Press Releases Archives: June, 2014

Crane Data's 6th annual Money Fund Symposium starts Monday, June 23 and runs through June 25 at The Renaissance Boston Waterfront. Crane's Money Fund Symposium is the largest gathering of money market mutual fund managers and cash investors in the world. Last summer's event in Baltimore attracted over 450 attendees, and we expect almost 500 to gather in Boston this week. See the agenda and more details on the Symposium website ( Watch for coverage of the event in coming days and excerpts from Monday's keynote speech by Fidelity Investment's Nancy Prior, "Money Market Funds - Past & Future." (Note: For those that can't make it this week, next year's Symposium will be in Minneapolis, June 24-26. Note also: Registered attendees and subscribers may access the current binder at the bottom of our "Content" page in our "Conference materials" section.) We look forward to seeing you in Boston!

In other news, the Federal Reserve Bank of New York's (FRBNY) daily reverse repurchase agreement (RRP) drove significant shifts in investment allocations by money funds that invest exclusively in Treasury and agency securities, either directly or through repos (government MMFs). Between September 2013 and May 2014, total FRBNY RRP investments by government MMFs (repos) rose by $65 billion, while combined Treasury and agency repo holdings with broker-dealers as counterparties fell by $38 billion, according to a new report by Fitch Ratings, "Reverse Repo Program Gains Influence."

Says Fitch: "This trend likely reflects growing comfort with the operations of the RRP program and more attractive rates. Decreasing reliance on repo funding among dealers also reflected the effects of Basel III regulatory considerations, as banks have been forced to re-assess the economics of short-term wholesale funding."

The report continues: "The RRP program, which may ultimately serve as a primary tool for the Fed to influence short-term interest rates, grew in size as the overnight rate (now 5 bps) and the counterparty allocation limit (now $10 billion) have risen. Growth in participation was evident across the universe of government MMFs, which had Fed RRP holdings totaling $87 billion as of May 31, compared with $21 billion on Sept. 30, 2013. RRP volumes have fallen off markedly since mid-May as repo rates have risen, providing more attractive investment alternatives for money funds. However, the test evidenced the RRP program's ability to "set a floor under money market rates," as FRBNY Chairman William Dudley noted in a May 20 speech. Mr. Dudley pointed out that Treasury repo rates had rarely traded much below the fixed RRP rate, supporting the view that the Fed could use the facility to control short-term rates."

In addition, the report explains, "The growing importance of the Fed's RRP program as a source of money market supply appears to have contributed to the reduction in non-FRBNY repos backed by Treasury and agency securities held by government MMFs over the period of our study. Treasury repo investments with counterparties other than the FRBNY (i.e. dealers) declined by 14% to $120.5 billion from $139.7 billion between Sept. 30, 2013, and May 31, 2014, while agency repo investments fell by 15% over the same period to $104.2 billion from $123.0 billion. Broker-dealers conducting the largest volumes of repo funding with government MMFs as of May 31 included BNP Paribas, Deutsche Bank and Barclays."

Fitch writes, "Several institutions that ranked among the largest government MMF counterparties when the daily RRP program was launched last September had less government MMF repo funding as of end-May. These included Citigroup, Bank of America, Credit Agricole, Goldman Sachs and RBC. Regulatory constraints on large banks' capital positions and trading activities, tied to Basel III (embodied in the Supplementary Leverage Ratio rule approved by U.S. banking regulators in April) and the Volcker Rule, are pushing dealers' securities inventories down, and these changes could cut further into demand for repo funding."

Concerning the increase in FRBNY RRP volumes between September 2013 and May 2014, the report says, "Daily utilization reached a peak of $242 billion on March 31. The most recent month-end volume figure, reported on May 30, was $165 billion. Since mid-May, volumes have trended significantly lower, averaging closer to $100 billion per day during the first half of June. On June 16, RRP volume had fallen to $53 billion."

The Fitch report is based on government MMFs universe with assets totaling $881 billion as of end-May 2014. "Among all fund types, these funds allocate the largest share of total assets under management to Treasury and agency repos. Unlike prime funds, government MMFs have more limited investment alternatives. They therefore provide a window into the potential impact of the Fed’s RRP activity on other fund investments, notably dealer repo agreements backed by Treasury and agency securities."

The Financial Times covered the issue in the story, "New York Federal Reserve Takes on Key Role in Repo Market." "The Fed's decision to quadruple its trading with government money market funds in the repurchase or "repo market" is a sign that the central bank is now engaging more directly with the shadow banking system at the expense of large Wall Street banks."

