Daily Links Archives: October, 2015

SSgA issued a press release entitled, "State Street Global Advisors Expands Money Market and Bond Fund Line-up." It says, "State Street Global Advisors (SSGA) today announced additions to its cash management product line-up designed to provide clients with options as they plan for market and regulatory changes to the cash investing landscape." (See our Oct. 16 News, "SSgA Meets Challenges With New Money Funds, Enhanced Cash Options.") Barry F.X. Smith, head of SSGA's Global Cash Business, comments, "The environment for cash investors changed dramatically after the 2008 financial crisis. We developed these products to offer a broad array of solutions to best meet the cash management needs of global institutions.... After speaking at length with clients and conducting broad-based market research, we are confident that we are offering them the right mix of options to meet their cash investment and business needs." The release adds, "When launched, the addition of the `six new funds, three money market funds and three bond funds, will bring the total number of SSGA's cash and short term fixed income fund offerings to 14." It continues, "Prime Money market Funds. SSGA will continue to offer prime money market funds and is adding three new prime funds to complement its flagship fund, State Street Institutional Liquid Reserves Fund. Institutional Prime Funds: State Street 60 Day Money Market Fund: The State Street 60 Day Money Market Fund will seek to provide preservation of capital while generating current income, and will serve as a bridge fund between prime and government strategies. State Street Institutional Liquid Assets Fund: The State Street Institutional Liquid Assets Fund will seek to maximize current income, to the extent consistent with the preservation of capital and liquidity by investing in US dollarā€denominated money market securities. The fund will carry a maximum weighted average maturity (WAM) of 60 and maximum weighted average life (WAL) of 120. Retail Prime Fund: State Street Cash Reserves Fund: The State Street Cash Reserves Fund will seek to maximize current income, to the extent consistent with the preservation of capital and liquidity and the maintenance of a stable $1.00 per share net asset value ("NAV") by investing in US dollar-denominated money market securities. This fund will be offered to intermediaries with a retail client base. As a retail fund, it will seek to maintain a constant NAV. However, it is subject to Rule 2a-7's liquidity fee and redemption gate requirements. Short-Term Bond Funds: To further demonstrate its short term fixed income management capabilities, SSGA intends to offer the following short-term bond funds not subject to Rule 2a-7's liquidity fees or redemption gates: State Street Current Yield Fund. This State Street Current Yield Fund will seek to provide current yield, and intends to invest up to 100% of its assets in tier II credits and maintain a maximum WAM of 45, maximum WAL of 60 and a maximum final maturity of 90 days. State Street Conservative Income Fund. The State Street Conservative Income Fund will seek to provide current income, while seeking to maintain a WAM of 90 and a WAL of 250. State Street Ultra Short Term Bond Fund. The State Street Ultra Short Term Bond Fund will seek to provide current income and total return. This fund will hold a diversified portfolio of investment grade securities. "As regulations come into effect in 2016, we anticipate an increase in demand for short-term government securities," added Smith. "In addition to these six new funds, we also continue to evaluate opportunities for new product development, and we remain actively engaged in discussions with our distribution partners and clients in an effort to understand how our investors' liquidity and cash management needs are changing."

The Federal Reserve's Federal Open Market Committee met this week, and, as expected, did not raise interest rates. But the Fed did remove references to overseas "market turbulence" and spoke about the possibility of raising rates at its next meeting in December. The FOMC's Statement says, "Information received since the Federal Open Market Committee met in September suggests that economic activity has been expanding at a moderate pace.... To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining whether it will be appropriate to raise the target range at its next meeting, the Committee will assess progress -- both realized and expected -- toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. This policy, by keeping the Committee's holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.... Voting against the action was Jeffrey M. Lacker, who preferred to raise the target range for the federal funds rate by 25 basis points at this meeting." The Wall Street Journal interpreted the FOMC's statement as an indication that a hike may be coming in December in the story, "Fed Signals Interest-Rate Increase 'at Its Next Meeting' After Standing Pat." They write, "The explicit reference to the next meeting effectively meant the Fed's decisions about rates are now being made on a meeting-to-meeting basis, though Fed officials stopped short of committing to an immediate move. Officials struck from the statement a sentence introduced in September that pointed to market turbulence and global developments as potential restraints on U.S. economic activity. That reduces an impediment officials had stressed in September as standing in their way."

Delaware Investments filed a Prospectus Supplement with the Securities and Exchange Commission to convert its $169 million Delaware Cash Reserves, a Prime Retail fund, to an Ultra Short Bond Fund, the Delaware Ultrashort Fund. The filing for the 65th largest MMF complexes' only money fund says, "The Fund's Board of Trustees has approved the conversion of the Fund from a money market fund with a stable net asset value of $1.00 per share into an ultrashort-term bond fund that will have a fluctuating net asset value. Following the conversion of the Fund into an ultrashort-term bond fund, the Fund will no longer operate as a money market fund and it will be renamed Delaware Investments Ultrashort Fund. In addition, check writing privileges will be discontinued in connection with the conversion of the Fund. We anticipate that the conversion will be effected by early January 2016. After the conversion, the Fund's new investment objective will be to seek total return to the extent consistent with relatively low volatility of principal. Although the current and new investment objectives of the Fund are different, the Fund will continue to invest its assets in short-term investment grade securities. Once converted, the Fund will maintain an average effective duration of less than 18 months, as compared with the Fund's current average maturity of 60 days or less. Prior to the conversion, shareholders will receive an updated summary prospectus reflecting these changes and providing further information, including a description of the Fund's revised principal investment strategies, fees, and expenses."

