Faster Fund Data

At Crane Data, we’re trying to speed the reporting of daily yields and performance information, so we’d be thrilled to assist you in pushing your company for faster processing, approval and distribution of information. Is your month-end, quarter-end and year-end information delayed? Would you like information the next day? Join us in pushing for more speed!

Is ABCP Making CP Safer, or Not? (as CP Hits $2 Trillion)

With the total amount of commercial paper poised to hit $2 trillion (probably today 1/17, but we won’ t know until the Fed’s numbers at: http://www.federalreserve.gov/releases/cp/outstandings.htm come out), is commercial paper safer than it was? Or more dangerous? The growth in asset-backed CP, or ABCP, has clearly been the driver of the surge. Some say the diversified collateral and oversubscribed structures make for less risk, but I can’ t help thinking that some things must get lost in all the complexity….

The Wall Street Journal’s “How Wall Street ‘Sweeps’ The Cash”

The WSJ ran a new article on “bankerage” or brokerage sweeps at: http://online.wsj.com/article/SB116847447287273191.html?mod=mkts_main_todays_mkts_tac. It discussed the supposedly huge profits that brokerages are making by switching to bank or free credit balance accounts from money market funds.

The questions I want to explore (and comment on) are: Do investors care if they earn 2% in a sweep? (They didn’t but they’re starting to.) Are brokerages really making “profits of 3 to 4 times the fees on money funds”? (No, it’s about 1/2 that … and dropping fast.) What are the assets saying? (Hard to tell, but it looks like programs are seeing outflows.) And, what do you think? (I don’t blame the brokers, I blame the investors for not caring — caveat emptor!)

The January issue of Money Fund Intelligence shows our Crane Brokerage Sweep Index at 2.66% vs. our Crane 100 Money Fund Index of 4.98%, a spread of 232 basis point. (So brokerages can make 3-4 times, but only if they take it from investors.) 

There are signs, though, that these bank sweep rates will rise in the near future, in response to pressure from investors, regulators and bad publicity. While this will be bad news for brokerage and bank profits, it will be good news for money funds and for investors.

Money Fund Advertising: Where’s the Yield?

Vanguard began a money fund advertising campaign with a 2/3 page spread in The Wall Street Journal saying “Keep more of what’s yours: How low-cost money market funds can help you keep more of your cash”. The ad provides a link to a new site, complete with a podcast, at http://www.vanguard.com/moneymarket.

While decent, alas, this latest campaign, like Fidelity’s banner ad campaign, beg the question: “Where’s the yield?” Fund companies seem afraid to show their 5.11%, 5.05%, or 4.98% proudly. Bank savings have no such qualms, showing their rates front and center.

Unlike other fund advertising, money funds have but one mandate: show the current yield (if you show anything). This makes the lack of 5%’s all the more frustrating….

Let us know if you see any money fund ads and what you think!