Daily Links Archives: September, 2019

The South China Morning Post writes, "Ant Financial's Yu'e Bao shrinks 39 per cent, loses top spot as world's biggest money market fund, says Fitch Ratings." The article tells us, "Yu'e Bao, the money market fund distributed on Ant Financial's payment network, Alipay, has lost its top ranking as the world's biggest such fund, according to Fitch Ratings. The fund has shrunk by 39 per cent from its peak in March last year as negative real yields and keener competition from banks' wealth management products triggered an outflow of money. As of June, Yu'e Bao's assets under management stood at 1.03 trillion yuan (US$150 billion), down from 1.69 trillion (US$267 billion) in March 2018, according to Fitch." It adds, "Yu'e Bao is managed by Tianhong Asset Management, which is 51 per cent controlled by Ant Financial, an affiliate of Alibaba Group. Alibaba owns the South China Morning Post.... By Fitch's estimates, at the end of August, the assets under management of the other two mega MMFs, JPMorgan US Government MMF, and Fidelity Government Cash Reserves Fund, were US$147 billion and US$150 billion respectively." For more, see our Sept. 26 News, "Worldwide MF Assets Hit Record $6.1T: US Jumps, China Crashes in Q2," our Sept. 9 Link of the Day, "Bloomberg: China's Yu'E Bao Shrinks," and our April 11 News, "China's Yu'e Bao No Longer World's Largest MMF; Repo Cap? Fed Minutes.

The Investment Company Institute published a press release entitled, "Retirement Assets Total $29.1 Trillion in First Quarter 2019," which shows that money market funds held in retirement accounts total $414 billion, or 13%, of the total $3.201 billion in money funds (up from $400 billion the previous quarter). The release says, "Total US retirement assets were $29.8 trillion as of June 30, 2019, up 2.3 percent from March 31, 2019. Retirement assets accounted for 33 percent of all household financial assets in the United States at the end of June 2019." It continues, "`Assets in individual retirement accounts (IRAs) totaled $9.7 trillion at the end of the second quarter of 2019, an increase of 2.9 percent from the end of the first quarter of 2019. Defined contribution (DC) plan assets were $8.4 trillion at the end of the second quarter, up 2.6 percent from March 31, 2019. Government defined benefit (DB) plans -- including federal, state, and local government plans -- held $6.2 trillion in assets as of the end of June 2019, a 0.7 percent increase from the end of March 2019. Private-sector DB plans held $3.2 trillion in assets at the end of the second quarter of 2019, and annuity reserves outside of retirement accounts accounted for another $2.2 trillion." ICI accompanying tables show money funds accounting for $279 billion, or 6%, of the $4.505 trillion in IRA mutual fund assets and $135 billion, or 3%, of the $4.814 trillion in defined contribution plan holdings in Q2'19. A year earlier (Q2'18), money fund assets in IRAs totaled $235 billion (5%) and in DC plans totaled $122 billion (3%).

Morningstar writes, "Cash Versus Bond Fund: Which Is Better?" They ask, "Where's the best parking place for the safe part of your portfolio?" The piece explains, "If it's money that you expect to spend within the next year--or even two--the answer is easy cash all the way. Cash investments are very short-term debt obligations that are often FDIC-insured; CDs, online savings accounts, checking accounts and bank-offered money accounts, and money market mutual funds are all versions of cash instruments." It continues, "The yields on all of these investments are generally quite low relative to bonds; on the other hand, these investments promise stability of principal. If you're saving next year's tuition payment or the property tax bill that's due in October, a cash account is the best place to hold those funds." Morningstar adds, "The long-term returns of bonds are solidly ahead of cash investments.... The return differential between cash and bonds has grown even more stark in recent decades, thanks to declining interest rates, which boost bond prices but merely depress cash yields.... Cash yields tend to be enormously variable, so it pays to shop around and avoid tying up large sums in accounts that are convenient but yield next to nothing.... If you venture into bond funds, be sure to mind the relationship between expenses, yield, and risk-taking.... Risk hasn't been a big consideration for bond investors in recent years, notwithstanding occasional short, rocky patches like 2018's first quarter, but it could become a bigger deal in a weakening economy and/or rising-rate environment."