BlackRock recently announced the results of its "Global Investor Pulse Survey." (You can find the full survey at www.blackrockinvestorpulse.com.) The press release, entitled "American Focus on the Right Goals, But Money Attitudes, Behaviors Get In the Way of Financial Success," says Americans have "too much allocated to cash." It explains, "While Americans said that they ideally should have 33% of their net worth in cash instruments, they admit to holding 65% -- far too high an allocation to achieve their retirement goals, given low interest rates and the diminishing purchasing power of their cash related to the pressures of inflation. The current asset allocation of American portfolios according to the survey includes 65% in cash, 18% in equities, 6% in bonds, 4% in property, 2% in alternatives, 5% listed as "other". It adds, "A key obstacle is the feeling of security that cash brings: Nearly four in 10 (39%) say they want to have "cash saved as a security blanket or reserve for unforeseen events before I can think about investing". Further, respondents said that saving money makes them feel secure (39%), hopeful (29%) and confident (28%), while investing money makes them feel risky (37%) and nervous (35%). More than one-third (36%) of Americans are afraid of taking risks with money or losing money, although only 7% said that they actually have lost a lot of money in past investments." The survey polled 31,139 individuals in 20 nations, including 4,213 Americans. In other news, Crain's Cleveland Business reports, "Cuyahoga County jury says Chicago broker is on hook for $1.86M following Ponzi scheme." It says, "A Cuyahoga County jury has awarded a Cleveland Heights man and two Swedish fraternal organizations he is associated with $1.86 million from a Chicago commodities broker. The case is one of a handful of legal actions growing from a Ponzi scheme spun by former Beachwood investment adviser Enrique Villalba Jr.... He [Villalba] held himself out as an investment manager and claimed he could produce long-term gains of between 8% and 12% for investors using a proprietary strategy he called "Money Market Plus" for investing in the futures market.... Villalba admitted that he had misappropriated client funds and hid his actions from clients of his Money Market Alternative LP (MMA).

Reuters published a story Thursday, "Debt-ceiling debate could put money funds into uncharted waters." It says, "A failure by Washington leaders to raise the federal debt ceiling by next month could test whether new regulations have made money market mutual funds more robust. With $2.7 trillion in assets, money funds play a key role in the financial system as purchasers of corporate and government debt used to fund short-term operations. Some funds' managers were rattled when past debt showdowns cast doubt on the payment schedules of U.S. Treasury securities they held, though investors ultimately stayed with the funds. Now Republicans in the U.S. Congress are once again resisting requests to raise the federal debt ceiling, leading to concerns the U.S. Treasury Department might not have enough cash to make interest payments due mid-November. The Treasury on Thursday decided to postpone a scheduled auction of two-year notes, citing the borrowing limit. The threat of payment interruptions has already caused one-month T-bill rates to jump temporarily. This time, industry analysts say, money funds could face an extra squeeze because of reforms passed in 2014 that have sponsors converting funds into ones that hold more government-backed debt, which in the worst case could lose value if Washington seizes up. More than $200 billion in funds are in the process of conversion, according to Peter Crane, who tracks the money-market industry, potentially shifting assets to the area that could be affected by a protracted debt-ceiling battle. "If you have a debt showdown, the new rules are going to raise the risk," said Crane, publisher of the cranedata.com website. On the other hand the government money funds did not face big withdrawals during prior debt debates, a record Crane said could reduce the stakes for the industry this time around." It continues, "Because investors prefer the fixed value and dislike withdrawal limits, funds including the $116 billion Fidelity Cash Reserves Fund have begun to convert from prime funds into government funds that are limited to the likes of treasuries and debt issued by agencies such as Fannie Mae and Freddie Mac. This potentially exposes more assets to Washington's foibles. As of Sept. 30, the Fidelity fund had 41 percent of its portfolio in U.S. government agency paper, up from 12 percent in June, though it has reduced its holdings of Treasuries to 4 percent from 6 percent in June. Fund analysts say another issue is the leeway given to government fund sponsors on whether to assume new powers to limit withdrawals, which could leave their hands tied in a crisis.... Deborah Cunningham, Federated's chief investment officer for global money markets, said other SEC rules would still enable the funds to limit withdrawals in a crisis.... "The impact of the reforms has not been felt from a supply-demand perspective," Cunningham said. Fidelity spokeswoman Sophie Launay said its policies reflect the preferences of its investors who want access to funds with stable asset values and not subject to withdrawal limits. Of the debt ceiling debate, she said, "We closely follow market events and developments. We are comfortable with the positioning of our money market mutual funds." It goes on, "A problem for any fund manager would be if the value of holdings like Treasury bills declined because of missed government interest payments, said Greg Fayvilevich, a Fitch Ratings director.... "It will be a dilemma," Fayvilevich said. Fitch pointed to the $9.3 billion Vanguard Admiral Treasury VUSXX.O money market fund as one exposed to a debt-ceiling fight, with 44 percent of its portfolio invested in Treasuries maturing in November, including $1.6 billion of notes maturing Nov. 15. Vanguard spokesman David Hoffman said the company is monitoring the situation in Washington, saying: "We remain confident in the prudent and conservative approach to managing our money market funds." For other debt ceiling commentary, see Citi's Hollenhorst and Barclays Abate's most recent weekly updates.

