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Warren Howe, National Sales Director of Stable Value Markets at MetLife was recently featured on AssetTV in a video entitled, "Advantages of Stable Value." He talks about "the advantages of offering stable value as a capital preservation option in a defined contribution (DC) plan." Howe explains, "Stable Value has a lot of advantages, and it's always a good idea to have a Stable Value option in your defined contribution plan. Especially when you think about Plan Sponsors, you need to have a Capital Preservation option in the lineup. Typically, it's either going to be Stable Value, a short-term bond fund or a money market fund. When you look at the three of those, Stable Value is clearly the superior alternative in that case.... When we looked at the volatility in the market late last year, that's kind of the key thing when you think about a Stable Value fund. What does it provide? It provides a safe haven, capital preservation and a reasonable return for participants. It gives people that safe haven for investing when they see the equity markets experiencing 700 point up-and-down at any give time period." Discussing the performance history of Stable Value, Howe comments, "I always find it interesting to look at participants and how they act.... When you see a long bull market in equities people kind of forget about risk. They think that it's always going to continue to go up.... [People] chase those markets and people forget about risk a little. But ... when you bring that volatility back and people understand that there actually is risk, that's when you see those trends reverse and the dollars start to flow out of the equity markets and back into Stable Value." He adds, "There's always been the perception that Stable Value works great in a declining interest rate environment but could experience a little bit of difficulty in a rising interest rate.... I would say that's not necessarily the case. When you look at Stable Value ... it's designed specifically for the defined contribution market and part of that is it's designed to perform in all interest rate scenarios. Whether that be a declining interest rate scenario, a prolonged flat interest rate scenario or a rising rate scenario, it's going to lag the market. So on the way down, Stable Value yields will lag the market based on the crediting rate reset formula in place to provide that volatility smoothing, and on the way up it will lag a bit as well but it will track the general direction of interest rates over time.... It's a little bit of a lag based on crediting rate formula and how it applies that to smooth out that volatility. So that you don't have those periods where you have a gain and then a loss and a negative return, it's smoothing that out for you so the ride is a little bit easier."

Crane Data's latest monthly Money Fund Portfolio Holdings statistics will be published Tuesday, Dec. 10, and we'll be writing our normal monthly update on the Nov. 30 data for Wednesday's News. But we also generate a separate and broader Portfolio Holdings data set based on the SEC's Form N-MFP filings, and we posted these to the website Monday. (We continue to merge the two series, and the N-MFP version is now available via Holding file listings to Money Fund Wisdom subscribers.) Our new N-MFP summary, with data as of Nov. 30, 2019, includes holdings information from 1,080 money funds, representing assets of $3.992 trillion (up from $3.968 trillion last month). Our latest Form N-MFP Summary for All Funds (taxable and tax-exempt) shows Repurchase Agreement (Repo) holdings in money market funds totaling $1,166 billion (down from $1,204 billion), or 29.2% of all assets. Treasury holdings total $1,138 billion (up from $1,081 billion), or 28.5%, and Government Agency securities totaled $785.4 billion (down from $804.0 billion), or 19.7%. Holdings of Treasuries, Government agencies and Repo (the vast majority of which is backed by Treasuries and agencies) combined total $3.089 trillion, or 77.4% of all holdings. Commercial paper (CP) totals $362.1 billion (up from $356.0 billion), or 9.1%, and Certificates of Deposit (CDs) total $280.3 billion (up from $267.1 billion), or 7.0%. The Other category (primarily Time Deposits) totals $158.1 billion (up from $154.3 billion), or 4.0%, and VRDNs account for $101.6 billion (up from $100.8 billion last month), or 2.5%. Broken out into the SEC's more detailed categories, the CP totals were comprised of: $236.5 billion, or 5.9%, in Financial Company Commercial Paper; $62.8 billion or 1.6%, in Asset Backed Commercial Paper; and, $62.9 billion, or 1.6%, in Non-Financial Company Commercial Paper. The Repo totals were made up of: U.S. Treasury Repo ($705.5B, or 17.7%), U.S. Govt Agency Repo ($406.5B, or 10.2%) and Other Repo ($54.1B, or 1.4%). The N-MFP Holdings summary for the 213 Prime Money Market Funds shows: CP holdings of $356.4 billion (up from $350.4 billion), or 31.8%; CD holdings of $280.3 billion (up from $267.1 billion), or 25.0%; Repo holdings of $186.4 billion (down from $196.6 billion), or 16.7%; Other (primarily Time Deposits) holdings of $108.2 billion (up from $105.9 billion), or 9.7%; Treasury holdings of $118.9 billion (up from $107.1 billion), or 10.6%; Government Agency holdings of $63.7 billion (down from $71.4 billion), or 5.7%; and VRDN holdings of $5.6 billion (unchanged from last month), or 0.5%. The SEC's more detailed categories show CP in Prime MMFs made up of: $236.5 billion (up from $236.4 billion), or 21.1% in Financial Company Commercial Paper; $62.8 billion (up from $61.4 billion) or, 5.6% in Asset Backed Commercial Paper; and $57.1 billion (up from $52.7 billion), or 5.1% in Non-Financial Company Commercial Paper. The Repo totals include: U.S. Treasury Repo ($74.0 billion, or 6.6%), U.S. Govt Agency Repo ($58.3 billion, or 5.2%), and Other Repo ($54.1 billion, or 4.8%).

