Link of The Day
Barron's: Too Late to Get Out of MMFs
Barron's tells us it's, "Time to Get Out of Money-Market Funds? Why It May Already Be Too Late." They write, "The 'cash is trash' talk is back. What's different is that money-market rates were near zero when that phrase was last heard. But it's being reprised now that the Federal Reserve has begun bringing down its key policy interest rate from over 5%, the highest in over a decade and a half. With the Fed projecting further rate reductions to around 3.4% by the end of 2025, from the current target range of 4.75% to 5%, and financial-futures market pricing in even steeper cuts, the clarion call of financial advisors is to get out of money-market funds, certificates of deposit, and Treasury bills before it's too late." But the piece explains, "Well, it may be already too late. The bond market has already priced in anticipation of sharp Fed rate reductions -- perhaps too much so. A five-year Treasury note yield of 3.77%, well below the 4.60% from the Fidelity Government Money Market fund, effectively prices in rate cuts reflected in the federal-funds futures market." Barron's adds, "All of which suggests that the advice to flee cash equivalents may be ill-timed, either because bond yields have already fallen ahead of Fed rate cuts or because yields may rebound from here.... The public is also sitting on nearly $6.5 trillion in money-market fund assets, a record, despite anticipating lower rates ahead.... While money-market funds will see their returns reduced by Fed rate cuts, closed-end funds should benefit. Unlike more familiar mutual funds and ETFs, CEFs issue a set number of shares, which trade on exchanges, above or (more often) below their net asset values. Most CEFs also utilize leverage—they borrow, frequently at costs linked to short-term market rates. Fed rate cuts should trim their financing costs while boosting the value of their investment portfolios."
Coindesk on Aptos, Franklin Onchain
Coindesk writes "Franklin Templeton Adds Aptos Blockchain to Support Tokenized Money Market Fund." They explain "Aptos (APT), the Layer 1 blockchain inspired by the discontinued Diem (formerly Libra) blockchain developed by Meta, has become the latest network where investors can trade shares of Franklin Templeton's OnChain U.S. Government Money Market Fund (FOBXX). The fund, which is the second-largest tokenized fund on the market with a $435 million market cap, is already available on Ethereum via Arbitrum, Stellar and Polygon as well as Avalanche." The brief quotes Bashar Lazaar, Head of Grants and Ecosystem at Aptos Foundation, "Franklin Templeton's willingness to innovate in the name of a truly decentralized and accessible financial future is inspiring. To reach that future, we need to connect not just the TradFi and DeFi worlds, but EVM and non-EVM networks as well. Integrating the Benji Investments platform with the Aptos Network is a massive step in the right direction and we look forward to welcoming them to the Aptos ecosystem."
MMFs Heading to Nashville for AFP
Money market mutual fund distributors and cash managers will be travelling to Nashville, Tenn. for AFP 2024, the Association for Financial Professionals' big annual gathering of corporate treasurers, which takes place October 20-22. AFP is the largest gathering of corporate investors in the country, attracting over 5,000 treasury management professionals, as well as a host of large banks and institutional money fund managers. Though the exhibit hall and parties are where the action is (for the cash world anyway), there are a few sessions that involve money funds and cash investing. (See the Session Explorer here.) On Monday, Oct. 21, sessions of interest include: "The Liquidity Lowdown: Powell Mountain Tucked Between Macro Clouds," which features James Griffin of KKR & Co. L.P., Patrick O'Callaghan of Goldman Sachs, Cameron Bowen of Salesforce, and Nicole Smith of Visa; "Elevating Investments Strategy While Prioritizing Safety And Liquidity," which features Brandon Hillstead of Autodesk Inc., Julie Mingus of Cinemark Holdings, LLC, Erica MacMillan of The Wendy's Company and Vanessa McMichael of Wells Fargo Securities; "From Strategy To Execution: Best Practices For Corporate Investments," which features, Bridget Rodnick of BioMarin Pharmaceuticals, Jessica Siu of Dropbox, and Sara Flour of RBC Global Asset Management; and, "Rethinking Treasury's Global And Geopolitical Approach To Counterparty Risk Management," which features Anshul Patni of Bakelite Synthetics, Sebastian Ramos of ICD, and Bill Lundeen of Indivior. On Tuesday, Oct. 22, sessions include: "`Choose Your Own Adventure: Navigating The Resilient Portfolio," which features Kevin Fitzgerald of BlackRock, William Brewer of Bristol Myers Squibb, and Matthew Daniel of FedEx Corporation; and, "Mastering