Money market fund assets rose for the fifth straight week, hovering right around the $2.70 trillion level, according to ICI's latest "Money Market Mutual Fund Assets" report. Government money funds (which ICI labels "Treasury") remained north of the $1 trillion level, which they first breached in August; they show no signs to date of outflows related to worries over the debt ceiling debate and the remote possibility of a technical default on Treasury bills. The release says, "Total money market fund assets increased by $770 million to $2.70 trillion for the week ended Wednesday, October 21, the Investment Company Institute reported today. Among taxable money market funds, Treasury funds (including agency and repo) increased by $920 million and prime funds increased by $1.36 billion. Tax-exempt money market funds decreased by $1.51 billion. Assets of retail money market funds decreased by $3.01 billion to $895.33 billion. Among retail funds, Treasury money market fund assets increased by $1.63 billion to $207.92 billion, prime money market fund assets decreased by $3.94 billion to $508.01 billion, and tax-exempt fund assets decreased by $700 million to $179.40 billion. Assets of institutional money market funds increased by $3.78 billion to $1.80 trillion. Among institutional funds, Treasury money market fund assets decreased by $710 million to $793.46 billion, prime money market fund assets increased by $5.30 billion to $943.19 billion, and tax-exempt fund assets decreased by $810 million to $66.63 billion." Year-to-date, money fund assets are down $34 billion, or 1.2%. Month-to-date, money fund assets are up $30 billion. In other news, T. Rowe Price released its Q3 earnings report. On fees it says, "Money market advisory fees and other fund expenses voluntarily waived by the firm to maintain positive yields for investors in the third quarter of 2015 were $11.6 million, compared with $14.6 million in the 2014 quarter. For the first nine months of 2015, the firm has waived $37.8 million in such fees compared with $43.9 million in the 2014 period. The firm expects that it will continue to waive such fees for the remainder of the year and into 2016." It adds, "For the three-month period ended September 30, 2015, the mutual funds' net cash flows after client transfers include net outflows of $3.7 billion from the fixed income funds that were offset in part by net inflows of $0.4 billion into the stock and blended asset funds and $0.2 billion into the money market funds." Finally, for more on shrinking fee waivers, see Federated Investors latest earnings, which were released last night. (The earnings call is Friday a.m. at 9am.) Watch for coverage in our "News" Monday.

Recent Q3 earnings statements by Charles Schwab and Northern Trust show a trend of money market fund managers reducing fee waivers. Schwab's earnings release says that money market fee waivers were $166 million in Q3, down from $190 million a year ago. Schwab CFO Joe Martinetto also gave an update on Schwab's cash sweep business. He said, "We are in the process of utilizing our recent $600 million preferred issuance to support approximately $4.0 billion in bulk transfers of cash sweep balances from money market funds to Schwab Bank. We completed the first $1.1 billion transfer in September, and plan to move the remainder during the fourth quarter." Northern Trust's Q3 earnings release says, "Investment management fees increased 10% due to new business and lower money market mutual fund fee waivers. Money market mutual fund fee waivers in C&IS totaled $12.2 million in the current quarter compared to $16.7 million in the prior-year quarter." (Crane's Money Fund Average shows average charged money fund expense ratios rising from 0.12% to 0.15% year-to-date through 9/30, while our Crane 100 has risen from 0.14% to 0.16% in charged expenses.) Yesterday, we featured the News story, "ICI, JPM on Sept. Portfolio Holdings; No Fee Recapture for Vanguard" which discussed how Vanguard is not going to recapture waived fees, as reported by The Independent Adviser for Vanguard Investors. Note too that late Thursday Federated Investors' will release its third quarter earnings, which should reflect easing fee waivers too. A press release says, "Federated Investors, Inc., one of the nation's largest investment managers, will report financial and operating results for the quarter ended Sept. 30, 2015 at approximately 4:15 p.m. on Thursday, Oct. 22, 2015. A conference call for investors and analysts will be held at 9 a.m. Eastern on Friday, Oct. 23, 2015. President and Chief Executive Officer J. Christopher Donahue and Chief Financial Officer Thomas R. Donahue will host the call." In other news, Bloomberg published an article, "These Are the Fed's Three Weapons If the Economy Falters." One weapon is, the piece says, "The Fed could lower its main policy rate below zero, something it has never done. The target rate is currently at between zero and 0.25 percent.... Faced with having to pay a bank to hold their money, depositors may choose to take on more risk by shifting funds into assets with longer maturities, pushing down interest rates further along the yield curve.... The goal of investment in short-term assets, says Joseph Abate, a money market strategist at Barclays in New York, becomes "losing less money," and the distortions that creates may not be worth the trouble."

Plan Sponsor magazine published an article, "Money Market Reform: Plan Sponsors are Misinterpreting the Rule Amendments." It says, "Some qualified retirement plan sponsors and service providers are misinterpreting the likely impact of the Securities and Exchange Commission (SEC)'s money market fund (MMF) reforms, opining that the rulemaking will necessarily drive defined contribution plans away from retail money market funds. Concerned industry groups warn that, despite a relatively long window provided for the reforms to take effect, huge numbers of plan sponsors will all at once, as the end-date approaches, turn to re-examining their money market options in light of their fiduciary duty to plans and participants. The industry groups say they worry that plan sponsors will feel compelled to replace their retail MMFs with government MMFs, which will escape some of the new restrictions.... To clear up any misunderstandings, the SEC is focusing on educating the retirement planning industry about the likely impact the July 2014 money market fund rule amendments will have." It continues, "The rulemaking also contains guidance about the fees and redemption gates that have caused some Employee Retirement Income Security Act fiduciaries to doubt whether they will still be able to offer retail MMFs. This is a common misconception -- that retirement plan fiduciaries will be flat out required to start using government-sponsored MMFs, which will not have the use of liquidity fees and/or redemption gates.... The money market fund rulemaking generally understands defined contribution retirement plans as collections of natural persons, rather than as a distinct class of institutional investors. This, in turn, means most of these plans will be able to continue to invest in retail MMFs." See also, Reuters' "U.S. T-bill rates jump on debt ceiling worries", which says, "Interest rates on U.S. Treasury bills due in November jumped on Monday on worries the absence of a deal to raise the federal borrowing limit will result in the government delaying payments on its debt obligations. About $235 billion of Treasury bill issues are scheduled to mature next month. Jitters about delayed repayments to T-bill holders in less than a month distorted the interest rates in this sector."