On Thursday, fund news source ignites published the article "UBS Eliminates Money Funds for Most Sweeps," which says, "Investors at UBS can no longer use the wirehouse's money market funds as their sweep option, according to a recent regulatory disclosure. UBS discontinued its money market funds as a sweep option effective Nov. 18, according to regulatory disclosures filed this week. Fund shares were sold last month, and their proceeds were deposited at UBS Bank, the firm's bank affiliate, one brochure states. Two money market funds used by the sweep program, the UBS RMA Government Money Market Fund and the UBS Liquid Assets Government Fund, both saw significant outflows the day the change took effect. The RMA Fund bled $4.3 billion that day, while the Liquid Assets Fund lost $1.3 billion, according to daily flow data posted on the UBS website." The piece explains, "With UBS's switch, now nearly every brokerage defaults to a bank deposit option for its sweep program, says Peter Crane, CEO of Crane Data. Edward Jones removed its money market fund as a sweep option for new brokerage accounts in February, following similar moves by Charles Schwab, Merrill Lynch and Morgan Stanley." The ignites article quotes our Peter Crane, "Brokerages, for a couple years now, have been focused on getting rid of [legacy money fund assets] and moving as much as they can into bank deposits, which are much more profitable for them.... It's pretty clear, the brokerages keep shoveling money into the banks, but investors keep moving it back into money market funds."

Money fund assets inched up in the latest week, after skyrocketing the prior week and plunging the week before that. The increase represents the 29th gain out of the past 33 weeks. ICI's latest "Money Market Fund Assets" report shows that MMF totals have increased by $532 billion, or 17.4%, year-to-date in 2019. Over the past 52 weeks, ICI's money fund asset series has increased by $670 billion, or 23.0%, with Retail MMFs rising by $233 billion (20.9%) and Inst MMFs rising by $437 billion (24.4%). ICI writes, "Total money market fund assets increased by $2.37 billion to $3.58 trillion for the eight-day period ended Wednesday, December 4, the Investment Company Institute reported.... Among taxable money market funds, government funds increased by $1.31 billion and prime funds increased by $817 million. Tax-exempt money market funds increased by $242 million." ICI's weekly series shows Institutional MMFs falling $1.5 billion and Retail MMFs increasing $3.9 billion. Total Government MMF assets, including Treasury funds, were $2.664 trillion (74.4% of all money funds), while Total Prime MMFs were $776.7 billion (21.7%). Tax Exempt MMFs totaled $138.8 billion, 3.9%. They explain, "Assets of retail money market funds increased by $3.89 billion to $1.35 trillion. Among retail funds, government money market fund assets increased by $1.87 billion to $762.94 billion, prime money market fund assets increased by $1.56 billion to $460.52 billion, and tax-exempt fund assets increased by $462 million to $125.94 billion." Retail assets account for over a third of total assets, or 37.7%, and Government Retail assets make up 56.6% of all Retail MMFs. The release adds, "Assets of institutional money market funds decreased by $1.52 billion to $2.23 trillion. Among institutional funds, government money market fund assets decreased by $564 million to $1.90 trillion, prime money market fund assets decreased by $739 million to $316.14 billion, and tax-exempt fund assets decreased by $219 million to $12.81 billion." Institutional assets accounted for 62.3% of all MMF assets, with Government Institutional assets making up 85.2% of all Institutional MMF totals. Crane Data's separate Money Fund Intelligence Daily series shows overall money fund assets up $8.3 billion month-to-date (through 12/4) to $3.919 trillion. (We're projecting that this series will break the $4.0 trillion level by the end of this year!) Prime MMF assets are down $119M MTD, while Government assets are up $8.2B.

