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Money market mutual fund complexes continue to gradually merge away tiny funds and fine-tune their fund lineups. A Prospectus Supplement filing for JPMorgan Prime Money Market Fund, JPMorgan Liquid Assets Money Market Fund and JPMorgan U.S. Treasury Plus Money Market Fund (Class C Shares) describes the "Conversion of Class C Shares to Reserve Shares." It says, "The Board of Trustees of the J.P. Morgan Funds approved the automatic conversion of each Fund's Class C Shares into Reserve Class Shares, effective as of the close of business on January 31, 2023. Beginning January 31, 2023, Class C Shares of the Fund will no longer be available for purchase." (See too our Jan. 26 Link of the Day, "Invesco Liquidating T-F Cash Reserves," and our Jan. 5 LOTD, "Harbor Money Market Fund Liquidates.")

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The GAO, or Government Accountability Office, published a "Report to Congressional Committees on Money Market Mutual Funds yesterday. Subtitled, "Pandemic Revealed Unresolved Vulnerabilities," its summary explains, "In 2010 and 2014, the Securities and Exchange Commission (SEC) revised its money market mutual fund (MMF) rules after some MMFs experienced runs (heavy redemptions) during the 2007–2009 financial crisis. For example, SEC required MMFs to hold minimum levels of liquid assets that they could sell to meet redemptions. If these liquidity levels fell below the minimum, SEC allowed certain MMFs to charge investors a liquidity fee for redeeming shares or to impose a redemption gate to temporarily suspend redemptions."

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Late last week, Charles Schwab hosted its "Winter Business Update Agenda," a week after releasing its Q4'22 earnings the previous week. (See the release, "Schwab Reports Record Full-year Earnings Per Share.) CFO Peter Crawford comments in the earnings release, "Schwab's record financial performance in 2022 highlighted the resiliency of our diversified financial model. Sustained business momentum through an uneven macroeconomic environment helped drive 12% growth in total net revenues. Net interest revenue reached $10.7 billion, an increase of 33% versus the prior year, as higher interest rates more than offset the impact of balance sheet contraction due to client cash sorting. Lower market valuations throughout the year pushed asset management and administration fees down slightly to $4.2 billion, or 1% year-over-year."

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S&P Global Ratings published three updates on the cash investment space yesterday, including: "U.S. Domestic 'AAAm' Money Market Fund Trends (Fourth-Quarter 2022)," "European 'AAAm' Money Market Fund Trends (Fourth-Quarter 2022)" and "'AAAm' Local Government Investment Pool Trends (Fourth-Quarter 2022)." The first update tells us, "Money market funds (MMFs) received significant regulatory and market attention in 2022, following indicated U.S. MMF reforms, yet to be finalized, and climbing yields that have spotlighted this asset class for investors. Rated U.S. government MMFs had a slight decline in assets during the fourth quarter, and outflows of 9% for 2022, as some investors moved funds into higher yielding products. Rated prime MMFs benefited from higher yields and attracted flows. Assets under management (AUM) in prime fund strategies grew nearly 15% in 2022, landing at $418 billion in the fourth quarter."

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The Investment Company Institute released its latest monthly "Trends in Mutual Fund Investing" and "Month-End Portfolio Holdings of Taxable Money Funds" for December 2022 Monday. ICI's monthly "Trends" report shows that money fund assets increased $105.3 billion in December to $4.777 trillion. Meanwhile, bond fund assets decreased by $73.4 billion to $4.492 trillion. Money fund assets, which surpassed bond fund assets in September 2022 for the first time since 2010, remain larger than bond funds and are seeing their lead grow. MMFs have increased by $21.0 billion over the past 12 months. (The bond fund totals don't include bond ETFs, which total $1.261 trillion as of 12/31, according to ICI.)

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Federated Hermes released its Q4'22 earnings and hosted its quarterly earnings call late last week, which discussed record money fund assets and seasonal flows, the end of fee waivers and money funds vs. bank deposits. The press release, entitled, "Federated Hermes, Inc. reports fourth quarter and full-year 2022 earnings," quotes President & CEO J. Christopher Donahue, "Federated Hermes' record assets at year-end 2022 were driven by money market asset increases and investor interest in our flagship Total Return Bond Fund and related separate accounts, as well as continued demand for our popular dividend income equity products. In addition, investors valued our investment perspective as they sought haven from market volatility in a diverse range of Federated Hermes products -- from money market funds to low-duration fixed-income options to market neutral and bear market alternative strategies." (See Federated Hermes' Q4 2022 Earnings Call Transcript from Seeking Alpha.)