The NY Fed's "Liberty Street Economics" blog, writes, "The Tri-Party Repo Market Like You Have Never Seen it Before." The article says, "The tri-party repo market is a large and important market where securities dealers find a substantial amount of short-term funding. Despite its importance, this market was very opaque before the crisis. Since March 2010, in accordance with recommendation 13 of the Task Force on Tri-Party Repo Infrastructure Reform report, the Federal Reserve Bank of New York has made monthly data on the tri-party repo market available to the public. Today, with our new interactive tool, there is a whole new way to view the market and its evolution. You can make your own charts, looking at volumes for specific asset classes, at haircuts, or at concentration, over your preferred time horizon." It continues, "Now, with the tri-party repo interactive tool, seeing how the market is evolving has become remarkably easy. For example, you may be interested in finding out how the market's size has changed over time or how the composition of financing has evolved. You can do either one in three clicks under the Volume tab.... What you see is that the market as a whole has fluctuated between $1.5 trillion and $2 trillion and that riskier assets represent less than $500 billion. Another view reveals that the share of riskier assets has been around 20 percent but has increased in recent months. It was as low as 14.5 percent in June 2012 and as high as 23.5 percent in May 2015.... Finally, you might ask about the concentration of collateral among dealers.... Concentration has decreased for most asset classes, which should reduce the risk of fire sales to some extent." It concludes, "There are many other aspects of the repo data that you can explore with the interactive tool. We hope that this new tool will be useful -- and entertaining -- for everyone who has an interest in the U.S. tri-party repo market."

Goldman Sachs Asset Management published recent commentary entitled, "Rule Changes Likely to Spur Large Rotation Out of Prime Money Market Funds and Front-End Credit." It says, "Changes to the rules governing US money market funds (MMFs) have significant implications for Prime MMFs, or funds that invest in corporate bonds, primarily via short-term debt known as commercial paper. While we do not see a lot of opportunity at the front end of the credit curve now, we think the combination of rule changes and increased supply will put ongoing pressure on credit spreads and likely provide opportunities to capture value in coming months." It continues, "We expect that the switch to a floating NAV and the imposition of fees and gates will result in a large migration of assets out of Prime funds. The global money market industry is roughly $3.3tn in size, $2.7tn of which is in the US. Prime funds account for just over half the US total, about $1.4tn. We estimate as much as 70% of the $1.4tn [$980 billion] in Prime funds will migrate elsewhere due to uncertainty around how the transitional period will play out, along with the fact that several institutions, governments and agencies have investment policies that only allow cash to be invested in stable value instruments.... As a result, we expect significantly lower demand for front-end IG corporate credit, which is likely to cause spread widening and may stem the large issuance we've seen of late. We are already seeing signs of the market anticipating the uncertainty and volatility that is likely to accompany the rotation as demand for shorter-dated issuance has increased. At GSAM we have been conservative in our approach to investing in this environment by focusing the majority of our purchases in securities with weighted average maturities (WAMs) of three-months or less. Towards the end of 2015 and through 2016, as the deadline to implement the SEC reforms approaches, we expect elevated volatility to produce attractive relative value opportunities in front-end credit markets."

Money market fund assets rose for the fourth straight week, hitting the $2.70 trillion level for the first time since January 2015, according to ICI's latest "Money Market Mutual Fund Assets" report. Government money funds (which ICI labels "Treasury") broke back over the $1 trillion level, which they first breached in August, and Institutional money funds broke back above $1.8 trillion. The release says, "Total money market fund assets increased by $9.50 billion to $2.70 trillion for the week ended Wednesday, October 14, the Investment Company Institute reported today. Among taxable money market funds, Treasury funds (including agency and repo) increased by $7.31 billion and prime funds increased by $1.98 billion. Tax-exempt money market funds increased by $210 million. Assets of retail money market funds decreased by $1.51 billion to $898.34 billion. Among retail funds, Treasury money market fund assets decreased by $310 million to $206.29 billion, prime money market fund assets decreased by $1.30 billion to $511.95 billion, and tax-exempt fund assets increased by $110 million to $180.10 billion. Assets of institutional money market funds increased by $11.00 billion to $1.80 trillion. Among institutional funds, Treasury money market fund assets increased by $7.62 billion to $794.16 billion, prime money market fund assets increased by $3.28 billion to $937.89 billion, and tax-exempt fund assets increased by $100 million to $67.45 billion." Year-to-date, money fund assets are down just $35 billion, or 1.3%. Month-to-date, money fund assets are up $29 billion. In other news, Pensions & Investments writes, "Fidelity Ditches Pyramis Name, Rebrands Institutional Distribution Business." It says, "Fidelity Investments consolidated a number of its divisions to create a new business for consultants and institutional investors.... The new business, Fidelity Institutional Asset Management, combines the distribution and client service teams from Pyramis Global Advisors and Fidelity Financial Advisor Solutions."

