Wednesday, November 02, 2016

IM staff finds decrease in money market fund assets, shifts in portfolio composition

By Amy Leisinger, J.D.

The SEC’s Division of Investment Management has issued an update on statistical trends in the money market fund industry. Based on the data submitted in reports by industry participants, the staff found that the total assets held by money market funds has decreased by $35.2 billion through the month of September with slightly increasing yields. Along with notable changes in assets’ weighted average life (WAL) and weighted average maturity (WAM), as well as general portfolio composition, the staff found substantial shifts in total assets held by government and treasury funds and prime funds, with the former increasing by over $280 billion and the latter falling by $292.1 billion.

In the report, the staff notes a continuing decline in the total number of money market funds with an upswing in weighted average seven-day gross yield, particularly for tax-exempt funds. The WAL and WAM of prime fund assets have slightly increased in recent months, while those of tax-exempt funds have fallen. The WAL and WAM of government fund assets remain relatively steady, according to the report. Overall, money market funds continue to see an upward trend in total daily and weekly liquidity, the staff finds.

Prime money market funds hold the bulk of their bank-related investments in U.S. and Canadian securities, while recently decreasing holdings in French, Swedish, and Japanese banks, according to the report. As to general portfolio composition, the staff notes a sharp decline in certificate-of-deposit holdings and minor drops in financial-company and asset-backed commercial paper. The proportion of non-government securities in taxable funds also continues to fall as prime funds trend to longer-maturity securities, the report states.

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