Changes in Money Fund Investments & Regulations

Changes in Money Fund Investments & Regulations

CPIWG MeetingDTCC, Jersey City, NJ

February 6, 2014

Peter Crane President & PublisherCrane Data LLC

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Current State, Assets, Yields, Expenses

Portfolio Holdings Trends & Data

Regulatory Issues & Update

Miscellaneous, News

Questions & Discussion

Changes in Money Fund Investments & Regulations

Changes in Money Fund Investments & Regulations

Current State of Money Fund IndustryCurrent State of Money Fund Industry

MMF Assets $2.7 Trillion (Record was $3.9T)

– Bank Savings Over $6.5 Trillion

Approx. 27 Million Shareholders

$5 Billion in Annual Revenue (down from $11B)

Approx. 1/4 Share of “Cash” Markets

“Breaking the Buck,” Near-Death Experience

Shifting Regulatory & Competitive Landscape

Zero Yields, Attrition & Consolidation

Record Levels of Cash

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History of Money Fund Assets History of Money Fund Assets

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Money Funds Are Down $1.2 Trillion Over 5 Years (-31%), But Still at mid-’07 Levels.

Assets by Type: Prime Bottom & ReboundAssets by Type: Prime Bottom & Rebound

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Banks Take $1+ Trillion From MMFsBanks Take $1+ Trillion From MMFs

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Money Funds Are Down $.965T (-28.4%) Over 5 Yrs.; MMDAs Are Up $3.121T (+77.5%)

Rock Bottom Yields (Crane MFA 7-Day)Rock Bottom Yields (Crane MFA 7-Day)

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Fund Expenses & Fee WaiversFund Expenses & Fee Waivers

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Money Fund Revenue Estimates: $2.6 Trillion x 0.15% = $3.8 Billion (12/13); $3.1 Trillion x 0.35% = $8.4 Bil. (12/09)

Money Fund Market Share

(12/31/13)

Money Fund Market Share

(12/31/13)

Taxable MMF Portfolio CompositionTaxable MMF Portfolio Composition

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Securities, Supply & TransparencySecurities, Supply & Transparency

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Largest Issuers & Largest CD & CPLargest Issuers & Largest CD & CP

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Regulatory: SEC MMF Reform ProposalRegulatory: SEC MMF Reform Proposal

Rule 2a-7 Amendments (2/10)

President’s Working Grp (10/10)

SEC Cancels Vote (8/12)

FSOC Issues Draft (11/12)

SEC Reform Proposal (6/13)

Comment Letters Due (9/13)

Timeline of EventsTimeline of Events

Current ProposalsCurrent Proposals

Floating NAV (Prime Inst) or

Liquidity Fees/Gates (Prime)

2a-7 Tweaks, Buffer Gone

Final Rule March-June ‘14

Floating NAV & Gates Combo

Letters to Date

Predictions?Predictions?

SEC MMF Reform Comment LettersSEC MMF Reform Comment Letters

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Worldwide & Intl MF Markets ($4.7T)Worldwide & Intl MF Markets ($4.7T)

Dublin & Luxemburg (IMMFA) Domiciles

Source: ICI, Crane Data.

Online Money Fund Trading PortalsOnline Money Fund Trading Portals

Approx. $438 Billion in Assets

– 25% of Institutional MMFs’ $1.75T

AFP ‘13 Liquidity Survey

– 34% of Corps. Use Portals (46% of large cos.)

– 73% of Trades Via Portal? (old data)

Enhancements

– Adding MM Securities, TDs, Tools

– Transparency: Weekly, SMAs

New Entrants, Exits

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Ultra-Short, Enhanced Cash & SMAsUltra-Short, Enhanced Cash & SMAs

Bond Funds & Ultra-Shorts

Bonds $3.5T But Ultras < $200B

ETFs ($100B)

PIMCO MINT, Guggenheim, SHY

Enhanced Cash (maybe $200B)

Banned from using stable NAV?

Separately Managed Accounts ($200B-$400B)

“Bankerage”/FDIC Amalgamators

$400B + $200B?

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Money Fund News; Q&AMoney Fund News; Q&A

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Contact InfoContact Info