A Prospectus Supplement filing for Wells Fargo Government Money Market Fund and Wells Fargo Treasury Plus Money Market Fund tells us, "At a meeting held on November 21-22, 2019, the Board of Trustees of Wells Fargo Funds Trust unanimously approved the elimination of the Sweep Class shares of the Funds. Effective at the close of business on November 22, 2019, the Sweep Class shares of the Funds are closed to investment. The elimination of the Sweep Class shares is expected to occur on or about November 29, 2019, upon the redemption in full of all assets in the Sweep Classes. After this date, all references to Sweep Class shares in the Funds' prospectus and SAI will be removed." Wells Fargo continues to offer a Sweep class on its 100% Treasury Money Market Funds (WFA10). According to our Brokerage Sweep Intelligence publication, Wells Fargo Advisors is paying 0.05% on brokerage sweep cash balances under $1 million, versus a yield of 0.92% for the Wells Fargo 100% US Treasury Sweep money market fund. (The latter is available only to select accounts.)

As a reminder to readers, Crane's Money Fund University will be held January 23-24 at the Renaissance Providence Downtown Hotel. The 10th annual Money Fund University will cover the history of money funds, interest rates, regulations (Rule 2a-7), ratings, rankings, money market instruments such as commercial paper, CDs and repo, and portfolio construction and credit analysis. We also include segments on offshore money funds and ultra-short bond funds. Money Fund University's comprehensive program is good for anyone -- beginners and experienced professionals looking for a refresher -- alike. The agenda is available online and we are still accepting registrations. (We're also willing to "comp" tickets for large Crane Data or sponsor clients, so let us know if you're interested.) Crane Data is also making plans for its fourth annual ultra-short bond fund event, Bond Fund Symposium, which will take place March 23-24, 2020 at the Hyatt Regency in Boston. Crane's Bond Fund Symposium offers a concentrated and affordable educational experience, as well as an excellent networking venue, for bond fund and fixed-income professionals. Registrations are now being accepted ($750) and sponsorship opportunities are available. Mark your calendars for our big show, Crane's Money Fund Symposium, which will be held June 24-26, 2020, at the Hyatt Regency Minneapolis. We're now taking registrations and the preliminary agenda will soon be available at: www.moneyfundsymposium.com. Finally, we've also set the dates and location for our next European Money Fund Symposium. It is scheduled for Sept. 17-18, 2020, in Paris, France. Let us know if you'd like more details on any of our events, and we hope to see you in Providence, Boston, Minneapolis or Paris in 2020!

The San Francisco Chronicle writes "Robinhood drops plan to start a bank; brokerage clients still waiting for interest on cash." The article says, "Robinhood won't be opening a bank after all. The Menlo Park brokerage firm, which made a splash offering free online stock trading popular with Millennials, said it is withdrawing its application to start a federally insured bank. The venture-backed company got in hot water almost a year ago when it advertised 'checking and savings accounts' yielding 3%, on its website." The piece explains, "The accounts were not bank accounts and were not insured by the Federal Deposit Insurance Corp.... But the [SIPC] CEO ... Steve Harbeck, said they would not be protected because his company only protects cash used to buy securities.... Robinhood quickly took down references to checking and savings accounts, saying in a blog post that its announcement 'may have caused some confusion.' Instead, it said it would offer 'cash management accounts.' In April, the company said it had applied for a bank charter with the Office of the Comptroller of the Currency." The Chronicle adds, "On Oct. 8, it announced it will begin offering a cash management program within its brokerage account and started a wait-list for the feature. It said clients' 'uninvested cash' would be moved to 'program banks that pay you 2.05% APY as of October 8, 2019.' In an email, Robinhood said the program banks are Goldman Sachs Bank, HSBC, Wells Fargo, Citibank, Bank of Baroda and U.S. Bank. 'Your uninvested cash at these program banks is eligible for FDIC insurance up to a total of $1.25 million -- or up to $250,000 per bank, subject to FDIC rules,' Robinhood said in an announcement." Finally, they write, "This feature is still not available and Robinhood would not say when it will be. Uninvested cash in client accounts now earns zero. The promised rate on its cash management account is down to 1.8% as rates in general have fallen in response to recent Federal Reserve rate cuts. Robinhood said in a statement that it is 'voluntarily' withdrawing its application for a national bank charter but wouldn't say why. It said it will 'focus on increasing participation in the financial system and challenging the industry to better serve everyone.' A spokesman said the move was unrelated to the commission cuts."