Crane Data published its latest Weekly Money Fund Portfolio Holdings statistics and summary Tuesday. Our weekly holdings track a shifting subset of our monthly Portfolio Holdings collection. The latest cut (with data as of Sept. 20) includes Holdings information from 86 money funds (up from 77 last week), includes $1.898 trillion (up from $1.690 trillion last week) of the $3.597 trillion (52.8%) in total money fund assets tracked by Crane Data <b:>`_. Our latest Weekly MFPH Composition summary again shows Government assets dominating the holdings list with Repurchase Agreements (Repo) totaling $729.5 billion (up from $675.4 billion the previous week), or 38.4%, Treasury debt totaling $589.2 billion (up from $524.0 billion) or 31.0%, and Government Agency securities totaling $297.8 billion (up from $270.5 billion), or 15.7%. Commercial Paper (CP) totaled $102.2 billion (up from $77.9 billion), or 5.4%, and Certificates of Deposit (CDs) totaled $91.7 billion (up from $80.7 billion), or 4.8%. A total of $48.4 billion or 2.6%, was listed in the Other category (primarily Time Deposits), and VRDNs accounted for $38.9 billion, or 2.0%. The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $589.2 billion (31.0% of total holdings), Federal Home Loan Bank with $209.7B (11.1%), Fixed Income Clearing Co with $108.4B (5.7%), BNP Paribas with $79.4 billion (4.2%), RBC with $56.6B (3.0%), Federal Farm Credit Bank with $48.8B (2.6%), JP Morgan with $46.6B (2.5%), Wells Fargo with $44.2B (2.3%), Societe Generale with $33.9B (1.8%) and Credit Agricole with $32.1B (1.7%). The Ten Largest Funds tracked in our latest Weekly include: JP Morgan US Govt ($151.6B), Fidelity Inv MM: Govt Port ($130.6B), Goldman Sachs FS Govt ($107.1B), BlackRock Lq FedFund ($97.3B), Federated Govt Oblg ($91.9B), Wells Fargo Govt MMkt ($86.2B), BlackRock Lq T-Fund ($71.5B), Fidelity Inv MM: MMkt Port ($68.5B), JP Morgan 100% US Trs MMkt ($64.0B) and Dreyfus Govt Cash Mgmt ($63.3B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary, or our Bond Fund Portfolio Holdings data series.)

A press release entitled, "Confluence Helps Industry to Prepare for More Complex ESMA Money Market Fund Reporting Ahead of Looming Deadline" tells us, "Confluence, a global leader in investment data management automation for regulatory, financial and investor reporting, is urging the fund management industry to prepare for the more complex disclosures required under the new European Securities and Markets Authority (ESMA) Money Market Fund Regulation (MMFR). Confluence's Unity NXT Regulatory Reporting Platform will have the capability to help firms to meet the impending deadline and reduce filing efforts. Beginning in Q1 2020, European MMFs -- investments regarded as being as safe as bank deposits while still giving a higher yield -- will be required by the European Securities and Markets Authority (ESMA) to provide more detailed information on performance, liquidity, stress test results and holdings level-data." The release explains, "Under Article 37 of the MMFR, an extension of UCITS and Annex IV AIFMD, large MMFs and their administrators are faced with the steep challenge of meeting these significant and complex disclosure requirements on a quarterly basis." Confluence President & COO Todd Moyer comments, "The powerful Unity NXT Regulatory Reporting Platform will help MMFs and administrators meet the short implementation timeframe and automate what could otherwise be a costly, error-prone manual preparation.... Importantly, Confluence's platform is also able to keep up with any further potential changes to the MMF regulation and will maintain common regulatory changes to existing forms to ensure data is reliably transformed into ESMA's structure."