A press release entitled, "Infovisa Partners with Reich & Tang to Deliver FDIC Insured Sweep Alternative," says, "Infovisa today announced that it has partnered with Reich & Tang to offer an FDIC insured cash solution to its client base. Reich & Tang, a leading national FDIC insured investment provider, will administer the programs, which will be offered to all of Infovisa's bank trust, independent trust company, not-for-profit, foundation, and college and university clients." Mike Dinges, president and CEO of Infovisa, comments, "We are very excited to add more depth and choice of cash investments to all of our client segments. Clearly there is an increasing demand for FDIC insured investments in light of money market mutual fund reform. We feel that this, coupled with the uniquely achieved high levels of FDIC insurance through Reich & Tang's Demand Deposit Marketplace program, enables our clients to safely minimize risks and potentially increase returns on their cash investments." The release continues, "Demand Deposit Marketplace (DDM) is an automated, daily cash sweep solution that enables investors to achieve millions of dollars in FDIC insurance while maintaining daily liquidity. The program automatically allocates investor deposits among several banks participating in the program, wherein the deposits never exceed the maximum FDIC coverage of $250,000 per bank per tax identification number. The new joint interface further streamlines the cash sweep process between Infovisa and Reich & Tang." Michael Lydon, president and CEO of Reich & Tang, says, "We love to see companies like Infovisa being proactive and getting ahead of the market. DDM will certainly add immediate value to Infovisa's clients and the investors they serve. There are many predictable downsides to money market mutual fund reform and likely several that have not yet been contemplated. Infovisa has effectively removed this risk and uncertainty for their clients by giving them the choice to pursue an FDIC insured strategy that is outside the scope of money fund reform." Finally, the release adds, "The DDM offering is scheduled to go live for Infovisa clients in October." In other news, a story from Beijing Business Today, entitled, "Internet money market funds in China post declining returns," says, "Yu'ebao, an online investment product that started China's internet financial services, has seen its returns drop from a high of nearly 7% to below 3% two years after it was launched by e-commerce giant Alibaba."

Western Asset filed to launch a new Prime Retail money fund, the Western Prime Obligations Money Market Fund, we learned from Strategic Insight's Simfund Filing. The Preliminary Prospectus says, "The fund is a money market fund that invests in high quality, U.S. dollar-denominated short-term debt securities that, at the time of purchase, are rated by one or more rating agencies in the highest short-term rating category or, if not rated, are determined by the subadviser to be of equivalent quality. The fund may invest in all types of money market instruments, including bank obligations, commercial paper and asset-backed securities, structured investments, repurchase agreements and other short-term debt securities. These instruments may be issued or guaranteed by all types of issuers, including U.S. and foreign banks and other private issuers, the U.S. government or any of its agencies or instrumentalities, U.S. states and municipalities, or foreign governments." It continues, "The fund is a retail money market fund, meaning that the fund is only offered to accounts that are beneficially owned solely by natural persons. As a retail money market fund, the fund tries to maintain a share price of $1.00." The new fund also includes a "small account fee" of $15 for several of the share classes. In other news, a press release entitled, "Fitch Rates Three UBS Money Market Funds 'AAAmmf'," says, "Fitch Ratings has assigned three short-term money market funds managed by UBS Global Asset Management 'AAAmmf' ratings, as follows: UBS (IRL) Select Money Market Fund - EUR: assigned AAAmmf; UBS (IRL) Select Money Market Fund - USD: assigned AAAmmf; UBS (IRL) Select Money Market Fund - GBP: assigned AAAmmf." Also, Fitch posted a Powerpoint, "Credit, Liquidity Profile Diversity Heightens Among European VNAV Money Funds." The press release announcing it says, "The credit and liquidity risk profiles of European Variable Net Asset Value (VNAV) money funds are increasingly diverse, says Fitch Ratings in a new presentation on the sector. Key findings of the reports are: Behind an average portfolio allocation to 'BBB'/'BBB-' or unrated securities of 14%, there is material allocation disparity among VNAV money funds. This is in contrast to a year ago, when they had only marginal exposure to 'BBB'/'F3' or lower assets. The most conservative ones (37%) apply the same limit to their investment guidelines than constant NAV funds. Such disparity reflects variations of return and safety objectives among European asset managers' money fund ranges. Portfolios' average maturities span the full spectrum offered under the ESMA framework. 65% European VNAV funds are domiciled in France."