A Prospectus Supplement for Putnam Money Market Fund tells us, "All Putnam retail open-end funds, except for Putnam Diversified Income Trust, Putnam Dynamic Asset Allocation Equity Fund, George Putnam Balanced Fund, Putnam Global Income Trust, Putnam High Yield Fund, Putnam Income Fund, Putnam Mortgage Opportunities Fund, Putnam Mortgage Securities Fund and Putnam Short Term Investment Fund. Effective November 25, 2019 (the 'Effective Date'), class M shares of each fund will no longer be available for purchase. Class M shares of each fund acquired prior to the Effective Date will convert automatically to class A shares on the Effective Date."

BNP Paribas Asset Management e-mailed (offshore money fund) clients recently, saying, "We are pleased to let you know we, as an Asset Manager, have committed to ensuring all our investment strategies will integrate relevant ESG criteria by 2020. This pledge also applies to our Money Market funds, which will hold a strong ESG component within the investment process." The communication included an attachment with a sponsored article in PI Magazine. Gregory Chereau asks, "Can money market funds really be sustainable?" He tell us, "BNP Paribas Asset Management (BNPP AM) has been an early leader in sustainable investment.... At BNPP AM, we have a wide range of money market and short-term investment strategies, and our investment process seeks to favour issuers with better than average ESG ratings. Our objective is to always respect a minimum ESG score, according to our internal methodology, within each of our money market funds. Our ESG research team currently provides a score for 4,000 issuers. All companies included in our money market funds are covered. This team is independent from investment teams and its findings are based on a variety of sources, not limited to ESG data suppliers and includes regular research carried out with issuers directly." It continues, "In practice, we aim to achieve a minimum average ESG score for each of our money market funds. Companies with a low score will have to be underweighted compared to the current exposures (or even arbitrated versus a better-rated name). In addition, as part of our wider commitment to help improve the way companies operate, we may engage with lower-rated companies. Our objective is to raise their awareness of any perceived weaknesses identified through our ESG analysis, and to help them improve their behaviour, and thus their score. In the case of insufficient improvement, we may decide to exclude the company from our buy-list." BNP adds, "In terms of performance, it is difficult to assess the direct impact that our ESG integration approach is having on our fund returns. We do believe that companies with solid ESG foundations should perform positively. Conversely, we believe that companies facing environmental, social or governance difficulties are more likely to suffer operating issues, potentially affecting their credit profile, and thus the pricing of their fixed income instruments. What we are certain of is that our clients are demanding more sustainable investment solutions and that we as a firm are committed to providing this to them. We believe our expertise will give us a long-term competitive advantage in sustainable short-term investing."