Liquidity In A Fluid Rate Environment <b:>`_" which features Jessie DiMeglio of Allegis Group, Sara Teyema, CTP of Inova Health System, Christy Williamson of Phillips 66, and Cory Paape of Truist. Look for us at Booth #434 and we look forward to seeing you all in Nashville! Finally, thank you once more to those who supported last month's European Money Fund Symposium, which took place Sept. 19-20 in London, England. Mark your calendars for our next live event, our "basic training" Money Fund University, which will take place December 19-20, 2024 at The Renaissance Hotel in Providence, R.I <b:>`_. Crane Data is also preparing the preliminary agenda for our next Bond Fund Symposium, which will be held March 27-28, 2025, at the Hyatt Regency Hotel in Newport Beach, Calif. We'll also soon be making plans for our next "big show," Money Fund Symposium, which will be held June 23-25, 2025, at The Renaissance Boston Seaport in Boston, and for next year's European Money Fund Symposium, which will be held Sept. 25-26 in Dublin, Ireland. Watch for details on these shows in coming weeks and months.
CNBC Pro Explains Money Funds' 'Lag'
CNBC Pro writes, "This is the cost of carrying too much cash, according to Wells Fargo." It tells us, "Americans' love affair with cash may be costing them in the long run, according to Wells Fargo. The bank believes 'the time may have come' to start pulling money out of cash vehicles like money markets, high-yield savings accounts and other short-term instruments. A record $6.42 trillion is sitting in money market funds, as of Wednesday, according to the Investment Company Institute." The article continues, "While it has been a great place to park cash and earn attractive yields, those rates are coming down now that the Federal Reserve has started cutting rates. The seven-day annualized yield on the Crane 100 list of the 100 largest taxable money funds is currently 4.75%. The last time funds yielded less than 5% was July 2023, according to Peter Crane, founder of Crane Data, a firm that tracks money markets. The yield was 5.2% in November, the highest since Crane started tracking yields in 2006, although they were over 6% for a period in 2000-2001 and in the high teens in the 1970s, he said." It adds, "The move in money market fund yields typically lag federal funds rate cuts. It usually takes about a month to fully digest Fed moves, Crane said. That delay is attractive for institutional investors. During Fed rate decreases, direct money market investments, like Treasury bills, will absorb the cuts quicker than money market funds. 'Of course, so much cash is coming in so fast that the rates will drop faster,' Crane noted. 'The new cash must be reinvested at the new lower levels, but T-bill, repo [repurchase agreement] and CD investors are flocking to MMFs while they still hold some of the older, higher yielding stuff.'"
Barron's Says "Cash's Heyday Is Over"
Barron's says, "Cash's Heyday Is Over. Investors Need to Move On." The article comments, "Whether the Federal Reserve delivers another outsize rate cut at its next meeting or not, the time has come for investors to move out of big holdings of cash. Interest rates on money-market funds and other safe vehicles are falling.... Diminishing inflation gives the Fed more leeway to cut aggressively. After the numbers came out, the CME Group's FedWatch tool, which tracks interest-rate futures, showed 53% of odds of a half-point cut in November, up from 49% odds on Thursday. That would come on the heels of the half-point cut the Federal Open Market Committee delivered at its September meeting as it shifted from battling inflation to supporting employment and averting an economic slowdown." It tells us, "Rates have already begun to fall on some savings accounts and certificates of deposit. And yet, investors continue to pile into money-market funds. Total money-market-fund assets increased by $120.80 billion to $6.42 trillion for the week ended Wednesday, according to the Investment Company Institute. That is likely at least in part because yields are still attractive, but they will become less so over time. Money-fund yields have fallen from 5.06% on Sept. 18, when the Fed cut rates, to 4.76% as of Thursday, as measured by the Crane 100 Money Fund Index, Crane Data's average of the 100 largest taxable money funds. They should drift lower still over the next few weeks as the cut works its way through money-market funds, before pausing around 4.60% before the Fed moves again, says Peter G. Crane, president and publisher of Crane Data." The piece quotes, "'It's not too late' for investors to trim their cash exposure, says Gargi Chaudhuri, chief investment and portfolio strategist for the Americas at BlackRock. If investors are too slow to move, however, they'll miss out on today's opportunities in bonds and fixed income."