PIMCO writes, "Repo Rate Spike: A 'Tail' of Low Liquidity." They say, "Banks' 'reporting' dates are known inflection points in the short-term funding markets and typically fall at the end of the month, quarter, and of course the year. But periodically, the 15th of the month is also a pressure point. Such was the case this past Monday when a short-term funding rate that had been hovering around 2.21% soared as high as 10%." The post explains, "The funding market succumbed to a trifecta of pressures: Payments on corporate taxes were due on 15 September, leading to high redemptions of more than $35 billion in money market funds; Cash balances increased by an additional $83 billion in the U.S. Treasury general account, which reduces excess reserves and simultaneously acts to reduce the aggregate supply of overnight liquidity available in funding markets; [and] Dealers needed an additional $20 billion in funding to finance the settlement of recent scheduled U.S. Treasury issuance.... None of these pressures was extraordinary or unforeseen, but together they had an extraordinary impact." PIMCO's piece continues, "We expect these episodes of funding stresses to become more frequent with demand for funding and U.S. Treasury supply forecast to increase heading into year-end and the Fed's reserve levels likely to drop further. Over the past two years as the Fed has undertaken 'quantitative tightening,' its reserves have declined to $1.4 trillion from $2.3 trillion in August 2017. Meanwhile, since June 2018, banks' holdings of U.S. Treasuries have more than doubled to over $200 billion from $100 billion. These holdings have been financed by money market funds which have increased their repo investments by over $300 billion this year alone, based on data from the Investment Company Institute." The article adds, "We think investors should be prepared for deteriorating liquidity in the funding markets into year-end and the impact of this on the financial markets as a whole, with potential costs for levered strategies and risk assets in particular.... From a broader investment perspective, market participants who have excess cash and can provide liquidity to the short-term funding markets may benefit.... As the past few days have shown, current market liquidity conditions warrant defensive positioning overall but can also present opportunities for investors who are in a position to take them."

We learned from the private-equity website PE Hub that, "Blackstone Group is buying Promontory Interfinancial Network for $2.5 billion, sources told Buyouts." Their article, "Blackstone to scoop up Promontory Interfinancial," explains, "Launched in 2002, Promontory provides technology-based services to banks to help them retain large-dollar relationships. The Arlington, Virginia, fintech supplies balance sheet management as well as deposit allocation services to 3,000 financial institutions, the company's website said. Mark Jacobsen, Promontory's president and CEO, is the former chief of staff at the FDIC and the Office of the Comptroller of the Currency. Eugene Ludwig, former U.S. Comptroller of the Currency, founded Promontory Interfinancial with several other leading bank executives.... Promontory was envisioned as a network comprised of thousands of financial institutions whose 'synthetic size' would help each member institution compete more efficiently, a statement said." An 8-K filing for The Bank of New York Mellon states, "On September 11, 2019, MCDI (Holdings) LLC, a wholly-owned subsidiary of BNY Mellon, along with the other holders of Promontory Interfinancial Network, LLC, entered into a definitive agreement to sell their interests in PIN. The transaction is expected to close in the fourth quarter of 2019, subject to customary closing conditions. Upon the closing of the transaction, BNY Mellon expects an after tax gain of approximately $600 million." Promontory runs the CDARS (certificate of deposit account registry service) and IND (insured network deposits) programs. `Promontory is one of the largest networks servicing the $1.5 trillion brokerage sweeps market.

U.K.-based publication HedgeWeek writes that, "Insight money market fund completes first cleared trade via central counterparty." The article explains, "A money market fund managed by asset manager Insight Investment has completed its first repo trade cleared via a central counterparty, providing investors in the fund with access to a fresh pool of liquidity and marking a further milestone in the structural development of the liquidity market.... This latest trade, placed by the GBP£24 billion Insight GBP Liquidity Fund, was cleared by the RepoClear 'Sponsored Clearing' service operated by global clearing house LCH. The service provides buy-side market participants with access to central clearing, a facility which until recent years has been largely restricted to the banking community. Central clearing can offer capital and operational efficiencies, enabling firms to reduce their risk, while increasing capacity in the market. It provides an alternative source of liquidity to the more common route of one-to-one, or 'bilateral', counterparty trading relationships." Chris Brown, Head of Money Markets at Insight Investment and portfolio manager of the fund, tells HedgeWeek, "This development is significant for money market funds, which use repo as an asset class and can now access a wider pool of liquidity. The ability of the buy side to clear with a central clearing counterparty deepens and diversifies the available sources of repo liquidity." Watch for more on Sterling and European money funds as we host our European Money Fund Symposium next week, Sept. 23-24, at The Hilton Dublin in Dublin, Ireland. The latest agenda is available and registrations are still being taken for the largest money market fund gathering in Europe. Contact us for more information, or feel free to stop by the show if you're in Dublin.... See you Monday!

