury Repo. Treasury money funds were comprised of 69.7% US Treasury debt, 30.1% in US Treasury Repo, and 0.1% in Government agency repo, Other Instrument, and Investment Company shares. Government and Treasury funds combined now total $2.220 trillion, or 77.3% of all taxable money fund assets, the same as last month.

European-affiliated holdings fell $136.5 billion in June to $541.0 billion among all taxable funds (and including repos); their share of holdings fell to 18.4% from 23.2% the previous month. Eurozone-affiliated holdings fell $98.2 billion to $337.3 billion in June; they account for 11.8% of overall taxable money fund holdings. Asia & Pacific related holdings increased by $0.9 billion to $244.8 billion (8.5% of the total). Americas related holdings rose $0.1 billion to $2.083 trillion and now represent 72.6% of holdings.

The overall taxable fund Repo totals were made up of: US Treasury Repurchase Agreements, which decreased $26.2 billion, or -4.3%, to $591.1 billion, or 20.6% of assets; US Government Agency Repurchase Agreements (down $5.1 billion to $328.0 billion, or 11.4% of total holdings), and Other Repurchase Agreements ($33.7 billion, or 1.2% of holdings, down $0.1 billion from last month). The Commercial Paper totals were comprised of Financial Company Commercial Paper (down $2.1 billion to $139.6 billion, or 4.9% of assets), Asset Backed Commercial Paper (up $0.3 billion to $42.2 billion, or 1.5%), and Non-Financial Company Commercial Paper (down $8.2 billion to $32.2 billion, or 1.1%).

The 20 largest Issuers to taxable money market funds as of June 30, 2018, include: the US Treasury ($773.0 billion, or 26.9%), Federal Home Loan Bank ($549.0B, 19.1%), BNP Paribas ($143.4B, 5.0%), RBC ($95.5B, 3.3%), Federal Reserve Bank of New York $88.6B, 3.1%), Federal Farm Credit Bank $76.9B, 2.7%), Wells Fargo ($67.5B, 2.4%), Fixed Income Clearing Corp ($51.0B, 1.8%), HSBC ($51.0B, 1.8%), Mitsubishi UFJ Financial Group Inc ($46.1B, 1.6%), Sumitomo Mitsui Banking Co ($45.1B, 1.6%), JP Morgan ($43.3B, 1.5%), Bank of Montreal ($41.5B, 1.4%), Nomura ($40.4B, 1.4%), Bank of America ($38.2B, 1.3%), Barclays PLC ($36.8B, 1.3%), Societe Generale ($36.1B, 1.3%), Toronto-Dominion ($33.7B, 1.2%), Citi ($30.2B, 1.1%), and Federal Home Loan Mortgage Co ($29.9B, 1.0%).

In the repo space, the 10 largest Repo counterparties (dealers) with the amount of repo outstanding and market share (among the money funds we track) include: BNP Paribas ($133.5B, 14.0%), Federal Reserve Bank of New York ($88.6B, 9.3%), RBC ($79.0B, 8.3%), Wells Fargo ($54.0B, 5.7%), Fixed Income Clearing Corp ($51.0B, 5.4%), HSBC ($42.7B, 4.5%), Nomura ($40.4B, 4.2%), JP Morgan ($34.7B, 3.6%), Bank of America ($34.1B, 3.6%), and Sumitomo Mitsui Banking Co ($32.4B, 3.4%).

The 10 largest Fed Repo positions among MMFs on 6/30/18 include: Fidelity Cash Central Fund ($15.1B in Fed Repo), Fidelity Sec Lending Cash Central ($8.7B), Dreyfus Govt Cash Mgmt ($8.5B), Schwab Govt MMkt ($8.4B), Fidelity Inv MM: Treasury Port ($6.2B), Dreyfus Tr&Ag Cash Mgmt ($4.0B), JP Morgan US Govt ($3.7B), BlackRock Lq FedFund ($3.4B), JP Morgan US Trs Plus ($2.9B), and BlackRock Cash Treas ($2.8B),.