BlackRock TempCash Filing on Fees
A Prospectus Supplement for BlackRock Liquidity Funds' TempCash tells us, "The Securities and Exchange Commission ('SEC') approved new amendments to the rules governing money market funds in July 2023. Among the changes, the SEC adopted rules that require institutional prime and institutional tax‑exempt money market funds to apply a mandatory liquidity fee to all shares redeemed on a day that such a fund has total net redemptions that exceed 5% of the fund's total assets, unless the amount of the fee is determined to be less than 0.01% of the value of the shares redeemed. The compliance date for these amendments is October 2, 2024. Consequently, effective October 2, 2024, the Fund's Summary Prospectus and Prospectus are amended as follows: The section of the Summary Prospectus and Prospectus entitled 'Key Facts About TempCash -- Principal Risks of Investing in the Fund' and 'Fund Overview -- Key Facts About TempCash -- Principal Risks of Investing in the Fund,' is hereby amended to delete the first paragraph thereof in its entirety and replace it with the following: Risk is inherent in all investing." It continues, "You could lose money by investing in the Fund. Because the share price of the Fund will fluctuate, when you sell your shares they may be worth more or less than what you originally paid for them. The Fund may impose a fee upon the sale of your shares. The Fund generally must impose a fee when net sales of Fund shares exceed certain levels. An investment in the Fund is not a bank account and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund's sponsor is not required to reimburse the Fund for losses, and you should not expect that the sponsor will provide financial support to the Fund at any time, including during periods of market stress." The filing tells us, "The section of the Summary Prospectus and Prospectus entitled 'Key Facts About TempCash -- Principal Risks of Investing in the Fund' and 'Fund Overview -- Key Facts About TempCash -- Principal Risks of Investing in the Fund,' is hereby amended to add the following paragraph in its proper alphabetical order: Mandatory Liquidity Fee Risk -- The Board, or its delegate, must impose a mandatory liquidity fee upon the sale of your shares if the Fund's net redemptions on any business day exceed 5% of the Fund’s net assets, unless the liquidity costs are de minimis. Accordingly, your redemptions may be subject to a liquidity fee when you sell your shares at certain times. The sixth paragraph of the section of the Prospectus entitled 'Details About the Fund -- How The Fund Invests' is hereby deleted in its entirety and replaced with the following: The Trust's Board of Trustees (the 'Board'), or its delegate, will be required to impose a mandatory liquidity fee on redemptions from the Fund when net redemptions in the Fund exceed 5% of the Fund's net assets on any business day, unless the liquidity costs are de minimis. Additionally, the Board, or its delegate, may impose a discretionary liquidity fee on redemptions from the Fund (up to 2%) under certain circumstances. Please see the section below titled 'Account Information -- Mandatory and Discretionary Liquidity Fees' for additional information about mandatory and discretionary liquidity fees."