"Spike in repo rate a technical event" writes Federated Investors' Sue Hill. She explains, "When rates on the typically steady overnight repurchase agreements behave like the stock market, as they did yesterday and this morning, even the broad market pays attention. But despite the flashing red lights, this increase in short-term rates is being driven by technical factors rather than credit concerns. A confluence of factors, chiefly the deadline for corporate quarterly tax payments and the settlement of $54 billion of net new U.S. Treasury supply, led to funding pressures over the past few trading sessions. That pushed rates on repo transactions with Treasury and agency collateral to an eye-popping 5% today for the general collateral type of trades done by money market funds. The volatility has been furthered by reserve balances at the Fed that have declined to a level that may make it more difficult for the Fed to maintain control over the level of short-term interest rates." She adds, "This event is unusual, but the surge -- and the resulting increase in yields on certain money funds -- is not a credit-driven event. The Fed acted quickly this morning to address this perceived reserve shortage through operations in the market that provide liquidity, and may announce new tools at the Federal Open Market Committee (FOMC) meeting ... to address the market dislocation. In a separate action, we also expect the FOMC to lower the fed funds target range to 1.75% to 2%." J.P. Morgan Securities' Alex Roever also commented on the spike yesterday, in a brief entitled, "Repo: What just happened?" He writes, "US funding markets were shocked this week as a combination of factors reduced the amount of cash available to fund securities positions. Repo rates surged in response, prompting the Fed to inject liquidity via an open market operation. A combination of factors have caused the securities financing markets to grow by a third over the past year. Although they have generally become safer and more diverse in recent years, they remain susceptible to temporary mismatches in the demand for funding and the availability of cash." Finally, see the Wall Street Journal's update, "Fed Intervenes to Curb Soaring Short-Term Borrowing Costs."

Bloomberg writes "Repo Market Chaos Signals Fed May Be Losing Control of Rates." The article says, "One of the key U.S. borrowing markets saw a massive surge Monday, a sign the Federal Reserve is having trouble controlling short-term interest rates. Amid the settlement of Treasury coupon auctions and the influx of quarterly corporate tax payments, the rate on overnight repurchase agreements soared by as much as 248 basis points to 4.75%, the highest level since December, according to ICAP pricing. It came back down to 2.50%, still up 23 basis points for the day.... While the spike doesn't necessarily mean credit markets are seizing up or a financial calamity is imminent, it could hamper the Fed's ability to steer the economy. As the Federal Open Market Committee meets this week, this surge could force yet another tweak to the central bank's interest on excess reserves rate to help ensure its main tool for guiding the economy -- the fed funds rate -- stays within policy makers' preferred band." Bloomberg quotes Bank of America's Mark Cabana, "The Fed has lost control of funding." The piece adds, "A combination of factors are behind the latest drive higher, including the settlement of the mid-month Treasury coupon auctions that pushed more collateral into the repo market. At the same time, cash is leaving the funding space as corporations withdraw from banks and money-market funds to make their quarterly tax payment.... The drop-off in reserves and fund outflows are driving up funding rates and starting to spill into the fed funds market because repo's attractive yields can draw some lenders away from the unsecured market." BMO Capital Markets's Jon Hill comments, "Secured funding markets are clearly not functioning well."

A press release entitled, "Ally Bank Surpasses $100 Billion in Retail Deposits in Just 10 Years," tells us, "Ally Bank, the customer-obsessed banking arm of Ally Financial Inc. (ALLY), announced a major milestone today, surpassing $100 billion in retail deposits. The news comes just months after the bank celebrated its 10th anniversary. Ally Bank's 1.9 million retail deposit customers have demonstrated strong loyalty over its 10-year history, where retention levels have remained consistently above 90%. This has been driven by Ally Bank's commitment to customer service and personalization of the banking experience, and consistently competitive rates on deposit products. Through the first half of 2019, Ally grew retail deposits by $9.5 billion and added more than 200,000 customers." CEO Jeffrey Brown comments, "We're very proud to move through the $100 billion mark in retail deposits, a significant achievement in our journey to be the leading digital bank in the U.S. Our relentless focus on our customers and strategic approach to offering innovative digital products, reinforces our view that consumers are increasingly seeking a differentiated banking experience." The release also comments, "Ally Bank launched in 2009 under the premise that customers didn't need another bank, they needed a better bank, which is reflected in the company's "Do It Right" mantra. Ally Bank is an all-digital platform, providing 24/7 customer service and consistently competitive rates, with no monthly maintenance fees or minimum balance requirement on deposit accounts." President of Consumer & Commercial Banking Products Diane Morais adds, "Our customer-first mindset, differentiated products and services, matched with our exceptional 24/7 customer service is what we attribute this milestone to. We could not have reached $100 billion in retail deposits without our customers." (Ally is currently paying 1.90% on its Online Savings, one of the highest rates available.)