The 10 largest issuers of "credit" -- CDs, CP and Other securities (including Time Deposits and Notes) combined -- include: Toronto-Dominion Bank ($21.3B, 5.4%), RBC ($16.5B, 4.2%), Mitsubishi UFJ Financial Group Inc. ($15.2B, 3.9%), Swedbank AB ($14.7B, 3.7%), Canadian Imperial Bank of Commerce ($14.0B, 3.6%), Bank of Montreal ($13.5B, 3.4%) Wells Fargo ($13.5B, 3.4%), Sumitomo Mitsui Banking Co ($12.7, 3.2%), Australia & New Zealand Banking Group Ltd ($12.0B, 3.1%), and Svenska Handelsbanken ($11.9, 3.0%).

The 10 largest CD issuers include: Wells Fargo ($13.4B, 8.0%), Bank of Montreal ($12.6B, 7.4%), RBC ($10.1, 6.0%), Svenska Handelsbanken ($9.3B, 5.5%), Mitsubishi UFJ Financial Group Inc ($9.0B, 5.3%), Sumitomo Mitsui Trust Bank ($8.8B, 5.2%), Swedbank AB ($8.7B, 5.2%), Sumitomo Mitsui Banking Co ($7.7B, 4.6%), Mizuho Corporate Bank Ltd ($7.6B, 4.5%), and Canadian Imperial Bank of Commerce ($6.8B, 4.0%).

The 10 largest CP issuers (we include affiliated ABCP programs) include: Toronto-Dominion Bank ($13.2B, 7.3%), JPMorgan ($8.5B, 4.7%), Commonwealth Bank of Australia ($7.2B, 3.9%), Credit Suisse ($6.8B, 3.7%), UBS AG ($6.6B, 3.6%), Australia & New Zealand Banking Group Ltd ($6.5B, 3.6%), National Australia Bank Ltd ($6.4B, 3.5%), Mitsubishi UFJ Financial Group Inc ($6.1B, 3.4%), Bank of Nova Scotia ($5.8B, 3.2%), and Canadian Imperial Bank of Commerce ($5.7B, 3.1%).

The largest increases among Issuers include: Federal Reserve Bank of New York (up $67.1B to $88.6B), RBC (up $12.6B to $95.5B), Bank of Montreal (up $6.7B to $41.5B), Nomura (up $6.0B to $40.4B), Sumitomo Mitsui Trust Bank (up $4.1B to $14.1B), Fixed Income Clearing Co (up $4.1B to $51.0B), BNP Paribas (up $3.7B to $143.4B), DNB ASA (up $3.6B to $14.0B), Mitsubishi UFJ Financial Group Inc (up $3.4B to $46.1B), and Bank of America (up $3.3B to $38.2B).

The largest decreases among Issuers of money market securities (including Repo) in June were shown by: Credit Agricole (down $42.1B to $24.4B), Barclays PLC (down $21.9B to 36.8B), Credit Suisse (down $18.1B to $11.2B), Natixis (down $15.3B to $28.0B), Societe Generale (down $15.2B to $36.1B), Mizuho Corporate Bank Ltd (down $11.6B to $17.8B), Deutsche Bank AG (down $10.5B to $7.2B), JP Morgan (down $9.3B to $43.3B), Federal Home Loan Bank (down $6.7B to $549.0B), and the US Treasury (down $6.3B to $773.0B).