Wells Fargo Advantage Funds' latest "Portfolio Manager Commentary recaps the SEC's recent removal of ratings references from its rules. It says, "On September 16, 2015, the Securities and Exchange Commission (SEC) approved amendments to Rule 2a-7 to remove references to credit ratings issued by Nationally Recognized Statistical Rating Organizations (NRSROs) and replace such references with a new standard of creditworthiness. Money market funds will be required to comply by October 14, 2016 -- the same date that institutional prime money market funds will convert to a floating net asset value (NAV). Money market funds are allowed to invest only in securities that present minimal credit risks to the fund. These so-called eligible securities historically have been defined in Rule 2a-7 largely by reference to NRSRO ratings, being designated first tier (in the highest ratings category, such as A-1/P-1) and second tier (in the second-highest ratings category, typically A-2/P-2). However, the Dodd-Frank Wall Street Reform and Consumer Protection Act required the SEC to end reliance on NRSRO ratings in its rules. And, thus, the SEC now has amended Rule 2a-7 to remove references to NRSRO ratings and to require a fund board to make a determination, without reliance on NRSRO ratings, that a security presents minimal credit risks based on analysis of the capacity of the security's issuer or guarantor to meet its financial obligations. Under the amended rule, such analysis must consider specific factors as appropriate, including an issuer's or guarantor's financial condition, sources of liquidity, competitive position, industry strength, and likely adaptability in response to adverse events." Wells explains, "What does this mean to investors in prime and municipal instruments? Changes are likely to be cosmetic -- for example, credit rating information will no longer be included on required filings. The SEC has stated that the removal of credit ratings from Rule 2a-7 is not intended to change the current risk profile of money market funds, a point they make on the third page of the discussion prior to the rule. Whether one considers this guidance or not, it is illustrative of the spirit of the rule and what the regulator expects to see. Currently, Rule 2a-7 permits funds to invest up to 3% of their assets in second tier securities. However, in spite of this, the use of second tier securities in prime money market funds is extremely low. August 31 data from Crane Data reveal that prime money market funds total $1.6 trillion, but holdings of nonrepo tier 2 securities total only $1.5 billion, or less than 0.1% of total holdings. Finally, these amendments do not prohibit money market funds from seeking an NRSRO rating on the overall money market fund itself, which is likely to be the most binding constraint against a wholesale migration to tier two instruments. Standard & Poor's, which rates 72% of institutional prime money market funds, prohibits the use of tier two securities in funds it rates as AAA. As long as customers demand rated funds, funds are likely to continue to be rated after conversion to floating NAV and removal of NRSRO references in the regulations."

Money market fund assets rose for the third straight week, according to ICI's latest "Money Market Mutual Fund Assets" report. The release shows a big bounce back in Institutional Prime MMFs after outflows last week. The release says, "Total money market fund assets increased by $19.55 billion to $2.69 trillion for the week ended Wednesday, October 7, the Investment Company Institute reported today. Among taxable money market funds, Treasury funds (including agency and repo) decreased by $7.49 billion and prime funds increased by $23.20 billion. Tax-exempt money market funds increased by $3.83 billion. Assets of retail money market funds increased by $3.69 billion to $899.85 billion. Among retail funds, Treasury money market fund assets increased by $1.22 billion to $206.60 billion, prime money market fund assets increased by $540 million to $513.25 billion, and tax-exempt fund assets increased by $1.93 billion to $179.99 billion. Assets of institutional money market funds increased by $15.86 billion to $1.79 trillion. Among institutional funds, Treasury money market fund assets decreased by $8.71 billion to $786.54 billion, prime money market fund assets increased by $22.66 billion to $934.61 billion, and tax-exempt fund assets increased by $1.91 billion to $67.35 billion." Year-to-date, money fund assets are down $45 billion, or 1.6%. In other news, The Wall Street Journal writes, "Clinton Proposes Big Bank 'Risk Fee'," which says, "Hillary Clinton sought middle ground in one of the most contentious debates roiling Wall Street, proposing a new "risk fee" on large financial institutions dubbed "too big to fail," but stopping short of demanding the breakup of such firms backed by populist critics.... Mrs. Clinton also proposed new rules governing the "shadow banking" system, which has expanded rapidly outside the conventional banking sector. The plan calls for new constraints on borrowing by brokerages, which don't always face the tight borrowing limits that banks do. She also proposed requiring more public disclosures from hedge funds and new disclosures and safety measures for a type of short-term loan called a repurchase agreement, which played a role in the financial panic of 2008." A Reuters piece says, "Clinton would also pursue additional oversight of the "shadow-banking" sector by imposing additional margin and collateral requirements on risky short-term borrowing; reviewing recent regulatory changes to the money market fund industry for possible holes; creating new reporting requirements for hedge funds and private equity firms; and strengthening the authority of the Financial Stability Oversight Council."

Boutique cash manager Capital Advisors Group released a white paper entitled, "The Transformation of Corporate Deposits in a New Regulatory Environment" and a press release entitled, "Capital Advisors Group to Introduce Liquidity Accounts for Corporate Cash Investments." The paper's abstract says, "Bank deposits have always represented the main cash management vehicle for institutions. Growth in deposits and money market fund balances crisscrossed each other over recent decades. Recent financial regulations, notably the liquidity coverage ratio, net stable funding ratio and G-SIB capital surcharges, caused deposit dynamics to change, reducing banks' appetite for non-operating deposits. We offer seven practical tips to help treasury managers cope with the new deposit reality." The "Seven Tips to Cope" are: "1. Deepen existing relationships, 2. Diversify, 3. Size still matters, 4. Integrated counterparty risk assessment, 5. Liquidity is the name of the game, 6. Alternative liquidity vehicles, and, 7. Beware of higher interest rates." The piece adds, "Challenges in corporate transaction deposits and prime money market funds open up opportunities to alternative liquidity vehicles. Such options may include separately managed accounts (SMAs) and direct purchases of government and corporate debt as well as repurchase agreements, private liquidity funds, ultra short-term bond mutual funds and exchange traded funds (ETFs). Although few alternative vehicles can truly replace the functions of transaction accounts, especially as sweep vehicles, they may fulfill certain functions not readily available in deposits alone." The press release, subtitled, "Portfolios of directly owned short-term securities are new alternative to institutional money market funds," says, "Capital Advisors Group today announced it will offer a new short-term cash investment vehicle -- Capital Advisors Group Liquidity Accounts -- for investors considering alternatives to institutional prime money market funds. Designed to provide safety of principal, short-term liquidity, and control through portfolios of directly owned securities, Capital Advisors Group Liquidity Accounts are a response to SEC regulations that will change the risk and liquidity profiles of institutional prime money funds starting in October 2016."