Bloomberg writes "The Fed Doesn't Want Negative Interest Rates Even Though Trump Does," which briefly mentions money market funds. The article says, "Federal Reserve Chairman Jerome Powell and his colleagues are loath to follow Europe and Japan into negative interest rate territory -- no matter what President Donald Trump might want or how bad the U.S. economy might get. Not only could such a move be deemed illegal, it's also unclear how much of an economic gain it would yield given the likely disruption it could cause to banks and money market funds." It explains, "Money-market funds would also be squeezed by negative rates, though reforms unveiled by the Securities and Exchange Commission in 2014 mean that some are less vulnerable than they were before. If rates fall below zero, the funds' first line of defense against investors yanking out their money would be to reduce the fees that the managers charge." Bloomberg quotes Peter Crane, president of Crane Data, "If rates don't go too far negative, the playbook says suck it up and survive on lower fees.... If you go too negative like you see in Europe, then you need another plan." The piece adds, "The Fed is in the midst of a wide-ranging strategic study of ways it can tackle what Powell has called the 'key question' facing it: How can it best manage the ups and downs of the economy in a world of permanently lower interest rates. But negative rates don't seem to be high on the agenda." In other news, website AssetTV features a video from MetLife, which discusses, "Stable Value in Target Date Funds." MetLife National Sales Director for Stable Value Markets Warren Howe, says, "It's very interesting because if you look at stable value now, it's about $820 billion or so ... that we see for the size of the asset class. And, if you went back 10-15 years, stable value got the predominant amount of default investments, if you will." Howe continues, "But, then target dates have come along and over a 10 year period they've gone from virtually zero to somewhere north of a trillion dollars. They have grown dramatically.... Because they're mutual funds, stable value has not been a component of that."

Federated Investors' Head of Government Liquidity Sue Hill writes in an update entitled, "SOFR, so good" that, "Libor's heir apparent is making progress but daunting issues remain." She explains, "With a market footprint of more than $200 trillion, the London interbank offered rate (Libor) has been referred to by some as 'the world's largest number.' It is a benchmark rate -- technically a series of rates across five currencies and seven maturities -- used for many financial instruments, including derivatives, securitizations, floating-rate notes and bank loans. But caught up in scandal and weakened by reforms on financial institutions and money markets that led to a drop in assets referencing it, Libor’s days are, well, numbered. U.K regulators have announced their intention to phase it out by the end of 2021." She tells us, "The magnitude of the obstacles to do away with Libor is enormous. It is estimated that in 2016 there was $200 trillion in exposure to financial instruments tied to some measure of Libor, with the majority of that in derivative contracts. While 82% of this exposure, including most money market funds at present, is estimated to mature by the end of 2021, roughly $35 trillion, such as loans and floating-rate notes, have maturities beyond that date. This staggering amount of legacy contracts presents significant legal, operational, accounting and investment challenges." Hill continues, "In 2014, the Federal Reserve formed a committee to find a replacement. It recommended the Secured Overnight Financing Rate (SOFR), an index based on transactions in the market for overnight repurchase agreements collateralized by Treasury securities.... It isn't as simple as switching one rate for another, unfortunately. Daunting questions must be addressed, including when and how the switch takes place and how to account for the difference in economic value at the time of transition. While the risk-free nature of the rate makes it desirable for hedging, SOFR lacks a credit component and term structure, which is an issue for products such as floating-rate securities. Because most money funds do not currently have Libor exposure beyond 2021, the money market industry has the luxury of time to create strategies to address issues." Finally, she adds, "To date, issuance of SOFR-based floating-rate securities has exceeded $200 billion and the volume of trading and open interest in SOFR futures continues to grow. But far before SOFR is ready to take over for Libor, cash managers and investors need a game plan for current and new exposure. 2021 may seem a long way away, but it's never too soon to start."