The United States remained the largest segment of country-affiliations; it represents 64.3% of holdings, or $1.846 trillion. France (8.5%, $243.9B) remained in the No. 2 spot and Canada (8.3%, $237.1B) remained No. 3. Japan (6.7%, $191.3B) stayed in fourth place, while the United Kingdom (4.2%, $119.5B) remained in fifth place. Germany (1.5%, $43.9B) moved ahead of The Netherlands (1.5%, $42.4B) into sixth place. Sweden (1.5%, $44.1B) ranked 8th while Australia (1.4%, $39.1B) moved ahead of Switzerland (0.8%, $23.7B) to rank 9th and 10th. (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, 2018, Taxable money funds held 31.8% (down from 32.0%) of their assets in securities maturing Overnight, and another 15.5% maturing in 2-7 days (down from 16.2%). Thus, 47.3% in total matures in 1-7 days. Another 23.4% matures in 8-30 days, while 10.0% matures in 31-60 days. Note that over three-quarters, or 80.6% 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 10.6% of taxable securities, while 7.5% matures in 91-180 days, and just 1.3% matures beyond 181 days.

Jul 09
 

The July issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Monday morning, features the articles: "Money Fund Symposium Focus on Rising Yields, Pending Flows," which cites highlights and quotes from our recent Pittsburgh conference; "Federated's Donahue Tells MFS: Be Good Neighbors," which excerpts Federated Investors' CEO Chris Donahue's keynote speech at MFS; and, "Worldwide MF Assets: Chinese MFs Jump, US Drop," which reviews ICI's latest quarterly collection of global fund statistics. We've also updated our Money Fund Wisdom database with June 30, 2018, 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 July Money Fund Portfolio Holdings are scheduled to ship on Wednesday, July 11, and our June Bond Fund Intelligence is scheduled to go out Monday, July 16.

MFI's "MF Symposium Recap" article says, "Two weeks ago, Crane Data hosted its 10th annual Money Fund Symposium, which brought together a near-record 565 money fund managers, issuers, dealers, investors and servicers to the $3.0 trillion money market fund industry. The mood overall was warm (thanks in part to an air conditioning issue on the first day) and upbeat, as money market funds celebrated what no doubt will be their best year in a decade. Higher yields, rising assets, the continued gradual recovery in Prime funds, and the potential to take back market share from bank deposits dominated the agenda. We quote from some of the sessions below."

The lead piece continues, "Our 'Major Money Fund Issues 2018,' moderated by Crane Data's Peter Crane, featured Dreyfus's Tracy Hopkins, Goldman Sachs Asset Management's Pat O’Callaghan, and Wells Fargo AM's Jeff Weaver. (Note: Thanks to those who attended and supported our Pittsburgh show. Visit our 'Money Fund Symposium 2018 Download Center' to access the conference materials, and mark your calendars for next year’s show, June 24-26, 2019, at the Boston Renaissance.)"

It tells us, "On the 'Major Issues' panel, Crane first asked about ultra-short issues and whether investors were still interested in this segment. O'Callaghan says, 'Yes, absolutely. I think there are a lot of issues going on right now in the front end.... The Fed being active is drawing people's attention.... If you go back to a couple of years ago -- there wasn't a lot of deviation [between MMFs and ultra-shorts].... Now you have a situation where rates are going higher and spreads are growing wider.... They're not just looking at money funds; they're looking at products across the board, whether it’s ultra-shorts or Treasury funds.... All of that is good for us.'"

MFI's latest Profile reads, "Our recent Money Fund Symposium in Pittsburgh was keynoted by Federated Investors President & CEO J. Christopher Donahue. He addressed a number of topics, including the history of money funds, the effort to roll back recent regulatory reforms and money funds overseas. We excerpt from the speech below."

Donahue comments, "There was one Pittsburgher who wanted to make a difference, and 50 years ago he began his program talking to children. I'm talking about 'Mr. Rogers' Neighborhood.' Interestingly enough, we, my wife and I, live in Mr. Rogers' house in Pittsburgh where he raised his children.... 'What can Mr. Rogers teach us about money market funds?' Far more than we thought."

Mr. Rogers said, "It's the knowing that we can be trusted, that we never have to fear the truth." That is the bedrock of our very being. Peter Crane has also asked me a number of questions, which we will cover in this discussion."