Bloomberg BNA writes, "ERISA Plans Must Heed New Money Fund Rules, Lawyers Say." The article explains, "A Securities and Exchange Commission regulation designed to help prevent runs on U.S. money market mutual funds will require pension plan fiduciaries to evaluate such funds in a new light, attorneys said during a recent interview and webinar. Bruce L. Ashton, partner with Drinker Biddle & Reath LLP in Los Angeles, said during a Sept. 29 webinar that the rules will require many pension plan fiduciaries under the Employee Retirement Income Security Act to not only consider which type of money market fund is most suitable for its needs but also evaluate whether the "hassle factor" in continuing to use money funds justifies a decision to switch to another cash equivalent alternative, such as a stable value fund. Peter E. Haller, partner with Willkie Farr & Gallagher LLP in New York, told Bloomberg BNA Sept. 30 that switching to stable value funds may not be needed for many plans, but that, in any event, each fund needs to consider the effect of the rules on the needs of the plan and on the characteristics, demographics and behavior of the plan's participant population. Haller admitted, however, that the rules unleashed a number of potential administrative consequences that plan fiduciaries would need to consider -- some of which will require SEC and/or Labor Department guidance -- in dealing with the new requirements." It continues, "Government funds will be attractive to plan sponsors seeking stability, liquidity and simplicity, but are likely to offer the lowest yield of the three classifications, Larry H. Goldbrum, senior vice president and director of Reliance Trust's ERISA fiduciary services team in Atlanta, said during the webinar sponsored jointly by his company and Drinker Biddle. A retail money market fund will be defined as a fund that has policies and procedures reasonably designed to limit all beneficial owners of the fund to "natural persons".... Consequently, defined benefit pension plans wouldn't be permitted to invest in retail funds, he added."

Money market mutual funds are preparing to head to Denver in 2 weeks for the Association for Financial Professionals 2015 Annual Conference, which takes place October 18-21 at the Colorado Convention Center in Denver, Colo. AFP is the largest gathering of corporate treasurers in the world (over 5,000), and it attracts all of the large institutional money fund managers, as well as portals and servicers to its exhibit hall. Crane Data's Peter Crane will speaking on "Floating NAV Money Funds and Cash Alternatives" with Qualcomm's Vicki Fiegehen and Pacific Life's Lance Doherty on Monday, Oct. 19 at 10:30a.m. The session description says, "This interactive panel discusses pending regulatory changes and cash investing alternatives in the money markets with case studies from two large corporate investors, Qualcomm and Pacific Life. The treasurers discuss current cash investment practices, and explore future options and alternatives, including separate accounts, direct money market investments, ultra-short bond funds, private pools and bank deposits. The impact of a floating NAV on money market funds, plus regulatory pressures impacting bank deposit rates, are examined in-depth." Other money market related sessions include: "Higher interest rates are coming ... Now what?" with Fidelity's Nancy Prior; "Investing for Liquidity in a New Era" with Brian Godfrey of Houghton Mifflin Harcourt Company and Benjamin Campbell of Capital Advisors Group; "Iceberg Ahead? Navigating a Changing Liquidity Environment" with Scott Gilbert of Goldman Sachs Asset Management and Jessica Sheryn Moore of Liberty Media Corporation; and "The New World of Cash" with William Goldthwait at SSgA; Peter Koumas of Wendy's Company, Barbara Quiroga of Delta Air Lines, and Sean O'Keefe of United Airlines. Be sure to visit Crane Data at Booth #300 while at AFP! Also, Treasury Strategies will host its "Quarterly Cash Briefing" this Thursday, October 8 at 10:00 am. Panelists include Peter Matza of the Association of Corporate Treasurers (ACT); Deborah A. Cunningham of Federated Investors; and Roger Merritt of Fitch Ratings. Treasury Strategies' Anthony Carfang and Kevin Ruiz will moderate.