WSJ: Dash for Cash Not Over Yet
The Wall Street Journal asks, "When Will Money-Market Funds Lose Their Allure?" It states, "Americans' dash for cash isn't over yet. Investors have poured $126 billion into money-market funds since the Federal Reserve's jumbo-size interest-rate cut. That sent assets in such funds to a record $6.76 trillion as of Tuesday, based on Crane Data.... The trillions of dollars sitting in cash has been a fixation for big Wall Street investors and market watchers alike. They have been trying to divine what the sum will mean for the path of stocks, which have historically provided the highest returns in the long run. Skeptics say some Americans have simply shifted their savings to higher-yielding money markets from traditional bank accounts -- and they question the idea that a pile of cash is waiting on the sidelines to enter the market." The piece tells us, "Although interest rates are falling, many investors say they are still high enough that it makes sense to keep a fair amount of money in cash. Yields on money-market funds recently stood at 4.9%, after peaking at 5.2% in December. Stock valuations, meanwhile, are elevated, and investors are fretting that the economy is beginning to lose some of its momentum. Together, those factors make money-market funds and other defensive assets look like prudent investments." The Journal quotes, "Institutional money-fund assets have typically increased by an average of 3.8% during months in which the Fed has trimmed interest rates, according to an analysis by Crane Data going back to 1990. The past five times the Fed began trimming interest rates, assets in such funds peaked about nine months after the first rate cut, according to Bank of America data since 1988.... [Invesco's Laurie] Brignac and other analysts say they don't expect interest in money-market funds to subside until yields fall to about 3%." The article adds, "Income generated from money markets surged to more than $27 billion in August, a record on an inflation-adjusted basis in Strategas Securities data going back to 1990. That has offered a boon to the wallets of many Americans that is now set to subside."
Texas Capital Launches Govt MM ETF
A press release titled, "Texas Capital Launches Government Money Market Exchange Traded Fund" claims, "Texas Capital Bank Private Wealth Advisors, a subsidiary of Texas Capital Bank, and the Texas Capital Funds Trust today announced the launch of the Texas Capital Government Money Market ETF (MMKT).... This innovative and first-of-its-kind ETF will hold highly liquid, short-term U.S. government debt instruments and cash equivalents, providing an exchange-traded investment option for investors focused on managing credit risk and preserving capital. The MMKT ETF is the latest fund launched by Texas Capital ETF & Funds Management.... Complementing Texas Capital's other funds, the MMKT ETF is designed to provide investors with a government money market fund in the form of an ETF, combining the intraday liquidity and flexibility of an ETF with the risk and return characteristics of a money market fund." Daniel Hoverman, Head of Corporate & Investment Banking at Texas Capital, comments, "With the substantial changes in the interest rate environment over the last few years, the Texas Capital Government Money Market ETF offers an exciting alternative for investors. As the first ETF committed to following Rule 2a-7, the provision of the Investment Company Act of 1940 that governs money market funds, Texas Capital believes the combination of the tradability of an ETF and the structure of a money market fund will prove an important investment alternative for investors looking to manage liquidity, volatility and credit risks in their securities portfolio." The release adds, "The Texas Capital Government Money Market ETF seeks to provide as high a level of current interest income as is consistent with maintaining liquidity and stability of principal while following Rule 2a-7.... The Texas Capital Funds Trust is a Delaware statutory trust formed in 2023 and registered as an open-end management investment company under the Investment Company Act of 1940."
Weekly Money Fund Portfolio Holdings
Crane Data published its latest Weekly Money Fund Portfolio Holdings statistics Tuesday, which track a shifting subset of our monthly Portfolio Holdings collection. The most recent cut (with data as of Sept. 20) includes Holdings information from 60 money funds (up 13 from a week ago), or $3.091 trillion (up from $2.591 trillion) of the $6.717 trillion in total money fund assets (or 46.0%) tracked by Crane Data. (Our Weekly MFPH are e-mail only and aren't available on the website. See our latest Monthly Money Fund Portfolio Holdings here and our Sept. 12 News, "September Money Fund Portfolio Holdings: Treasuries Jump; Repo Slides.") Our latest Weekly MFPH Composition summary shows Government assets dominating the holdings list with Treasuries totaling $1.342 trillion (up from $1.113 trillion a week ago), or 43.4%; Repurchase Agreements (Repo) totaling $1.169 trillion (up from $1.011 trillion a week ago), or 37.8%, and Government Agency securities totaling $259.5 billion (up from $229.4 billion), or 8.4%. Commercial Paper (CP) totaled $109.5 billion (up from a week ago at $81.5 billion), or 3.5%. Certificates of Deposit (CDs) totaled $68.6 billion (up from $48.7 billion a week ago), or 2.2%. The Other category accounted for $105.4 billion or 3.4%, while VRDNs accounted for $37.4 billion, or 1.2%. The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $1.342 trillion (43.4% of total holdings), Fixed Income Clearing Corp with $367.0B (11.9%), the Federal Home Loan Bank with $193.0 billion (6.2%), JP Morgan with $97.6B (3.2%), the Federal Reserve Bank of New York with $87.3B (2.8%), BNP Paribas with $68.7B (2.2%), Citi with $66.1B (2.1%), Federal Farm Credit Bank with $55.2B (1.8%), RBC with $54.5B (1.8%) and Goldman Sachs with $51.8B (1.7%). The Ten Largest Funds tracked in our latest Weekly include: JPMorgan US Govt MM ($267.1B), Fidelity Inv MM: Govt Port ($239.3B), JPMorgan 100% US Treas MMkt ($215.4B), Federated Hermes Govt ObI ($169.0B), BlackRock Lq FedFund ($160.5B), State Street Inst US Govt ($146.0B), Morgan Stanley Inst Liq Govt ($145.5B), Fidelity Inv MM: MM Port ($136.4B), BlackRock Lq Treas Tr ($128.6B) and Dreyfus Govt Cash Mgmt ($122.8B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary.)