He explains, "We'll begin with a little history to see how whether we can be trusted and see whether we have to fear the truth. A short history, a very neighborly history began in '74, when the SEC decided to grant three funds, Fidelity, Federated, and Dreyfus, effective [orders] for their money market funds.... We wanted the name Federated Cash Management, but the SEC told us, 'You can't have that name because you cannot manage cash.' Glen Johnson [then] chose the name Money Market Management."

Donahue tells us, "Then, a bad neighbor appeared on the scene. The bad neighbor was the Comptroller of the Currency. They said, 'You cannot delegate cash management to a fund. This is a violation of fiduciary duty.' Well, with client support, good legal work, and with Gene Maloney of our company learning how to spell 'fiduciary,' we got [approval] and we were back in business." (See Donahue's full speech in MFI or watch for more excerpts in coming weeks.)

MFI's "Worldwide" article says, "The Investment Company Institute released its "Worldwide Regulated Open-Fund Assets and Flows, First Quarter 2018” late last month. The most recent data collection on mutual funds in other countries (as well as the U.S.) shows that money fund assets globally rose by $198.0 billion, or 3.4%, in Q1’18 to $6.098 trillion, led by big jumps in Chinese and French money funds. Money funds in Korea, India, Ireland, and Mexico also rose. MMF assets worldwide have increased by $940.6 billion, or 18.2%, the past 12 months. The U.S., Luxembourg, and Japan were the only countries showing noticeable decreases in Q1’18. We review the latest Worldwide MMF totals below."

ICI’s release says, "Worldwide regulated open-end fund assets increased 1.5 percent to $50.01 trillion at the end of the first quarter of 2018, excluding funds of funds. Worldwide net cash inflow to all funds was $584 billion in the first quarter, compared with $687 billion of net inflows in the fourth quarter of 2017. The Investment Company Institute compiles worldwide open-end fund statistics on behalf of the International Investment Funds Association, the organization of national fund associations. The collection for the first quarter of 2018 contains statistics from 47 jurisdictions.”

Our July MFI XLS, with June 30, 2018, data, shows total assets decreased $32.6 billion in June to $3.025 trillion, after increasing $63.5 billion in May and $19.9 billion in April, and decreasing $42.9 billion in March. Our broad Crane Money Fund Average 7-Day Yield was up 11 basis points to 1.53% during the month, while our Crane 100 Money Fund Index (the 100 largest taxable funds) was up 13 bps to 1.74%.

On a Gross Yield Basis (7-Day) (before expenses were taken out), the Crane MFA rose to 1.98% and the Crane 100 rose to 2.01%. 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 and Crane 100 were both 29 days, respectively (up one day from last month). (See our Crane Index or craneindexes.xlsx history file for more on our averages.)

Jun 21
 

This month, Money Fund Intelligence interviews Jason Granet, Deputy Head of Liquidity Solutions for Goldman Sachs Asset Management, and Kathleen Hughes, Global Head of GSAM's Liquidity Solutions Client Business. Goldman Sachs Asset Management is one of the top 5 money fund managers globally, and we discuss the firm's history in cash, their latest priorities and challenges, and developments in Europe and in the world just beyond money markets. Our interview follows. (Note: This article is reprinted from the June issue of our flagship Money Fund Intelligence newsletter; contact us at inquiry@cranedata.com to request the full issue.)

MFI: Tell us about your history. Granet: We entered the business in 1981 with $2 billion in assets. Over our 37-year history, we have grown the franchise into $280 billion-plus of money market fund assets across a range of fund families globally. In 1996, we launched our Dublin-domiciled Liquid Reserves family and we consolidated our U.S. funds into the Financial Square family in 2010. We recently launched our Liquid Reserves Plus funds in dollars, euros, and sterling, which is an extension of our Liquid Reserves range. We manage taxable, tax exempt and tax advantaged money funds both onshore and offshore, and we have funds domiciled in dollars, euros, sterling, and yen, as well as a suite of separate accounts and short duration products. Money markets have a long legacy here and are an important part of our global franchise.