The European Central Bank issued a press release entitled, "Results of the Euro Money Market Survey 2015." Though there is nothing on money market funds in the study, the statement says, "Overall money market turnover in the second quarter of 2015 fell to the level of the same quarter of 2012, with a year-on-year decline of 12% to E69 trillion (compared with a revised 7% year-on-year rise in the second quarter of 2014).... Today the European Central Bank (ECB) is publishing the results of the "Euro Money Market Survey 2015," which highlights the main developments in the euro money market in the second quarter of 2015, comparing them with those in the second quarters of 2014 and previous years. The results of this year's survey, which are derived from a constant panel of 98 banks, show that overall turnover has declined in the main segments. This can be partly attributed to the relative attractiveness of instruments with longer maturities on account of value or regulatory considerations. The decline is especially noticeable in the largest market segment, the secured market, and in the unsecured market. Total turnover in secured lending and borrowing decreased by 13% to E28.6 trillion in the second quarter of 2015 compared with the same period a year earlier. The decline in volumes was most visible in the overnight maturity. However, the share of centrally cleared secured operations remained broadly stable, at 72% of all bilateral repo transactions. As in previous years, activity in the derivatives segments covered by the survey showed significant changes. Activity in foreign exchange (FX) swaps, the second-largest market segment, rose by 5% in the second quarter of 2015.... The qualitative part of the survey also shows that perceived market liquidity generally worsened compared with last year. The efficiency of the secured and unsecured market segments as well as that of the short-term securities market was perceived to have remained broadly unchanged, while the efficiency of the derivatives market was seen as having deteriorated slightly." In other news, Fitch Ratings issued the release, "Fitch Rates 4 Deutsche Global Liquidity Series plc Money Market Funds 'AAAmmf'." The funds are sub-funds of the Irish-domiciled umbrella fund, Deutsche Global Liquidity Series plc. The funds are: Deutsche Global Liquidity Series plc - Deutsche Managed Euro Fund, Deutsche Global Liquidity Series plc - Deutsche Managed Sterling Fund, Deutsche Global Liquidity Series plc - Deutsche Managed Dollar Fund, and Deutsche Global Liquidity Series plc - Deutsche Managed Dollar Treasury Fund. Another release, "Fitch Rates 2 BlackRock Institutional Cash Series plc Money Market Funds 'AAAmmf'," says, "They are sub-funds of the Irish-domiciled umbrella fund, BlackRock Institutional Cash Series plc. They are: BlackRock ICS Institutional Euro Liquidity Fund and BlackRock ICS Institutional Euro Government Liquidity Fund."

Money market fund assets rose for the second straight week following 3 weeks of big outflows, according to ICI's latest "Money Market Mutual Fund Assets" report. The release, which shows a big shift from Prime money funds into Treasury funds (one of the first we've seen), says, "Total money market fund assets increased by $8.40 billion to $2.67 trillion for the week ended Wednesday, September 30, the Investment Company Institute reported today. Among taxable money market funds, Treasury funds (including agency and repo) increased by $27.26 billion and prime funds decreased by $17.02 billion. Tax-exempt money market funds decreased by $1.84 billion. Assets of retail money market funds decreased by $1.08 billion to $896.16 billion. Among retail funds, Treasury money market fund assets increased by $140 million to $205.38 billion, prime money market fund assets decreased by $230 million to $512.72 billion, and tax-exempt fund assets decreased by $990 million to $178.06 billion. Assets of institutional money market funds increased by $9.48 billion to $1.77 trillion. Among institutional funds, Treasury money market fund assets increased by $27.13 billion to $795.25 billion, prime money market fund assets decreased by $16.79 billion to $911.94 billion, and tax-exempt fund assets decreased by $860 million to $65.44 billion." Year-to-date, money fund assets are down $64 billion, or 2.3%. Month-to-date in September (since 9/3), MMF assets are down $9 billion. September is the first month since April that money market fund assets have declined. In other news, the Federal Reserve Bank of New York <i:http://newyorkfed.org>`_updated its `Reverse Repo Counterparties list to reflects a name change. Specifically, Goldman Sachs Financial Square Federal Fund changed its name to Goldman Sachs Financial Square Treasury Solutions Fund, effective October 1, 2015.

Dow Jones Business News writes, "BNY Mellon Unveils Repo Indexes." The article says, "Bank of New York Mellon Corp. has introduced a set of indexes tracking U.S. interest rates on certain short-term loans known as repurchase agreements, in the latest move to shed light on an obscure corner of the shadow banking system. Repurchase agreements, or repos, are a roughly $2.6 trillion market in which different types of lenders temporarily exchange cash for bonds, providing a critical source of funding for Wall Street securities dealers. They are often caught under the "shadow banking" moniker because the market involves loans made by nonbanks such as money-market funds. The three indexes -- for repos backed by high-quality collateral in the U.S. Treasury, agency and mortgage bond markets -- were unveiled by BNY earlier this month on its website, a spokesman said, after the company initially disclosed the index project in November last year." The Dow Jones piece adds, "Aggregated, publicly disseminated rates in the repo markets are few and far between. The Fed's repo facility, known as the overnight reverse repo program, offers a fixed daily rate of 0.05% under a program in which the New York Fed takes in loans in exchange for Treasury bonds as collateral.... To collect information on repo rates today, lenders in the $2.7 trillion money-market fund industry sometimes call around repo desks to compare quotes from as many as 20 different market participants before deciding how to invest their cash. The BNY rate that is being published daily is a U.S. dollar-weighted average of newly minted, overnight repo trades submitted into BNY's systems, including trades involving the Fed's reverse repo facility. As of Tuesday, the BNY tri-party aggregated repo rate for overnight trades backed by Treasurys was 0.05254%, just above the Fed's reverse repo rate of 0.05%." For more information, visit CME Group's "BNY Mellon Treasury Tri-Party Repo Index" page. In other news, Reuters writes, "U.S. Repo Rate Jumps to Highest in 3 Months," which says, "A key borrowing cost for Wall Street dealers jumped on Wednesday to its highest level in three months as cash investors reduced their lending at the end of the quarter... In the $5 trillion repo market, Wall Street dealers borrow from money market funds and other investors with Treasuries and other securities as collateral to fund their trades. At quarter-end, investors tend to scale back their repo exposure to conserve cash. Instead of repos, they put money into near risk-free Treasury bills, and fixed-rate reverse repurchase agreements offered by the Federal Reserve. On Wednesday, the Fed awarded $150 billion of two-day fixed-rate reverse repos to 70 bidders at an interest rate of 0.07 percent after it allotted $100 billion in seven-day reverse RRPs last week."

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