WisdomTree Connect Launched
A press release titled, "WisdomTree Launches New Platform - WisdomTree Connect" states, "WisdomTree, Inc. (WT) ... announced the launch of WisdomTree Connect, a new platform unlocking tokenized real world assets (RWA) access to a broader range of users. The vision for WisdomTree Connect is to enable customers over time to interact with any WisdomTree-issued token, in any wallet, across supported blockchains. WisdomTree Connect marks the first time WisdomTree digital funds will be available directly to clients with their own wallet infrastructure, including businesses and other institutional users. Features of this platform will enable WisdomTree to, over time, offer access to digital funds to other customer-facing platforms and apps (B2B2C distribution) and retail users with self-hosted wallets." It continues, "Supported by the same proprietary tokenization platform and technology infrastructure as the direct-to-retail app, WisdomTree Prime, WisdomTree Connect is its direct-to-business counterpart and together the two platforms offer complementary digital assets solutions across the entire customer spectrum. The platform solves a key problem for firms seeking integration between traditional and decentralized finance. For example, a crypto-native institution looking to purchase a traditional money market fund for a treasury or cash management solution would typically have to sell its stablecoins, send fiat currency to its bank, and then separately purchase a money market fund. WisdomTree Connect solves for this and allows firms to access yield-generating products, such as the WisdomTree Government Money Market Digital Fund (WTGXX), on chain with blockchain-integrated recordkeeping through an easy-to-use gateway focused on security." They continue, "WisdomTree Connect will initially be available via web portal and API. In the future, WisdomTree is exploring other novel methods of interaction via decentralized application (dApp). Once onboarded, institutional users will be able to purchase or redeem via US dollars, which can also be facilitated via USDC, a stablecoin that is redeemable 1:1 for US dollars. A separate stablecoin conversion service is made available by WisdomTree Digital Movement, Inc., in which stablecoins (i.e., USDC) are converted into fiat currency (i.e., US dollars) to facilitate a purchase of WTGXX's shares via WisdomTree Transfers, Inc., WTGXX's transfer agent, and vice versa on redemption. The inclusion of features that provide fiat-to-crypto on and off ramps further bridges the gap between traditional and decentralized finance. Tokens will be initially minted on Ethereum with additional blockchains anticipated to be added over time. With respect to WTGXX, WisdomTree Transfers, Inc. maintains the official record of share ownership via a blockchain-integrated system with respect to each token on the Ethereum blockchain. Smart contracts associated with WisdomTree's tokenized real world assets were created leveraging Token Factory, part of a suite of digital infrastructure capabilities DTCC Digital Assets offers."