We believe our credit process is a strong contributing factor to our business. We're unique in the sense that we run an independently constructed list of between 600 and 1,000 issuers -- depending on the day or week -- that is maintained by Goldman Sachs' credit risk team. They've been doing that since the day we started in the early 1980s. It is the cornerstone of our franchise and something that we are very proud of.

Personally, I am just finishing 18 years at Goldman Sachs. I was responsible for our Liquidity Solutions business in Europe and Asia, and I've just recently relocated back to New York as the deputy head of the business globally <b:>. `Hughes: I've been with GSAM for nearly eight years. I joined in September of 2010, and I've been in the money market space in Europe since 2001.

MFI: What are your big priorities? Hughes: When we think about priorities, the overarching theme has always been to understand our clients and aim to align our product offerings with their biggest needs or challenges. So, one of our biggest priorities right now won't be a surprise to you or your readers: it's European money market regulatory reform. We're engaging with clients, helping them understand how that reform will impact them and making sure that we are evolving our products to meet their needs.

Another theme that we're very engaged with clients on right now is the impact of tax reform in the U.S. and how to navigate the potential effects of repatriation. Some other things that we have been focused on are changes in technology, and how we can use technology to help our clients and drive more efficiencies for them, whether it's efficiencies around trading, moving money, or even risk management. As Jason said, we have also recently launched some new products. Those are clearly products and opportunities that were created by pending European money market fund reform and client feedback. Again, we are focused on seeing how can we help clients.

MFI: What are your big challenges? Granet: We believe different cycles bring different challenges. The first is obviously when there is stress in the system, whether it was in '94, '98, clearly '07-'08, or the early 2010's with stress in Europe. So, there are different points in times that require that we adapt to those challenges. Right now, negative rates continue to be a challenge in some parts of the world and interest rates remain relatively low globally. In this environment, just showing some differentiation can be a challenge. Lastly, bank regulation has been another challenge. As ratios are introduced and then get tweaked, adjusting can create different challenges on the investment side for our clients and different types of clients.

The overarching credit quality of the investment universe also goes through different cycles. In managing money market funds, we are investing the highest quality, most liquid part of the investment spectrum. So there is always pressure on sourcing appropriate investments and making sure we have robust, bulletproof portfolios in the highest quality, best, and most liquid markets. Different backdrops, political and regulatory changes, idiosyncratic company events and tax changes can all play into that, and it's something we are regularly navigating.

MFI: What are you buying? Granet: Markets at the front end of the curve have been volatile in 2018. That's created lots of different opportunities for us in our different strategies. As one example, with the reconciliation of some negotiations in Washington, T-bill issuance has increased massively versus years past. Market dynamics are always fluid, so when it comes to the portfolio we are always evaluating the relative value of different assets. The overarching perspective that we take doesn’t change, but every day or every week can provide some micro-differences.

MFI: What are clients asking about? Hughes: I'll mention three different things. First, clients are always acutely attuned to the interest rate environment. When we talk to clients in the U.S., they are wondering how to take advantage or think about the rising rate environment and what is happening in the short end of the yield curve, thinking about that with respect to cash on their balance sheets or cash within the ecosystem that they may be managing.

Second, and in contrast the U.S., clients in Europe are still dealing with the pain of negative interest rates. Those clients that have excess cash may not want to keep it all in money market funds and are looking for alternatives. Are there ways to use other strategies in the short duration space that can help to offset some of that negativity?

Third, tax reform is top of mind for many of our clients, certainly clients in the U.S. Their outlook on structural cash within their system has changed. Cash that used to be thought of as sitting in another jurisdiction with kind of an unlimited investment horizon allowed you to think differently about risk and return. Now that U.S. tax reform has been passed and is underway, that cash is no longer trapped and many are thinking about their options.... There is definitely money in motion as a result of tax reform.

