Press Releases Archives: August, 2009

"Fidelity shines in slow lane" writes the Sunday Boston Globe. The article, subtitled "Firm's money market funds capitalize on investor worries and rivals' missteps to take the lead," says, "Some of Fidelity Investments' fastest growing mutual funds aren't managed in Boston's financial district, but rather in an airy trading room in an unassuming office park an hour away. This is where Fidelity runs its mammoth money market mutual funds business, which after years of being a quiet source of strength and profits for the investment company, emerged as a star during the financial crisis of the past year. In that time, Fidelity's money market mutual funds managed to avoid losses that felled other substantial competitors and gained an even more dominant share of the market while accounting for a sizable portion of the company's overall growth. And during a recent period when yields in many money market funds have hovered near zero, some of Fidelity's most prominent funds have paid significantly higher rates. Sometimes relegated to the backwater of the mutual fund industry, the money market business at Fidelity is accorded prominent status." The Globe quotes Charles S. Morrison II, president of the company's Money Market Group, "This is a franchise business for Fidelity." The piece also quotes Peter Crane, president of Crane Data, "Fidelity had zero loss events in protecting their shareholders. It's just astounding. Fidelity has been both good and lucky in the last couple years." It adds, "Fidelity executives bristle at the idea luck had anything to do with the company's success. It is a result of the company's investment in the business -- with nearly 70 researchers devoted to money market funds -- and the skill of those people."

We were happy to get mentions of this week's inaugural Crane's Money Fund Symposium in several publications and stories., which has password-protected content, ran "Money Fund Execs Disparage Liquidity Reforms" on Monday and "SEC, White House Mull Money Fund Liquidity Plan" on Tuesday. The latter story said, "The President's Working Group on Financial Markets and the Securities and Exchange Commission are considering creating a 'private liquidity bank' for money market funds that would be paid for by funds. The idea stems from concern that the SEC's proposed liquidity thresholds for money funds are inadequate to sustain redemptions of the type that occurred last September after the Reserve Primary Fund broke the buck, said Robert Plaze, assistant director of the agency's Division of Investment Management.... A liquidity facility would be created to avoid the need for the federal government to intervene, as it did last September with a Treasury guarantee for money funds and other programs, he added. Plaze, who is co-chair of the President's Working Group's committee on money funds, made his comments during a session of Crane Data's Money Fund Symposium. Plaze said there is 'quite a degree of connectivity' between the agency and the President's Working Group. He also said the President's Working Group sees the SEC's proposed money fund rules as a 'critical component' of the government's response to the traumatic market events of 2008." Yesterday, Investment News writes "Money market funds may suffer when federal backstops expire, J. P. Morgan exec fears," which says, "Money market mutual funds would benefit from a federal program to guard against the risk of illiquidity in the markets, analysts yesterday at the first Money Fund Symposium in Providence, R.I." Finally, see Reuters' "Judge combines Reserve Primary Fund lawsuits".

Investment News writes "Money fund assets 'bleed out' as low interest rates persist, managers say". The article says, "The continued zero interest rate environment may be presenting a bigger challenge to money market mutual fund managers than rule changes proposed by the Securities and Exchange Commission, several managers told participants today at the Money Fund Symposium in Providence, R.I." It quotes Deborah Cunningham, chief investment officer for the Pittsburgh-based Federated Investors Inc., "If all of the [SEC] proposals come to fruition, the industry continues.... Investors may lose out on a couple of basis points of yield. But it would not cause major issues." The article continues, "Under the proposed SEC rules, money funds would be prohibited from purchasing illiquid securities and anything less than the highest-quality securities. Additionally, they would be required to hold a certain percentage of assets in cash or Treasury securities so they could be converted to cash easily.... The current low interest rate environment, however, will likely put even more pressure on money fund managers, said speakers at the conference, which is sponsored by Crane Data LLC of Westborough, Mass.... Still, money funds added $892 billion in assets in the last two years, representing a growth of 33%, he said." "We're not dead yet," Mr. Crane said.

Approximately 150 money market mutual fund managers, marketers, suppliers, servicers, investors, and regulators descended on Providence, Rhode Island this weekend for the inaugural Crane's Money Fund Symposium at the Renaissance Hotel, which began Sunday afternoon. Speakers, sponsors and attendees will undoubtedly spend much of their time discussing the SEC's Money Market Fund Reform proposals, as well as a host of challenges, including ultra-low interest rates, potential consolidation, and competition from bank and other fixed-income products. But while participants have concerns, money fund managers will also just be happy to be there, still very much alive at $3.6 trillion in assets, following what was no doubt their most traumatic year in history. "Best of Times, Worst of Times" was an understatement for money funds in 2008.

