The SEC recently released its latest quarterly "Private Funds Statistics report, which summarizes Form PF reporting and includes some data on "Liquidity Funds." The publication shows that overall Liquidity fund assets rebounded in the latest reported quarter to $580 billion (up from $573 billion in Q1). The SEC's "Introduction" tells us, "This report provides a summary of recent private fund industry statistics and trends, reflecting data collected through Form PF and Form ADV filings. Form PF information provided in this report is aggregated, rounded, and/or masked to avoid potential disclosure of proprietary information of individual Form PF filers. This report reflects data from Third Calendar Quarter 2017 through Second Calendar Quarter 2019 as reported by Form PF filers." (Note: Crane Data believes many of the liquidity funds are securities lending reinvestment pools and other short-term investment funds; these are not the "3c-7" private liquidity funds being offered to institutional clients by Federated, JPMorgan and some others.)

The tables in the SEC's "Private Funds Statistics: Second Calendar Quarter 2019 the most recent data available, now show 116 Liquidity Funds (including "Section 3 Liquidity Funds," which are Liquidity Funds from advisers with over $1 billion total in cash), down 1 from the last quarter and up 3 from a year ago. (There are 72 Liquidity Funds and 44 Section 3 Liquidity Funds.) The SEC receives Form PF reports from 39 Liquidity Fund advisers and 22 Section 3 Liquidity Fund advisers, or 61 advisers in total, unchanged from last quarter (up 1 from a year ago).

The SEC's table on "Aggregate Private Fund Net Asset Value" shows total Liquidity Fund assets at $580 billion, up $7 billion from Q1'19 and down $34 billion from a year ago (Q2'18). Of this total, $292 billion is in normal Liquidity Funds while $288 billion is in Section 3 (large manager) Liquidity Funds. The SEC's table on "Aggregate Private Fund Gross Asset Value" shows total Liquidity Fund assets at $584 billion, up $3 billion from Q1'19 and down $34 billion from a year ago (Q2'18). Of this total, $294 billion is in normal Liquidity Funds while $290 billion is in Section 3 (large manager) Liquidity Funds.

A table on "Beneficial Ownership for Section 3 Liquidity Funds" shows $84 billion is held by Private Funds (29.1%), $60 billion is held by Unknown Non-U.S. Investors (20.7%), $58 billion is held by Other (20.1%), $19 billion is held by SEC-Registered Investment Companies (6.6%), $10 billion is held by Insurance Companies (3.3%) and $3 billion is held by Non-U.S. Individuals (1.1%).

The tables also show that 76.2% of Section 3 Liquidity Funds have a liquidation period of one day, $276 billion of these funds may suspend redemptions, and $241 billion of these funds may have gates (out of a total of $517 billion). The Portfolio Characteristics show that these funds are very close to money market funds. WAMs average a short 30 days (38 days when weighted by assets), WALs are a short 57 days (67 days when asset-weighted), and 7-Day Gross Yields average 2.3% (2.5% asset-weighted). Daily Liquid Assets average about 50% (49% asset-weighted) while Weekly Liquid Assets average about 61% (59% asset-weighted). Overall, these portfolios appear shorter with a much heavier Treasury exposure than money market funds in general; almost half of them (47.7%) are fully compliant with Rule 2a-7.

In other news, Fitch Ratings published "Local Government Investment Pools: 3Q19," which summarizes trends in the LGIP marketplace. They explain, "To add more granularity to the Fitch Local Government Investment Pool (LGIP) indices, Fitch has expanded the dataset of underlying pools tracked. Fitch added 15 LGIPs to the data, with approximately $39 billion in assets as of 3Q19. Fitch also further broke out yield and duration metrics by classifying pools into prime or government, and rated or unrated.... In total, the indices now track 43 funds with $280 billion in assets."

Fitch continues, "As typically seen during the third quarter, assets for both Fitch LGIP indices declined due to a slowdown in tax collection. On a quarter-over-quarter basis, the Fitch Liquidity LGIP Index and the Fitch Short-Term LGIP Index experienced a 2% and 8% decrease in assets, respectively.... On a year-over-year basis, the Fitch Liquidity LGIP Index was up $27 billion (+15%) and the Fitch Short-Term LGIP Index was up $7 billion (+9%)."

The brief shows the Fitch Liquidity LGIP Index's Average Net Yield at 2.08% as of September 2019 compared to our Crane Taxable Institutional Money Fund Average's 1.76%. They show the Fitch Short-Term LGIP Index's Average Net Yield at 2.14% as of September 2019 compared to a Blended Crane Short-Term Bond Fund Index's 2.32% Yield.

Fitch writes, "Short-term market yields across the curve continued to decline during the third quarter.... Net yields decreased by approximately 34bps and 24bps during the period for the Fitch Liquidity LGIP Index and the Fitch Short-Term LGIP Index, respectively."

Finally, they add, "In an effort to sustain yields, LGIPs within Fitch's Short-Term LGIP Index slightly extended durations out to an average of 1.33 years, up from 1.17 years at the end of 2Q19. Conversely, the weighted average maturity (WAM) for LGIPs within Fitch's Liquidity LGIP Index decreased slightly from 40 to 38 days during the period, contrary to similarly managed money funds, which increased WAMs by three days on average, and can likely be explained by outflows from LGIPs."

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