Overview, strategy, and outlook: As of September 30, 2016With the end of the third quarter bringing us just two short weeks shy of the U.S. Securities and Exchange Commission’s money market reform implementation deadline, unsurprisingly, the elephant in the room this past month was the same as the previous month. Also not surprisingly, the prospect of reform implementation drove not only investor behavior but also portfolio manager behavior and affected the money markets in a number of ways.
Overview, strategy, and outlook: As of August 31 2016With the passing of Labor Day—and, of more significance here, the Minnesota State Fair—the summer has officially come to a close. Back to school means back to the grindstone for many people. During the summer, activity in fixed-income markets traditionally drops off as traders, portfolio managers, and shareholders all find time to vacation, and this year has been no exception. But while trading in the money markets has been relatively subdued, activity in money market funds has not.
Overview, strategy, and outlook: As of June 30, 2016The decision of voters in the United Kingdom to exit the European Union (Brexit) will begin a lengthy—currently projected at greater than two years—process of negotiations, with uncertain effects for both the U.K. and the rest of Western Europe. The results of the Brexit vote caught market participants off guard, causing a spike in volatility as economic and political outcomes become quite uncertain. And if there’s one thing markets don’t like, it is uncertainty.
Overview, strategy, and outlook: As of May 31, 2016A couple of items on the agenda for June have the potential for making the month interesting. The first is the Federal Reserve (Fed) meeting on June 15, at which point the question of “will the Fed tighten in June?” will be answered. Futures markets over the past month have gone back and forth on the odds of a June rate hike.
Overview, strategy, and outlook: As of April 30, 2016If you Google the date July 14, 2014, for instances of historical or global significance, your search results likely will turn up nothing of note. But for the mutual fund industry, changes to Rule 2a-7—the rule governing money market mutual funds—were proposed on this date by the U.S. Securities and Exchange Commission (SEC) after 4 years of planning and industry input that would change the course of money market funds and the way they have been managed by investment professionals and used by consumers for over 40 years.
Overview, strategy, and outlook: As of March 31, 2016As we discussed in our January commentary, market volatility in multiple asset classes was quite pronounced as market participants struggled with the prospect of slower global growth, the weakened state of the Chinese economy, and commodity prices dampening inflation expectations.
Overview, strategy, and outlook: As of February 29, 2016Although improving somewhat in recent weeks, credit quality has been under pressure, as evidenced by spreads widening significantly since mid-2014. There has been particular weakness in high-yield spreads, especially in the oil and gas sector, and acute weakness with respect to banks, namely certain European global trading and universal banks.
Overview, strategy, and outlook: As of January 31, 2016Volatile (vol-uh-tl, -til or, esp. British, -tahyl), adjective
1. The U.S. markets in January 2016.
If that’s not a real definition, it should be, because it accurately describes the roller-coaster ride the fixed-income, equity, and commodities markets experienced in January.
Overview, strategy, and outlook: As of December 31, 2015On December 16, 2008, as it began to realize the magnitude of the financial crisis, the Federal Open Market Committee (FOMC), which is the monetary policymaking body of the Federal Reserve (Fed), established a target range for the federal funds rate of 0.00% to 0.25%, effectively lowering interest rates from 1% to 0%. Exactly seven years later, on December 16, 2015, the FOMC finally felt comfortable enough with the strength of the economy to raise interest rates, nudging its target range up to 0.25% to 0.50%.
Overview, strategy, and outlook: As of November 30, 2015After a year of listening to the Federal Reserve (Fed) say that it may be appropriate to begin the process of normalizing monetary policy by raising interest rates in 2015, here we are just a few short days ahead of the last Federal Open Market Committee (FOMC) meeting of the year.
Overview, strategy, and outlook: As of October 31, 2015We regularly monitor the high-grade corporate and financial issuers of securities we purchase, or may purchase in the future, for ongoing evaluations of their creditworthiness. One of the unintended consequences of that effort, the rare good kind, is a bottom-up perspective of the operating environment for those large multinational corporations that make up much of our investing universe.
Overview, strategy, and outlook: As of September 30, 2015On September 16, 2015, the Securities and Exchange Commission (SEC) approved amendments to Rule 2a-7 to remove references to credit ratings issued by Nationally Recognized Statistical Rating Organizations (NRSROs) and replace such references with a new standard of creditworthiness. Money market funds will be required to comply by October 14, 2016—the same date that institutional prime money market funds will convert to a floating net asset value (NAV).
Overview, strategy, and outlook: As of August 31, 2015In our last commentary, we wrote that Greece’s governing party rejected a five-month extension of its bailout package because it was contingent on additional austerity measures and capital controls. Instead, Greece would hold a referendum to allow its people to vote on a new bailout.
Three steps to optimize short-term cashCash portfolios have been viewed as an asset class in their own right for several decades—certainly since 3-month Treasury bill rates reached the more-than-16% stratosphere in the early 1980s. With interest rates now at the other end of the spectrum—near 0% since the 2008 financial crisis—optimizing a cash portfolio remains an important responsibility of corporate treasurers and investment committees.
Laurie R. White Managing Director
and Senior Fund Manager,
Taxable Money Funds
For variable NAV money market funds: 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. Effective October 14, 2016, the fund may impose a fee upon sale of your shares or may temporarily suspend your ability to sell shares if the fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The fund’s sponsor has no legal obligation to provide financial support to the fund, and you should not expect that the sponsor will provide financial support to the fund at any time.
For government money market funds: You could lose money by investing in the fund. Although the fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The fund’s sponsor has no legal obligation to provide financial support to the fund, and you should not expect that the sponsor will provide financial support to the fund at any time.