Just over year ago, we wrote in our daily Crane Data News, the article "DWS ESG Liquidity Goes Live," which marked the debut of the first "ESG" money market fund. As we wrote in our August 13, 2018 News, "DWS Converts Variable NAV to DWS ESG Money Fund, First ESG Offering," the manager formerly known as Deutsche just converted an existing fund into an "ESG" money market fund. A press release put out in September 2018, entitled, "DWS launches first ESG money market fund in the U.S.," tells us "DWS Group today announced the launch of DWS ESG Liquidity Fund (ESGXX), the first money market fund available in the U.S. to apply ESG (Environmental, Social and Governance) criteria. The fund will invest in high-quality, short-term, U.S. dollar-denominated money market instruments paying a fixed, variable or floating interest rate while also filtering for various ESG factors using DWS's proprietary software -- the ESG Engine." Sonelius Kendrick-Smith, Head of Liquidity Solutions, Americas, comments, "As a global asset manager, it is crucial for DWS to enable our clients to invest in a sustainable future by incorporating ESG factors into their global investment process across asset classes. Through the DWS ESG Liquidity Fund, investors will now be able to take advantage of our proprietary ESG Engine software while effectively managing their liquidity." Fiona Bassett, Global Co-Head of Products, tells us, "DWS has more than 20 years of experience as a leader and innovator in the field of sustainable, responsible and impact investing. The launch of the DWS ESG Liquidity Fund, the first ESG money market fund available for investors in the U.S., offers investors the opportunity to gain best-in-class ESG exposure for their liquidity needs and help invest in a sustainable future." For more recent news on ESG funds, see these Crane Data News articles: MFI Intl: European Money Fund Assets Surge Too; BlackRock LEAF; EMFS (8/15/19), August MFI: Assets Surging; Northern's Peter Yi; Confusion Over ESG (8/7/19), Federated Earnings Call Discusses Big MMF Inflows, Rate Cuts and ESG (7/29/19), BlackRock Launches First Offshore ESG MMF; ICS LEAF in EUR, GBP, USD (7/22/19), Money Fund Assets Up 13th Week Straight; Fitch on ESG in Money Funds (7/19/19) and SSGA Goes Live with ESG Money Market Fund; Fitch on Prime MF Inflows (7/3/19).

Morningstar U.K. asks, "Should You Park Cash in a Money Market Fund?" They begin, "With interest rates at rock bottom, Money Market funds offer limited returns, but investors are flocking to them anyway.... On the face of it, there is little reason to invest in a Money Market fund. After all, why would you pay a fund manager to put your money in a savings account when you could easily do that for yourself? ... According to Morningstar data, some £2.8 billion has been invested into Money Market funds over the past year and the category has experienced positive inflows for the past six months in a row. Yet the returns are meagre at best ... so why would you choose one?" The article, which contains a table of Sterling Money Market Fund performance, explains, "It's a very stressful time for investors -- Brexit, a US-China trade war, uncertainty in Europe where an election is on the cards in Italy and a recession looms in Germany -- there is much to be nervous about. As well as that, many stock markets are trading at all-time highs, leaving many fearful of a sudden correction. With such a fraught backdrop, it's not surprising that many investors are increasing their allocation to cash.... You can squirrel money away quite literally under the mattress at home, find a high street savings account or choose a Money Market fund." The piece adds, "The benefits of the latter are liquidity (your money is not tied in for a set period as it might be with a savings account) and diversification (a money market fund will spread your cash across a number of different deposits rather than leave it all in one place)." They quote David Callahan, head of Money Market at Lombard Odier, on credit research, "We establish a universe of eligible issuers, based on internal credit assessments, as well as external agency rating. `People may not want the concentration risk of having their money sitting with just on or two banks." It also says, "Another benefit of Money Market funds is that they can reduce interest rate risk.... Not only has that made it harder for savers to find an inflation-beating interest rate on the high street but it has forced bond yields down as more money has flowed into fixed interest. In recent weeks the bond yield has even inverted, meaning that investors are being better rewarded for lending their money to the government for two years rather than, say, 30 years." Finally, Morningstar quotes Royal London's Craig Inches, "A cash rate of 0.75% looks very attractive when the alternative is locking into a negative rate of interest for years to come."

