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ARCHIVE
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
TOPICS: Investor Research
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