Sunday's kickoff featured "Welcome to Money Fund Symposium" comments from host Peter Crane, then a series of sessions, including: "Washington & Money Market Funds" with Federated Investors' Eugene Maloney; "What's Driving Corporate Investors?" with Treasury Strategies' Tony Carfang; "ICI Market Update & Money Fund Issues" with ICI's Brian Reid and Invesco AIM's Bill Hoppe; and "The Future of Money Funds Discussion" with Fidelity Investments' Michael Morin, Standard & Poor's Peter Rizzo, and Cachematrix's George Hagerman.

Monday's agenda includes: "State of the Money Fund Industry" by Peter Crane; "Money Fund Managers' Current Strategies" with Federated's Debbie Cunningham, SSgA's Jeff St. Peters, and Wells Fargo Advantage Funds's Dave Sylvester; "Talking Treasury & Government Funds" with Western Asset's Kevin Kennedy and UBS's Rob Sabatino; "Municipal Money Market Update" with Neuberger & Berman's Kristian Lind; "Economic Update from SVB Asset Management's Joe Morgan; "Money Market Securities: What's New?" with JPMorgan Securities' Alex Roever and Bank of America Merrill Lynch's Mike Cloherty; "Institutional Investor Perspectives" with Capital Advisors Lance Pan and MWAA's Nancy Edwards; "Offshore & European Money Market Update from IMMFA's Travis Barker; and, "Revamping AAA Money Fund Ratings with Fitch Ratings' Viktoria Baklanova, Moody's Henry Shilling, and Standard & Poor's Joel Friedman.

Tuesday's Symposium sessions include: "Update on SEC's MMF Reform Proposals" featuring the SEC's Bob Plaze and Reed Smith's Stephen Keen; "Accounting Concerns & Mark-to-Market" by PriceWaterhouse Coopers' Tony Evangelista; "Grow or Die: Distribution Strategies by DB Advisors' Kevin Bannerton and Traibar Associates' Mark Steinberg; and "New Developments in Online MM Portals" with Citibank Online Investments' John Carter and Matrix MM Portal's Michael Rice.

Crane Data would like to thank all of our Money Fund Symposium sponsors and exhibitors, including: Bank of America Merrill Lynch, Federated Investors, Fidelity Investments, Cachematrix, J.M. Lummis, Wells Fargo Advantage Funds, Standard & Poor's, Capital Advisors Group, Fitch Ratings, Matrix Financial Solutions, Moody's Investors Service, Invesco AIM, Western Asset Management, Bank of Ireland, Bank of New York Mellon, and Citi Online Investments.

Crane's Money Fund Symposium was created as an affordable (registration is $500) new venue for exchanging ideas, networking, and learning about the latest investment strategies, business tactics, and news impacting money funds. To see the agenda click here. Next year's event is `tentatively scheduled for July 25-28, 2010, in Boston. Check back for updates from the conference in coming days, or see you in Providence!

Yesterday's Boston Globe wrote "Pain that won't yield", which said, "Money market mutual funds are supposed to be the no-brainer of the investment world. But the basic money market proposition -- a safe place to park cash with ready access, in return for modest yields -- is under stress as never before. Now, money funds have to answer real questions about safety and slash fees, because interest rates are appallingly low. Investors and the firms managing $3.6 trillion in money market assets are both feeling the strain.... Ultralow money market yields are a product of a Federal Reserve committed to very low short-term interest rates and the investment world's flight to safety, which has eased some since last year but remains a powerful force in the market for the most solid short-term securities. All money fund assets amounted to $3.6 trillion as of last week, according to the Investment Company Institute, an industry group. That's down from a peak of $3.9 trillion, achieved while the stock market plunged in April. But it's still up about $1 trillion from its level of two years ago, says Peter Crane of Crane Data LLC, a research firm in Westborough." Crane tells the Globe, "I don't think anyone is depressed about that scenario. You have a lot more issues and challenges, but in the mutual fund business it's all about the assets." Finally, the article says, "Retail money market assets have fallen about 14 percent since their peak earlier this year, the ICI reports. Where did the money go? Short-term bond funds, one step further out in both risk and reward, have been big winners. Many banks are paying for money market business, offering more than competitive yields of up to 1 percent for larger amounts. For now, and the foreseeable future, the no-brainer of the investment world is a much more complicated proposition."