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ICI's latest weekly "Money Market Fund Assets" report shows money fund assets bouncing back to record levels following two weeks of modest declines. Money funds saw their biggest weekly increase since April 29, 2020 during the first week of 2023, and they've risen by $235.0 billion (or 5.1%) over the past 13 weeks. Over the past 52 weeks, money fund assets are up by $174 billion, or 3.7%, with Retail MMFs rising by $258 billion (17.5%) and Inst MMFs falling by $69 billion (-2.2%). ICI shows assets up by $84 billion, or 1.8%, year-to-date in 2023, with Institutional MMFs up $14 billion, or 0.5% and Retail MMFs up $56 billion, or 3.3%. (Note: Please join us for our upcoming Bond Fund Symposium, which will take place March 23-24, 2023 at the Boston Hyatt Regency in Boston, Mass. See the latest agenda and information here.)

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The Wall Street Journal again mentions money market funds in, "Jittery Investors Turn to Cash in Hunt for Yield." They explain, "The dash for cash on Wall Street is back on. Investors have added about $135 billion to global money-market funds over the past four weeks, according to EPFR data through Jan. 18. That is the best stretch since the four-week period ended May 2020, when those funds logged roughly $175 billion in net inflows. A money-market fund is a form of mutual fund that invests in short-term debt securities including Treasury bills and commercial paper. Companies and consumers often use them like checking accounts to store their ready cash."

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State Street Global Advisors published its "Global Cash Outlook," entitled, "The Year Ahead – Chaos or Calm?" Portfolio Strategist Will Goldthwait writes, "The overall theme of 2023 will be confusion. The current geopolitical macro-economic back drop could deliver such a broad array of outcomes that it's anyone's guess where we will be at the end of the year. Looking back at my 2022 outlook made me chuckle ... I had said, 'inflation is less transitory,' and predicted the Fed raising rates by 75 bp by the end of 2022. Oh, how naïve. Just in the last few weeks of this year central banks have made it clear that they have a lot more to do. I predict the next year will be full of surprises, some more shocking than others, with outcomes that we might never have imagined, (like the Fed raising rates by 425 bp, not just 75)."

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CNBC.com comments that, "Investors are holding near-record levels of cash," explaining, "Investor cash holdings are near record highs, and that could be good news for stocks since there is a wall of money ready to come right back into the market. But the question is this: Will those investors return any time soon, especially with sentiment still so sour and stocks at risk of a major selloff? Total net assets in money market funds rose to $4.814 trillion in the week ended Jan. 4, according to the Investment Company Institute. That eclipses the prior peak of $4.79 trillion during May 2020, back in the earlier months of Covid-19. These sums include money market fund assets held by retail and institutional investors."

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The Securities and Exchange Commission's latest monthly "Money Market Fund Statistics" summary shows that total money fund assets increased by $54.8 billion in December to an all-time record of $5.235 trillion. Assets at yearend were above their previous record ($5.232T) from May 2020. The SEC shows that Prime MMFs increased by $10.5 billion in December to $1.051 trillion, Govt & Treasury funds increased $41.3 billion to $4.065 trillion and Tax Exempt funds increased $3.0 billion to $119.0 billion. Taxable yields jumped again in December after surging in November. The SEC's Division of Investment Management summarizes monthly Form N-MFP data and includes asset totals and averages for yields, liquidity levels, WAMs, WALs, holdings, and other money market fund trends. We review their latest numbers below.

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As we wrote earlier this month (and reprint here), our January MFI issue recognized the top performing money funds, ranked by total returns, for calendar year 2022, as well as the top funds for the past 5-year and 10-year periods. We present the funds below with our annual Money Fund Intelligence Awards. These are given to the No. 1‐ranked funds based on 1-year, 5-year and 10-year returns, through Dec. 31, 2022, in each of our major fund categories -- Prime Institutional, Government Institutional, Treasury Institutional, Prime Retail, Government Retail, Treasury Retail and Tax‐Exempt. (Let us know if you'd like to see our latest Money Fund Intelligence issue with the MFI Awards article or our latest MFI XLS product with the performance data and rankings behind the awards.)

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