Another theme, which is maybe a little bit more out there but is starting to come up, is ESG [environmental, social and governance issues]. Certain institutional investors have been focused on ESG for a long time, but we are starting to see it come up more in dialogues with corporate treasurers. Companies are being rated and scored on ESG factors by third-party providers. A company treasurer wants to know what is driving those scores and how they are being viewed.... There are lots of different ways that businesses are asking us about that topic and we are engaged on that one as well.

MFI: What about recent flows? Granet: There are a couple of things happening with flows. The first is, we are definitely seeing a shift -- somewhere between a trickle and a flow -- back into prime funds. There have clearly been opportunities in the markets as yields, indicated by LIBOR, have moved to levels that are attractive to investors, especially relative to other indices.... Money is also moving from offshore to onshore, and investors are shortening investment durations.

MFI: Tell us more about European funds? Granet: The European regulations have two styles -- short term money market funds and standard money market funds. The short-term have 60/120 day WAM/WAL limits, while the standards have 180/360 WAM/WAL limits. Our new Plus funds fall under the 180/360 limits.... This was a product completion exercise for us -- we didn't have any real offerings in the 180/360 bucket.... We also have offerings beyond too, [which] would fall outside of money market fund regulations.

Hughes: In Europe, everything is going to change. Doing nothing or sitting it out is not an option. What clients have shared with us as we have engaged them is that the low volatility NAV product feels closest to what they enjoy today from a utility perspective -- being able to trade in and out at a dollar or a euro or one pound. So client feedback seems to be coalescing around the LVNAV product.

MFI: What about your outlook? Hughes: I am optimistic. The industry since 2008 has definitely been tested with two rounds of reforms in the U.S., negative interest rates, etc. That certainly [attests] to the robustness of the market. We are optimistic about what is coming down the road in Europe, and we feel optimistic with respect to the importance of this product for our clients. We continue to hear that this is something they rely on every day. So we want to make sure that we are preserving the utility of the product and responding to our client’s needs and challenges.

Granet: This environment provides a tremendous opportunity for us right now to engage with clients. With rates moving, tax changes, and reform, we are rolling up our sleeves a little higher and digging in a little deeper. It's just an awesome time for us to be even more engaged and solve client issues.

Jun 07
 

The June issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Thursday morning, features the articles: "MMF Assets Turn Positive in '18, Despite Brokerage Sweeps," which discusses how the assets of money market mutual funds are beginning to see inflows; "Goldman Sachs AM's Granet & Hughes Talk Liquidity," which interviews Jason Granet and Kathleen Hughes of Goldman Sachs Asset Management; and, "ICI 2018 Fact Book Sparse on Money Fund Commentary," which excerpts from the annual compilation of statistics and commentary on the mutual fund industry. We've also updated our Money Fund Wisdom database with May 31, 2018, statistics, and sent out our MFI XLS spreadsheet this 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 Monday, June 11, and our June Bond Fund Intelligence is scheduled to go out Thursday, June 14.

MFI's "Assets Positive" article says, "Assets of money market mutual funds are beginning to see the benefits of higher yields. Year-to-date, money funds are now positive, the earliest that they've overcome their seasonal first-half weakness since 2008. While money funds are beginning to take back assets from bank deposits and other alternatives, brokerage sweep providers continue to shift assets away from MMFs and into banks."

Our lead piece continues, "ICI's latest 'Money Market Fund Assets' report shows money fund assets rising for 5 weeks in a row. Money fund assets turned positive for the year-to-date for the first time in 2018 last week. They've increased by $2 billion, or 0.1%, YTD, and they've increased by $192 billion, or 7.2%, over 52 weeks. Over the prior 3 years, MMFs have averaged declines of $75 billion, or 2.7% through the end of May, and over 5 years MMFs (prior to 2018) have averaged declines of $92 billion, or 3.4%, YTD."