Bloomberg writes, "World's No. 1 Money-Market Fund Shrinks by $120 Billion in China." The article says, "The world's biggest money-market fund, which once offered annualized returns of nearly 7%, is on track to lose its crown after shrinking by more than $120 billion in just over a year. Known as Yu'E Bao, the Chinese fund operated by an affiliate of Alibaba Group Holding Ltd. had 1.03 trillion yuan in assets under management at the end of June, or an equivalent of $144 billion based on current exchange rates, down from a peak of $270 billion on March 31, 2018. It's on course to fall behind the JPMorgan U.S. Government Money Market Fund, which has been hovering around $150 billion level since 2017, and Fidelity Government Cash Reserves fund, according to figures compiled by Bloomberg." (Crane Data shows the JPM portfolio currently at $149.9 billion and the Fidelity fund, FDRXX, at $147.4B as of 8/31/19.) Bloomberg continues, "Since its inception in 2013, Yu'E Bao has lured more than 600 million Chinese investors. The fund is owned by Alibaba affiliate Ant Financial and is available through the tech giant's Alipay platform.... In response to regulatory pressure, the fund in 2017 cut the maximum amount individuals could invest and took other steps to limit inflows. Ant Financial said in a statement that the Yu'E Bao fund is just one of the 24 money-market funds on Alipay's Yu'E Bao spare cash management platform. Its assets fluctuation doesn't reflect the overall performance of the Yu'E Bao platform, the firm said." The article adds, "Yu'E Bao returns have fallen to an annualized rate of 2.29%, according to latest figures, compared with 6.7% in 2014. Yields from Chinese banks' wealth management products were more than 4% in July, figures from research firm PY Standard show." For more on Chinese MMFs, see these Crane Data News articles: Worldwide MMF Assets Break $6.1 Trillion in Q1'19 on China, US Inflows (7/1/19), ICI's 2019 Fact Book Reviews Money Funds Globally, MMFs vs. Deposits (5/1/19) and China's Yu'e Bao No Longer World's Largest MMF; Repo Cap? Fed Minutes (4/11/19).

The Federal Deposit Insurance Corporation published its latest "Quarterly Banking Profile," which reviews the second quarter of 2019 in the banking industry in the U.S. A press release entitled, "FDIC-Insured Institutions Report Net Income of $62.6 Billion in Second Quarter 2019," states, "For the 5,303 commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC), aggregate net income totaled $62.6 billion in second quarter 2019, an increase of $2.5 billion (4.1 percent) from a year earlier. The improvement in net income is attributable to a $4.9 billion (3.7 percent) increase in net interest income. Financial results for second quarter 2019 are included in the FDIC's latest Quarterly Banking Profile released today." The release also tells us, "Net interest income rose by $4.9 billion (3.7 percent) from a year earlier to $139 billion in second quarter 2019. Slightly more than three out of four banks (75.1 percent) reported a year-over-year increase in net interest income. The average net interest margin remained stable from a year earlier at 3.39 percent." The full "Quarterly Banking Profile" report adds, "Total deposit balances increased by $114 billion (0.8 percent) from the previous quarter, as deposits in foreign offices increased by $51.3 billion (4.1 percent) and domestic office deposits rose by $62.7 billion (0.5 percent). Domestic deposits in noninterest-bearing accounts rose by $37.2 billion (1.2 percent), while interest-bearing deposits increased by $25.5 billion (0.3 percent). Nondeposit liabilities increased by $25.1 billion (1.2 percent) from the previous quarter, as other liabilities rose by $25.2 billion (6.2 percent)."