The FT adds, "Historically, the repo market was where big banks pawned out their securities such as Treasury bonds to lenders including money market funds, insurers and mutual funds, in exchange for short-term financing. Now the Fed is stepping in to trade as well as it prepares to end its current near-zero interest rate policy. Rather than lending to the banks, money market funds have sharply boosted their dealings with the US central bank."

The article goes on, "While the growing presence of the Fed in the market has been welcomed by money market funds keen to transact with the central bank, it comes with risks for the central bank and the broader financial system. Bill Dudley, New York Fed president, warned last month that if use of the repo facility were to grow too quickly it might "result in a large amount of disintermediation out of banks through money market funds and other financial intermediaries into the facility. This could encourage further enlargement of the shadow banking system."

A Wall Street Journal article, entitled, "Firms Find Short is Beautiful," reports on the increase in non-financial commercial paper issuance recently. The piece says, "Apple Inc. and at least a dozen other companies have started borrowing short-term cash at the fastest pace in almost two years, telegraphing economic growth. Last month, companies with the highest credit ratings sold an average of $5.88 billion of commercial paper a day, according to the Federal Reserve. For the first time in about two decades, corporate commercial paper accounts for a quarter of the market, with banks and insurers making up the rest." "Companies are issuing more commercial paper to finance expenses such as growing payrolls, capital spending and mergers and acquisitions," John Lonski of Moody's tells the Journal. "Companies are more optimistic, more confident," he says. "There is a correlation between what happens with private-sector payrolls and commercial paper." The article continues, "This year alone, the amount of commercial paper outstanding issued by nonfinancial companies has jumped $82.5 billion to $278.6 billion, according to Fed data, before adjustment for seasonal factors." It continues, "Fed Chairwoman Janet Yellen has been publicly frank that the central bank will keep short-term interest rates low even as the economy recovers. That's persuaded short-term borrowers they can continue to roll over their debts." "That has encouraged a fair amount of issuance in the CP market. They feel that much more comfortable operating their programs at capacity," Barclays' Christopher Conetta tells the Journal. The piece adds, "Apple, for example, recently began issuing up to $10 billion in paper for the first time in 17 years. The tech giant has paid 0.05% for three-week paper and 0.15% for debt maturing in about six months, according to Peter Crane, president of Crane Data LLC, a money-fund research firm." It explains, "There's strong demand for debt from companies like Apple as yield-starved, short-term investors hunt for higher rates. Three-month commercial paper yields range from about 0.10% for the highest-ranked borrowers to a little over 0.25% for so-called Tier 2 companies, according to the Fed. By contrast, three-month bank certificates of deposit are returning an average 0.09%, according to" The WSJ quotes Crane, "Demand is insatiable for nonfinancial, plain-vanilla blue chips."

The Wall Street Journal writes "Here's One Set of Potential Losers from the ECB's Rate Move". The Journal can't help itself anymore from spinning negative on anything money fund related, writing, "European money market funds, which have been pushing into riskier strategies to stem outflows, may be among the big losers now that the European Central Bank has cut interest rates to negative territory. Money market funds occupy an unglamorous but crucial part of the financial markets. They provide companies, banks and governments with short-term financing at low rates. For investors, they are typically seen as a low risk way to diversify surplus cash holdings. But they have been buffeted by persistently low interest rates that have seen investors put their money in higher yielding stocks and bonds, or alternative cash-management accounts. What do negative rates mean for the industry? Now, the widely expected ECB moves may contribute to a further decline in rates on the short-term debt that money funds buy.... Continued low yields could constrain the ability of European money market funds to generate income for their investors at a time when they are already struggling to justify their existence." The Journal quotes our Peter Crane, "You're seeing a continued, slow shrinkage of the sector. Historically, money funds took share from banks because of a yield advantage, but as yields compress that advantage is nullified." The piece explains, "Euro-denominated assets in money market funds alone now sit around E80 billion ($108.8 billion), down from E111 billion as of the end of May 2012, according to Crane Data LLC <b:>`_. If yields on short-term debt in the euro-zone turn negative for a protracted period, some funds could be forced to close to new investment."

