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Recent Data Underscores How Money Market Funds Have Responded to Regulatory Changes

By Sean Collins and Michael Breuer

May 19, 2011

One item discussed at ICI’s 2011 Money Market Funds Summit this week was how recent reforms adopted by the Securities and Exchange Commission (SEC) have made money market funds more resilient and ready to face future periods of severe market stress. The charts below, which we discussed at the summit, illustrate the idea.

The first chart shows the concentration of prime money market funds assets by holdings of repurchase agreements, Treasuries, and other agency securities, with levels in February 2011 compared against August 2008. The side-by-side comparison indicates the real changes since August 2008 in light of the new regulations. Note the rightward shift from the red bars (2008) to the yellow bars (2011) as prime money market funds have increased their portfolio concentration in securities that are very liquid.

Concentration of Prime Money Market Funds’ Assets by Holdings of Repo, Treasury, and Agency Securities

Source: Investment Company Institute

The next chart suggests that funds are not just meeting the new requirements for liquidity—they’re exceeding them by a substantial margin. We created this chart using data from the new Form N-MFP that money market funds have been required to file with the SEC since November 2010. This shows data for December 2010; we do not have the data to compare back to 2008 because at the time funds weren’t required to report this data.

As an example, prime money market funds have 26 percent of their assets in daily liquid assets and 47 percent in weekly liquid assets. Government/agency funds and Treasury funds, as one might expect, have an even higher percentage of their assets in liquid securities.

Liquid Assets for Taxable Money Market Funds

Percentage of total assets, December 2010

1Daily liquid assets include securities with a remaining maturity of one business day, Treasury securities of any maturity, and securities with a demand feature that is exercisable within one business day. Securities with a demand feature are excluded if it could not be determined when the demand feature is exercisable and the security does not meet any of the other criteria for daily liquid assets.

2Weekly liquid assets include securities with a remaining maturity of five business days, Treasury securities of any maturity, government agency securities with a remaining maturity of 60 days or less (regardless of whether those securities were initially issued at a discount), and securities with a demand feature that is exercisable within five business days. Securities with a demand feature are excluded if it could not be determined when the demand feature is exercisable and the security does not meet any of the other criteria for weekly liquid assets.

Note: This chart was updated on June 8, 2011, to reflect revisions in data tabulation.

Sources: Investment Company Institute tabulation of Form N-MFP data collected from SEC website, Bloomberg

  • Learn more about money market funds.
  • Read the summit’s keynote address from F. William McNabb III, Chairman and CEO of The Vanguard Group, Inc.

Sean Collins is ICI’s Senior Director of Industry and Financial Analysis and Michael Breuer is an ICI Assistant Economist.

TOPICS: Policy Research

Data Show Americans’ Commitment to Retirement Saving

By Sarah A. Holden

May 17, 2011

Despite the financial ups and downs of recent years, 401(k) participants have proven themselves both steady and committed to retirement saving.

ICI has a window into this commitment thanks to our surveys, conducted since 2008, of a cross section of recordkeeping firms representing a broad range of defined contribution (DC) plans and covering more than 23 million employer-based DC retirement plan participant accounts as of December 2010.

Read more…

TOPICS: Retirement Research

Money Market Funds: Four Key Points

By Mike McNamee

May 10, 2011

Later today, the Securities and Exchange Commission will hold a roundtable on money market funds and systemic risk. ICI Chief Economist Brian Reid will be one of the panelists at the roundtable, which should be an interesting discussion. Ahead of that discussion, here are four key points worth keeping in mind.

Read more…

TOPICS: Fund RegulationMoney Market Funds

Wall Street Journal Editorial Ignores “Economic Disruption” of Floating the Value of Money Market Funds

By Ianthe Zabel

May 9, 2011

The Wall Street Journal’s lead editorial today used a flawed analysis to mischaracterize money market funds and the recent efforts to make them more resilient in extreme market conditions. ICI President and CEO Paul Schott Stevens has submitted a letter to the editor in print and online to respond. 

Read more…

TOPICS: Fund RegulationMoney Market Funds

Experience Talks: Insight from Three Top Investment Leaders

By Inga Vitols

May 6, 2011

In a panel discussion moderated by John Rogers, Chairman and CEO of Ariel Investments, panelists Eddie Brown, President and CEO of Brown Capital Management, G. Stanley Cates, President of Longleaf Partners Funds, and Jack Laporte, Vice President of T. Rowe Price Associates, candidly discussed their own experiences and insight in money management and investing.

Read more…

TOPICS: Events

SEC Chairman: SEC Examining Role of High Frequency Traders

By Rachel McTague

May 6, 2011

On the first anniversary of the 2010 “flash crash,” Securities and Exchange Commission (SEC) Chairman Mary Schapiro highlighted the role of high frequency traders that day and said there is cause for the SEC to examine their role.

Read more…

TOPICS: EventsFinancial Markets

Coping in the Expanding World of Compliance

By Karrie McMillan

May 5, 2011

Compliance officers play a special role in the fund industry. In a nutshell, their job is to make sure the rules are followed—and thus to help maintain the industry’s fiduciary culture and the investor trust that it fosters. 

Read more…

TOPICS: EventsFund Regulation

Fostering the Next Generation of Investors

By Edward C. Bernard

May 4, 2011

In the four years since the financial crisis started, investors have been challenged to progress toward their financial goals even as markets have twisted and turned. For the most part, even in the face of considerable fear and uncertainty, investors stayed the course.

Read more…

TOPICS: Events

The Way Forward with Fund Investors

By Greg Johnson

May 4, 2011

Each year, ICI’s General Membership Meeting offers the fund industry a chance to come together to reflect on the past year and to look ahead to new opportunities. For the past eight months, it’s been my honor and pleasure to chair the GMM Planning Committee, working with a dedicated and talented group of individuals to organize this meeting.

Read more…

TOPICS: Events

Geithner: FSOC Will Bring Clarity to the Designation of 'SIFIs'

By Rachel McTague

May 4, 2011

In the four years since the financial crisis started, investors have been challenged to progress toward their financial goals even as markets have twisted and turned. For the most part, even in the face of considerable fear and uncertainty, investors stayed the course.

Read more…

TOPICS: Events

Fact Book Illustrates the Dynamic, Evolving Fund Industry

By Brian Reid

May 3, 2011

Each year, the annual update of the Investment Company Fact Book gives ICI an opportunity to present a broad overview of the investment landscape by recording, in a single volume, insights gleaned from both our members and our own research. Sometimes the developments are slow, and the picture barely changes from one year to the next. In other years, there are large shifts that permanently affect the investment management business.

Read more…

TOPICS: Investor Research

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