Earlier this week, Fitch Ratings published a "Local Government Investment Pools: 2Q19" report. They tell us, "Both Fitch Ratings' Local Government Investment Pool (LGIP) indices saw modest increases in assets during 2Q19. Inflows during the period were likely due to additional cash receipts from seasonal tax collections. On a year-over-year basis, assets in the Fitch Liquidity LGIP Index and Fitch Short Term LGIP Index increased 16% and 9%, respectively, to $172 billion and $78 billion." Fitch also writes, "Yields in the short-term markets fell across the curve during the second quarter due to global growth concerns, U.S./China trade war uncertainty, and an expected interest rate cut by the Federal Reserve. As a result, LGIP net yields fell slightly during the period, by 5 to 6 basis points for both Fitch indices, a reversal from several years of a steady upward trend." The brief shows the Fitch Liquidity LGIP Index's Average Net Yield at 1.96% as of June 2019 compared to our Crane Taxable Institutional Money Fund Average's 2.12%. They show the Fitch Short-Term LGIP Index's Average Net Yield at 2.34% as of June 2019 compared to a Blended Crane Short-Term Bond Fund Index's 2.60% Yield. Fitch adds, "As a result of expectations for low interest rates, LGIPs in Fitch's Short-Term Index slightly extended duration to sustain yields. Duration stood at 1.02 years at 2Q19, up from 0.97 years at 1Q19. The weighted average maturity (WAM) for the Fitch Liquidity LGIP Index remained steady at 42 days."

Rates on brokerage sweep accounts, bank accounts and money market funds continue inching lower in the fourth week following the Federal Reserve's most recent rate cut, though the declines are just about played out. Our latest Brokerage Sweep Intelligence publication, with data as of Friday, Nov. 22, shows only Ameriprise and Morgan Stanley cutting rates over the past week. Schwab, RW Baird and UBS all cut rates the week before and Raymond James and Wells Fargo cut rates three weeks ago. Ameriprise dropped rates by 1 basis point; its 100K balance tier sits at 0.09%. Morgan Stanley also cut rates; its 100K balance now pays 0.03%. `Our Crane Brokerage Sweep Index remained unchanged at 0.15% in the week ended November 22 (for balances of $100K); down from 0.17% two weeks ago. E*Trade and TD Ameritrade currently have the lowest rate for balances at this level (0.01%). Meanwhile, Fidelity continues to have the highest sweep rate (0.82%). (Fidelity also has a higher-yielding money fund option for new accounts.) Morgan Stanley <b:> is paying 0.03%, UBS and Merrill are both paying 0.05%. Schwab is paying 0.06%, Wells Fargo is paying 0.07% and Raymond James is paying 0.08%. Ameriprise is paying 0.09%, and RW Baird is paying 0.33% for balances of $100K. Money market fund yields also inched lower over the past week. Our Money Fund Intelligence Daily shows the Crane Money Fund Average 7-day yield falling by 0.01% to 1.39% in the week through 11/22. Our Crane 100 MF Index dropped 0.02% to 1.51% over the past week. In related sweep news, see The Wall Street Journal's, "Charles Schwab to Buy TD Ameritrade for $26 Billion." In recent weeks, both Schwab and TD Ameritrade have cut brokerage sweep rates. Schwab remains ahead of TD Ameritrade with its 100K tier rate sitting at 0.06% vs. TD Ameritrade's 0.01%.

The website Lexology posted a piece from law firm Eversheds Sutherland, entitled, "Regulators have bank deposit sweep programs in their sights." They tell us, "The US Securities and Exchange Commission (SEC) is at the initial stages of another initiative involving concerns about adviser disclosures and conflicts related to bank deposit sweep programs (BDSPs). A recent speech by Stephanie Avakian, Co-Director of the Division of Enforcement, indicates where the SEC is heading." They quote what we also quoted in our Nov. 12 Link of the Day, "SEC Warns on Cash Sweeps," where Avakian says, "We are also looking at cash sweep arrangements. Cash in advisory accounts is often automatically swept into a money market mutual fund or a bank deposit sweep program. A dually-registered adviser or an adviser with an affiliated broker-dealer may have a financial interest, a conflict, in recommending one cash investment over another. For example, some money market mutual funds carry 12b-1 fees or make revenue sharing payments that may be shared with a dually-registered adviser or an adviser's affiliated broker-dealer, while other money market funds do not carry those fees. Advisers recommending or choosing between different money market funds must make full and fair disclosure of these types of conflicts to their clients. The Commission has brought enforcement actions in the past where advisers have failed to make appropriate disclosure." The article adds, "In various exams and based on Ms. Avakian's speech, the SEC examination and enforcement staff has expressed concerns about BDSPs, including the following: value of FDIC insurance, requirement that clients must monitor FDIC accounts, rates of return, incomplete FDIC coverage, liquidity concerns [and] inappropriate charging of advisory fees."

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