MFI's latest Profile reads, "This month, MFI interviews Jason Granet, Deputy Head of Liquidity Solutions for Goldman Sachs Asset Management, and Kathleen Hughes, Global Head of GSAM's Liquidity Solutions Client Business. Goldman Sachs Asset Management is one of the top 5 fund money managers globally, and we discuss the firm's history in cash, their latest priorities and challenges, and developments in Europe and in the world just beyond money markets. Our interview follows."

MFI says, "MFI: Tell us about your history." Granet tells us, "We entered the business in 1981 with $2 billion in assets. `Over our 37-year history, we have grown the franchise into $280 billion-plus of money market fund assets across a range of fund families globally. In 1996, we launch our Dublin-domiciled Liquid Reserves family and we consolidated our US funds into the Financial Square family in 2010. We recently launched our Liquid Reserves Plus funds in dollars, euros, and sterling, which is an extension of our Liquid Reserves range. We manage taxable, tax exempt and tax advantaged money funds both onshore and offshore, and we have funds domiciled in dollars, euros, sterling, and yen, as well as a suite of separate accounts and short duration products. Money markets have a long legacy here and are an important part of our global franchise."

He adds, "We believe our credit process is a strong contributing factor to our business. We're unique in the sense that we run an independently constructed list of between 600 and 1,000 issuers -- depending on the day or week -- that is maintained by Goldman Sachs' credit risk team. They've been doing that since the day we started in the early 1980s. It is the cornerstone of our franchise and something that we are very proud of."

Our "Fact Book" article says, "The Investment Company Institute recently released its '2018 Investment Company Fact Book,' an annual compilation of statistics and commentary on the mutual fund industry. The latest edition reports that money market funds had their strongest inflows in almost 10 years in 2017. Overall, money funds assets were $2.847 trillion at year-end 2017, making up 15% of the $18.7 trillion in overall mutual fund assets."

It continues, "On `Worldwide Regulated Funds, ICI says, 'Money market funds, which are generally defined throughout the world as regulated funds that are restricted to holding only short-term, high-quality money market instruments, had $5.9 trillion in total net assets, or 12% of worldwide regulated fund total net assets.... Worldwide net sales of money market funds totaled $598 billion in 2017, a sharp increase from the $82 billion ... in 2016.'"

The book tells us, "The pattern of net sales over 2016 and 2017 primarily owed to developments in the Asia Pacific region, where money market funds had net sales of $404 billion in 2017, after experiencing net outflows of $14 billion in the previous year. Investor demand for Chinese money market funds strongly influenced net sales of money market funds in the Asia Pacific region. Nearly 80% of Asia-Pacific's total net assets in money market funds were held in funds domiciled in China at year-end 2017.'"

The piece adds, "Investor demand for money market funds in the Asia-Pacific region appears to be related to changes in the total return on the short-term money market instruments held by these funds.... Investors pulled back from Asia-Pacific money market funds as the total return on Chinese money market instruments declined from 4.3% in 2015 to 2.6% in 2016. As the total return on these money market instruments rose throughout 2017, investor demand for Asia-Pacific money market funds increased."

Our June MFI XLS, with May 31, 2018, data, shows total assets increased $63.5 billion in May to $3.068 trillion, after increasing $19.9 billion in April <b:>`_, and decreasing $42.9 billion in March. Our broad Crane Money Fund Average 7-Day Yield was up 6 basis points to 1.41% during the month, while our Crane 100 Money Fund Index (the 100 largest taxable funds) was up 6 bps to 1.61%.

On a Gross Yield Basis (7-Day) (before expenses were taken out), the Crane MFA stayed at 1.80% and the Crane 100 also stayed 1.84%. 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 and Crane 100 were both 28 days, respectively (down from last month). (See our Crane Index or craneindexes.xlsx history file for more on our averages.)