Press Releases Archives: July, 2008

Website IndexUniverse writes "ETFs 'Poaching' the Market", which discusses the possibility of a "money market ETF". It cites the recent filing of SSgA's SPDR S&P Commercial Paper ETF and the recent launch of WisdomTree's U.S. Current Income Fund (USY), but says, "None of these funds, however, will be able to call themselves actual money markets just yet." It quotes our Peter Crane, "Right now, ETFs are beginning to hover around the edges of money market mutual funds. But they're not the same thing as money market mutual funds. The seeming simplicity of maintaining a stable value is actually a formidable obstacle for the ETF industry." Also, see Crane Data's July 17 story, "SSgA Files to Launch SPDR SnP Commercial Paper, First Cash ETF", and see IndexFunds' other new article, "Money Market ETFs In Europe".

Investors' Business Daily writes "Parent Firms Bucking Up The Buck", which says about 17 advisors to date "bolstering" their money market funds, "So far the strategy has worked. No fund has broken the buck." IBD quotes Peter Crane, "Money market funds, though they've had painful bailouts, benefited from this.... High yield is good when it comes from certain things. Low expenses are good. A big, diversified (portfolio) is good. Also, a big asset base gives you protection." Also, see's "Money Funds Act to Address Investor Concerns", which summarizes recent communications efforts by money funds. (The article was derived in part from Crane Data's "Money Funds Step Up Communications With Conference Calls E-mails").

The Arizona Republic's Russ Wiles writes "Despite the economic worries, there are a few pieces of good news", which says, "But not everything has unraveled on the economic front. Here are a few examples of reasonably good news: Money-market funds: When the credit crunch hit last year, many experts worried about money-market mutual funds. Dozens of funds held exotic IOUs carrying credit risks. The fear was that defaults would cause funds to incur losses so that their prices would 'break the buck' or drop below the standard $1 a share, triggering panic.... But those fears have largely abated. The funds stopped buying shaky instruments, and most problem holdings have since matured, said Peter Crane, publisher of the Money Fund Intelligence newsletter. He said 16 fund-management firms voluntarily absorbed losses on bad holdings, while investors continued to add money to the funds, diluting problems with new cash." It quotes Crane, "The saving grace has been a large cash inflow. Investors haven't blinked."

Friday's New York Times features the article "Rethinking Money Market Funds". The piece discusses support actions taken by money fund advisors to date, saying, "During the last year, big banks and investment companies have committed more than $10 billion to shore up money market funds that were tainted by the mortgage mess." It says at least 17 companies "have moved to bolster funds" and adds, "Regulators say six or seven other investment firms have orchestrated bailouts that have not been made public."

The Times continues, "Money market funds have not experienced such turmoil since 1994 , when about 50 of them had to be rescued because of gyrations in interest rates." It cites disclosures, support actions and/or securities purchases by the following companies: Legg Mason, Credit Suisse, Bank of America, SunTrust, Morgan Stanley, Dresdner Bank, Janus, Lehman Brothers, Wachovia, U.S. Bancorp and TD Waterhouse, HSBC, Northern, SEI, and Wells Fargo.

The piece says, "Experts say fund investors are unlikely to lose money." It also cites the massive recent growth of money fund assets, saying, "The upshot is that assets of money funds have swollen to a record $3.5 trillion since the credit crisis began last year, according to Investment Company Institute data. That is an increase of $900 billion, or 35 percent."

Finally, the Times quotes: Alex Roever, "I think the damage has been done;" Bruce Bent, "Wall Street will respond by offering the next iteration of the questionable paper. If there is demand, we will come;" and Peter Crane, "There is still an awful lot of walking wounded investment money out there. Money funds should be a big beneficiary of that."

Mutual fund news source features two stories involving money market mutual funds today. The first, "Auction Rate Replacements Give Closed-Enders Hope", discusses "closed-end [fund] players' efforts at thawing out the frozen auction rate securities market". It quotes Peter Crane, "I think these things are going to go over like a lead zeppelin. The danger of headline risk is just too great." The ignites website also features, "Merrill and BlackRock Make Money Fund Changes." This story discusses "housekeeping" regulatory filings by Merrill Lynch and BlackRock funds, saying, "Merrill's recent filing adds to the list of parties privy to the select portfolio holdings.... `Such expanded reach represents the increased attention investors are paying to money funds and increased demands for disclosure, says Crane." Ignites adds, "Another change to perhaps assuage skittish investors is tighter language around what would happen if the Merrill Lynch funds were to 'break the buck', or slip below a net asset value of $1 per share. Previously, the Merrill prospectus stated that the funds' trustees had 'established procedures designed to stabilize, to the extent reasonably possible,' the $1-per-share net asset value. 'Deviation of more than an insignificant amount,' it read, 'will be reported to the trustees by the manager.'"

Bloomberg writes "Blackrock, Nuveen Sell New Preferred Haunted by Failed Auctions", saying, "Nuveen Investments Inc., BlackRock Inc. and Eaton Vance Corp., the biggest U.S. closed-end fund companies, plan to sell a new form of preferred share that can be bought by money-market funds." It quotes Peter Crane, "I think the funds are going to be gun-shy.... The last thing they want is to be in a story that they're buying auction-rate securities." The piece also quotes Reserve's Bruce Bent, "There are certain advantages to being a pioneer, but not a pioneer with an arrow in his back."

The Wall Street Journal's "Planning an Out for Auction-Rate Issues says, "Still, regardless of the safety of the new securities, investors in money-market funds may be scared off by the mere suggestion of involvement with auction-rate securities, said Peter Crane, president of Crane Data LLC. It adds, "Throughout the crisis, money-market funds have managed to maintain their status as havens." "The last thing money-market funds need right now is to be linked to auction-rate securities," Mr. Crane said.