The June issue of Crane Data's Money Fund Intelligence was sent out to subscribers on Friday morning. The latest edition of our flagship monthly newsletter features the articles: SEC Intensely Focused on MF Reform; Very Near Term?," which reviews SEC Chair Mary Jo Whites latest comments on money market reform; "Stability, Fiduciary Priorities at BlackRock; Eye to Future," which interviews BlackRock's Rich Hoerner and Tom Callahan; and, "ICI Releases 2014 Investment Co. Fact Book," which reviews a number annual MMF facts, stats, and trends. We also updated our Money Fund Wisdom database query system with May 31, 2014, performance statistics and rankings late Thursday night, and sent out our MFI XLS spreadsheet Friday a.m. (MFI, MFI XLS and our Crane Index products are available to subscribers at our Content center.) Our May 31 Money Fund Portfolio Holdings data are scheduled to go out on Tuesday, June 10.

The latest MFI newsletter's lead article comments, "Money market providers and investors continue to await the SEC's final Money Market Fund Reform regulations, but guesses as to when we might see the new rules range from next week to not at all. Most now seem to expect the regs between the end of June and the end of October though, with the heaviest betting now being late July or August. The speculative consensus still also seems to lean toward a combination of floating NAV for Inst MMFs and "gates & fees" for all prime MMFs. But of course, nobody really knows and many of the even minor details could matter greatly."

The article explains, "The most recent official word on the matter was from SEC Chair Mary Jo White, who spoke at the ICI's annual meeting on May 22. White didn't give any indication about what they might look like, but she did reiterate her comments from earlier this year that the rules would arrive in the "very near term." She told the ICI, "[T]he Commissioners ... and the Staff are intensely focused on it [MMF Reform] as we speak, completing the very important rulemaking. I expect it will be completed in the very near term. I won't say what the very near term is, but it's front and center."

Our MFI "profile" says, "This month, we sat down with Rich Hoerner, head of global cash management, and Tom Callahan, deputy head of global cash management, at BlackRock, the 3rd largest manager of money funds globally with approximately $263 billion (3/31/14). They talked about new products, the regulatory environment, and some emerging trends that could reshape the money fund landscape. Our discussion follows."

The piece continues, "MFI: Tell us about your background? Hoerner: I started with PNC in 1987 and joined the money market business, which was then known as Provident Institutional Management Corp., in 1992. In the mid-1990s, PNC bought BlackRock.... I grew up on the portfolio side of the money fund business before taking over as co-head of the cash business at BlackRock about 5 years ago. Callahan: I've been with BlackRock just 8 months. I joined in September of last year from the NYSE where I had been the CEO of their Liffe U.S. futures exchange. Prior to that, I ran Merrill Lynch's money market business for a time.... So I have been in and around the short end of the market for most of my career."

It adds, "Hoerner: The cash business at BlackRock has a long history. TempFund [which celebrated its 40th birthday late last year] was launched in October 1973 by Provident National Bank.... In 1982, Pittsburgh National Bank and Provident National Bank merged to form PNC. Then in 1995, PNC purchased BlackRock, [while BlackRock continued to be managed independently]. In 2006, BlackRock purchased Merrill Lynch Investment Managers.... In December of 2009, BlackRock bought Barclays Global Investors from Barclays Bank.... They also had a money fund business and a sizable securities lending business." (Watch for more excerpts of this interview later this month, or write us to request the full article.)

The June MFI article on ICI Releases 2014 Investment Co. Fact Book explains, "The ICI released its "2014 Investment Company Fact Book" last month at the Institute's annual meeting in Washington. As usual, the "Fact Book" is loaded with useful statistics on money market mutual funds. Under the section, "Demand for Money Market Funds (on page 45)," the Fact Book says, "In 2013, money market funds received a modest $15 billion -- the first annual inflow since 2008. Demand for money market funds was not uniform throughout 2013, however. Various factors, including tax events, rising long term interest rates, and a U.S. debt ceiling standoff, influenced money market fund flows during 2013."

Crane Data's June MFI with May 31, 2014, data shows total assets increasing by $11.9 billion (after falling by $59.5 billion last month and $25.9 billion in March) to $2.500 trillion (1,255 funds, up from 1,238 last month). Our broad Crane Money Fund Average 7-Day Yield and 30-Day Yield remained at a record low 0.01% while our Crane 100 Money Fund Index (the 100 largest taxable funds) yielded 0.02% (7-day and 30-day). On a Gross Yield Basis (before expenses were taken out), funds averaged 0.13% (Crane MFA, unchanged) and 0.16% (Crane 100) on an annualized basis for both the 7-day and 30-day yield averages. (Charged Expenses averaged 0.12% and 0.14% for the two main taxable averages.) The average WAM for the Crane MFA and the Crane 100 were 41 and 43 days, respectively, down one and two days, respectively, from the prior month. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)

The preliminary agenda and dates are now set for the largest money fund conference outside of the U.S., Crane's European Money Fund Symposium. Our second annual event will be held Sept. 22-23 at the London Tower Bridge Hilton in London, England. Crane Data's first European event, held last September in Dublin, attracted over 100 attendees, sponsors and speakers, and we expect our London event to be even bigger and better. (Crane Data will host its flagship U.S. event, Money Fund Symposium, a month from today in Boston, June 23-25. Note that the Renaissance and neighboring Seaport Hotel are now sold out for our dates; attendees will have to seek rooms at the Westin Waterfront or elsewhere.)