U.S. Bank asks, "How Are You Managing Your Company's Cash?" The posting says, "Although a robust cash balance is likely a sign that your company is doing well, having too much excess cash might signal ineffective cash management.... When searching for your organization's excess cash solution, it's important to consider the security, liquidity and interest rates of each investment option. Here, we'll explore several vehicles that can contribute to a diverse and productive portfolio suiting your institution's needs." The article says about MMDAs, "Money market deposit accounts (MMDAs) are a popular option for organizations looking to invest excess cash on a short-term basis, as deposits gain interest and are fairly easy to access. Further, MMDA investments are FDIC insured -- backed by the U.S. government -- up to $250,000.... If immediate liquidity with no market risk is your greatest concern, MMDAs might be a top option. MMDAs have the latest cutoff time for deposits, transfers and payments." It also says, "Money market funds -- often called money market mutual funds -- offer high liquidity with a relatively low level of risk. With money market funds, you're investing in a diverse pool of securities and spreading risk across a mix of Treasurys, CDs and other instruments, such as repurchase agreements (repos) and commercial paper. However, money market funds are not FDIC insured, so they're considered slightly riskier than their MMDA counterpart but do diversify concentration risk." Finally, the piece adds, "If you're looking to invest cash conservatively for a slightly longer tenor, you may want to consider Treasury bills. These securities have the full faith and credit of the U.S. government backing them, so there's little risk of losing your initial investment when held to maturity. Additionally, there are various term options available for Treasury bills. This means, with a bit of planning, you can decide whether shorter or longer bill duration fits your situation."

A press release entitled, "Wells Fargo Asset Management Announces New Head of Liquidity Client Group," tells us, "Wells Fargo Asset Management (WFAM) ... announced that Yeng Felipe Butler will join the firm as head of WFAM's Liquidity Client Group. Butler, who will be based in Boston, will report to Nico Marais, CEO of WFAM. As head of WFAM's Liquidity Client Group, Butler will manage WFAM's short-duration and cash management business, which has approximately $156 billion in assets under management (AUM) and includes capabilities such as money market mutual funds and customized liquidity accounts." WFAM CEO Marais comments, "We are thrilled to welcome Yeng to Wells Fargo Asset Management. She brings a long track record of providing innovative short-term investment and cash management solutions to both intermediary and institutional clients, and I am confident that her leadership and extensive skillset will be instrumental as we continue to grow this strategic product and solutions set." The release adds, "Butler joins WFAM from State Street Global Advisors, where she most recently served as Global Head of Cash Business, overseeing a global team of 30 short-term fixed income investment sales professionals. In her nearly nine years with State Street, Butler held a number of roles, including Strategic Leader for Fiduciary Advisory Solutions and Head of U.S. Cash Business. She began her career in sales and marketing with Merrill Lynch."

A notice entitled, "Invesco Oppenheimer Institutional Government Money Market Fund to liquidate." The release tells us, "After careful consideration, the Board of Trustees has determined that it is in the best interests of Invesco Oppenheimer Institutional Money Market Fund ('Fund') and its shareholders to liquidate and terminate the Fund. This liquidation is not subject to the approval of shareholders. The Fund will be closed to investments by new accounts after the close of business on June 27, 2019. Existing shareholders will be able to continue to invest in the Fund until the Fund is liquidated. This Fund will be liquidated on or before August 15, 2019." It adds, "To prepare for the closing and liquidation of the Fund, the Fund's portfolio managers will likely increase the Fund's assets held in cash and similar instruments in order to pay for Fund expenses and meet redemption requests. As a result, the Fund may deviate from its stated investment strategies and policies and may no longer be managed to meet its investment objective. On or promptly after the Liquidation Date, the Fund will make a liquidating distribution to each remaining shareholder equal to the shareholder's proportionate interest in the net assets of the Fund, in complete redemption and cancellation of the Fund's shares held by the shareholder, and the Fund will be dissolved. Capital gains distributions are not expected, but the liquidation may be a taxable event to shareholders. Please consult your tax advisor about the potential tax consequences. Share holders of the Fund may redeem their shares at any time prior to the Liquidation Date." See these Crane Data News articles on the Invesco/Oppenheimer merger: Oppenheimer Funds Now Invesco Oppenheimer; Dreyfus Keeping Name (6/3), Aberdeen, Fido Make European Reform Changes; Oppenheimer Merging (3/1) and Invesco Sheds Oppenheimer PMs (7/17).

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