MFs in Retirement Plans Jump to $810B
The Investment Company Institute published, "Retirement Assets Total $40.0 Trillion in Second Quarter 2024," which includes data tables showing that money market funds held in retirement accounts jumped to $810 billion (up from $779 billion) in the latest quarter, accounting for 13% of the total $6.092 trillion in money funds. MMFs represent just 6.3% of the total $12.789 trillion of mutual funds in retirement accounts. This release says, "Total US retirement assets were $40.0 trillion as of June 30, 2024, up 1.3 percent from March. Retirement assets accounted for 32 percent of all household financial assets in the United States at the end of June 2024. Assets in individual retirement accounts (IRAs) totaled $14.5 trillion at the end of the second quarter of 2024, an increase of 1.5 percent from the end of the first quarter of 2024. Defined contribution (DC) plan assets were $11.3 trillion at the end of the second quarter, up 1.9 percent from March 31, 2024. Government defined benefit (DB) plans—including federal, state, and local government plans—held $8.5 trillion in assets as of the end of June 2024, a 0.5 percent increase from the end of March 2024. Private-sector DB plans held $3.2 trillion in assets at the end of the second quarter of 2024, and annuity reserves outside of retirement accounts accounted for another $2.4 trillion." The ICI tables also show money funds accounting for $604 billion, or 10%, of the $6.290 trillion in IRA mutual fund assets and $205 billion, or 3%, of the $6.499 trillion in defined contribution plan holdings. (Money funds in 401k plans totaled $138 billion, or 3% of the $5.159 trillion of mutual funds in 401k's.)
MMF Assets Fall After Record Run
The Investment Company Institute published its latest weekly "Money Market Fund Assets" report Thursday. ICI shows money market mutual fund assets falling after rising for the previous six weeks in a row (down $20.0 billion) to $6.304 trillion. Assets have risen in 17 of the last 22 weeks, increasing by $326.1 billion (or 5.5%) since April 24. MMF assets are up by $417 billion, or 8.8%, year-to-date in 2024 (through 9/18/24), with Institutional MMFs up $142 billion, or 4.6% and Retail MMFs up $275 billion, or 16.4%. Over the past 52 weeks, money funds have risen by $668 billion, or 11.8%, with Retail MMFs up by $442 billion (20.8%) and Inst MMFs rising by $226 billion (6.4%). ICI's weekly release says, "Total money market fund assets decreased by $20.02 billion to $6.30 trillion for the week ended Wednesday, September 18.... Among taxable money market funds, government funds decreased by $18.82 billion and prime funds decreased by $2.42 billion. Tax-exempt money market funds increased by $1.22 billion." ICI's stats show Institutional MMFs falling $25.1 billion and Retail MMFs rising $5.1 billion in the latest week. Total Government MMF assets, including Treasury funds, were $5.129 trillion (81.4% of all money funds), while Total Prime MMFs were $1.046 trillion (16.6%). Tax Exempt MMFs totaled $128.5 billion (2.0%). ICI explains, "Assets of retail money market funds increased by $5.05 billion to $2.57 trillion. Among retail funds, government money market fund assets increased by $3.41 billion to $1.63 trillion, prime money market fund assets increased by $725 million to $819.56 billion, and tax-exempt fund assets increased by $915 million to $117.75 billion." Retail assets account for over a third of total assets, or 40.7%, and Government Retail assets make up 63.5% of all Retail MMFs. They add, "Assets of institutional money market funds decreased by $25.07 billion to $3.74 trillion. Among institutional funds, government money market fund assets decreased by $22.24 billion to $3.50 trillion, prime money market fund assets decreased by $3.14 billion to $226.46 billion, and tax-exempt fund assets increased by $308 million to $10.77 billion." Institutional assets accounted for 59.3% of all MMF assets, with Government Institutional assets making up 93.7% of all institutional MMF totals. According to Crane Data's separate Money Fund Intelligence Daily series, money fund assets have risen by $20.0 billion in September (through 9/18) to $6.635 trillion. They hit a record $6.682 trillion on 9/5 but have fallen since. Assets rose by $109.7 billion in August, $16.6 billion in July, $15.7 billion in June and $91.4 billion in May, but they fell $15.8 billion in April and $68.8 billion in March. They rose $72.1 billion in February, $93.9 billion in January, $32.7 billion in December and $226.4 billion in November. MMF totals fell by $31.9 billion in October and they rose $93.9 billion last September. Note that ICI's asset totals don't include a number of funds tracked by the SEC and Crane Data, so they're over $400 billion lower than Crane's asset series.
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