"European Money Fund Symposium offers European, Asian and "offshore" money market portfolio managers, investors, issuers, dealers and service providers a concentrated and affordable educational experience, as well as an excellent and informal networking venue," says Peter Crane, President & CEO of Crane Data. "Our mission is to deliver the best possible conference content at an affordable price to money market fund professionals."

Attendee registration for our 2014 Crane's European Money Fund Symposium is $1,500 (or 900 GBP). Registration is open and sponsorships are still available. Visit to register or to see the latest agenda <i:>`_. Contact us to request the PDF brochure, for Sponsorship pricing and info, and for more details.

The agenda features sessions led by many of the leading authorities on money funds in Europe and worldwide. The Day One Agenda for Crane's European Money Fund Symposium includes: "Welcome to European Money Fund Symposium" by Peter Crane of Crane Data; a "State of MMFs in Europe & IMMFA Update" with Jonathan Curry and Susan Hindle Barone of IMMFA; "Regulations in Europe: Bullet Dodged?" with Dan Morrissey of William Fry and Paul Wilson of SWIP; "Senior Portfolio Manager Perspectives," moderated by Yaron Ernst of Moody's Investors Service and featuring Debbie Cunningham, of Federated Investors, Joe McConnell of J.P. Morgan Asset Management and Jennifer Gillespie of Legal & General I.M.; "MM Securities: New Sources of Supply," with David Hynes, of Northcross Capital LLP, Kieran Davis of Barclays, and Jean-Luc Sinniger of Citi Global Markets; "Portals, Transparency & Investor Issues" with Greg Fortuna, of State Street's Fund Connect, Justin Meadows of MyTreasury, and Maryum Malik of SunGard; "Discussing Domiciles: Tax, Accounting, Servicing" with Pat Wall and Sarah Murphy of PricewaterhouserCoopers Dublin, and Owen McManus of Ernst & Young; and, finally, an "Ireland and IFIA Update" with Kevin Murphy, of Arthur Cox.

The Day Two Agenda includes: "MM Strategists Speak: Rates, Regulations, Risks" with Giuseppe Maraffino of Barclays and Vikram Rai, of Citi; "Distribution: Major Issues & Client Concerns" with Jim Fuell, of J.P. Morgan Asset Management, Kathleen Hughes, of Goldman Sachs A.M., and Kevin Thompson, of SSgA; "Recent Ratings Research: Trends & Issues" presented by Yaron Ernst of Moody's; "State of US Money Funds & Rule 2a-7" with Charlie Cardona, of BNY Mellon CIS, Jane Heinrichs of the Investment Company Institute, and John Hunt of Nutter, McClennen & Fish; "Euro & Sterling MMF Issues with David Callahan of Lombard Odier I.M. and Dennis Gepp of Federated Investors (UK) LLP; "Beyond MMFs: Enhanced Cash Strategies with Jason Granet of Goldman Sachs and Guyna Johnson of Standard & Poor's Ratings; "MMF's in Asia & Emerging Markets" by Peter Crane and Andrew Paranthoiene of Standard & Poor's; and finally, "Offshore Money Fund Data & Statistics" with Peter Crane and Aymeric Poizot of Fitch Ratings.

European Money Fund Symposium will be held at the Hilton London Tower Bridge Hotel. The negotiated conference rate is L261 for a single room and L272 for a double. Reservations can be made either online or by phone. You may call The Hilton London Tower Bridge Hotel directly at +44 203 002 4300. Please identify yourself as attending the Crane's European Money Fund Symposium in order to ensure you receive the negotiated conference rate.

Finally, visit to learn more about our big U.S. show, Crane's Money Fund Symposium which will be held June 23-25, 2014, in Boston, and to learn more about our "basic training" event, Crane's Money Fund University, which will take place January 22-23, 2015, in Stamford, Conn. Thanks for your support, and we hope to see you in London!