"Money fund woes fuel manager flight" writes this week's Investment News. The article says, "More asset managers are getting out of the money market fund business because the regulatory and market environment often makes offering such funds unprofitable. Aston Asset Management LLC of Chicago, formerly ABN AMRO Asset Management Holdings Inc., became the fifth firm in two years to leave the money fund business when in July it liquidated its money funds, according to Crane Data LLC, a Westborough, Mass., money fund consulting firm. The others are Calamos Advisors LLP of Naperville, Ill., Credit Suisse Asset Management LLC of New York, Munder Capital Management of Birmingham, Mich., Utendahl Capital Management LP of New York and Monarch Investment Advisors LLC of Beverly Hills, Calif. Janus Capital Group Inc. of Denver and Putnam Investment Management LLC of Boston have exited the institutional-money-fund business but still offer retail money funds." The Investment News piece adds, "Largely because of low yields, assets in money funds stood at $3.6 trillion July 29, down $196 billion, or 5.1%, from their level at Dec. 31, according to Crane Data. And because interest rates aren't expected to rise anytime soon, assets will decline by a total of 10% by the end of the year, predicts Peter Crane, president of Crane Data.... It has benefited companies such as Federated, the third-largest money fund manager, with $294 billion in money fund assets at the end of July, according to Crane. During the past few months, Fifth Third Asset Management Inc. of Cincinnati, a unit of Fifth Third Bancorp, and Nationwide Asset Management LLC of Columbus, Ohio, a unit of Nationwide Mutual Insurance Co., outsourced money fund management to Federated, according to Crane. Other firms that have benefited from the current environment include Fidelity Investments of Boston, the largest money fund manager, with $506.33 billion in money fund assets, which received money fund assets from Capital One Asset Management LLC of New Orleans, a unit of Capital One Financial Corp. of McLean, Va. State Street Global Advisors of Boston, the 18th-largest money fund manager, with $49.68 billion in such assets, received money fund assets from Neuberger Berman LLC of New York."

USA Today writes "Money market funds are yielding almost nothing", which says, "Money isn't everything, at least to investors in money market funds. Yields are at all-time lows, and nearly a quarter of funds yield nothing at all." (Our Crane 100 Money Fund Index reached yet another record low yesterday, an annualized 7-day yield of 0.14%.) The piece quotes Peter Crane, editor of newsletter Money Fund Intelligence, "They're taking more of the funds' yield to pay expenses than to pay investors." USA Today says, "Some $27.5 billion fled money funds the week ended Aug. 5, says the Investment Company Institute, a fund industry trade group. Some of that money is going to banks, which can offer any rate they want. The average one-year bank CD, for example, yields 1.88%. But investors apparently feel that moving to a bank account is too much hassle for too little return. Assets in money funds have fallen to $3.6 trillion from $3.8 trillion at the end of 2008. Yet that's still nearly $500 billion more than at the start of 2008. Many fund companies would welcome an exodus from money funds. Investors typically move money to another fund in the fund family, and most funds charge higher expenses than money funds, Crane says." See also, `Kiplinger's "Banks Trounce Money-Market Funds".

Money Market Executive writes "Investors Leave Money Funds for More Risk. The article discusses recent money fund outflows but says, "But it has been those money funds that have kept mutual fund investors appeased in the downturn. Safe investments like cash and money funds did a fantastic job of protecting assets during the recent bear market when the average equity fund lost more than 30%." The piece quotes Steve Meier, CIO for cash at State Street Global Advisors, "Investing in cash has become less satisfying for investors. The second quarter saw a tremendous reduction in risk aversion." It also quotes former Moody's analyst Steve Schoepke, now director of research at Financial Research & Analysis Associates, "How long will these firms be willing and able to subsidize money funds?" The article also quotes our Peter Crane, who counters, "A trickle out of the money market space tends to be a gusher in other asset classes.... The survivors of this bear market were the ones who kept their money market funds. The biggest winners in the mutual fund game had the broadest exposure in money funds. You've got to have money market funds to survive a bear market. Anybody exiting this space would be a fool." Finally, Crane tells MME, "The floating NAV does not even have a small likelihood of becoming a reality. It will be crucified during the comment period."

"Money fund assets fell 6% in 2Q" says Investment News. The article writes, "Assets of money market mutual funds declined by $215 billion, or 6%, in the second quarter, according to Crane Data LLC, a Westborough, Mass.-based research firm. Money market fund assets stood at $3.6 trillion on July 29, Crane reported, down $196 billion, or 5.1%, from their level at Dec. 31." IN quotes Peter Crane, "I estimate that assets will decline by a total of 10% by the end of the year because of the ultra-low interest rates. The Fed is forcing people into riskier assets." The article writes about our Money Fund Distribution Survey, "The report found greater concentration in the money market business, with the largest 25 fund complexes accounting for 94.3% of money fund assets as of June 30, compared with 91.2% a year ago." In other news, see the latest comment on the SEC's Proposed Money Market Fund Reform from iMoneyNet Managing Director Randy Wood.