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Prime Institutional money-market funds, consistently less likely than other Taxable MMFs to grant fee waivers, are now the most likely funds to offer some breaks to investors when it comes to charged expenses, according to iMoneyNet’s latest Money Fund Expense Report.

 

Its second-quarter survey showed that the floating-NAV funds, whose numbers have been seriously reduced to 119 reporting funds since new MMF regulations applied to them took effect last October, reported 92.4 percent participation in waiving some or all fund expenses on June 30, well above the Taxable funds’ average of 75.4 percent of funds offering fee waivers. Three years ago, Prime Institutional funds, at 93.5 percent, was the sole Taxable category not reporting 100.0 percent fee-waiver usage. One year ago, Prime Institutionals averaged 86.6 percent of funds employing waivers, compared to the 90.8 percent average posted by all Taxable funds.     

 

Government Institutional fund fee-waiver use during the second quarter was 79.4 percent compared to 81.6 percent the previous quarter and to 90.3 percent of such funds waiving fees one year ago.

 

Fee-waiver offers from Government Retail funds declined to 64.4 percent from 79.1 percent last quarter and from 97.2 percent during second-quarter 2016. Prime Retail fund fee-waiver use slipped to 68.8 percent from 76.1 percent in the prior quarter and from 88.1 percent one year ago.

 

Some 76.4 percent of all money-market funds offered some fee forgiveness to investors in June, down from 81.6 percent as of March 31 and from 91.4 percent during the year-ago quarter. The tax-free sector reported a drop to 79.7 percent of funds waiving some or all fees, down from 84.1 percent doing so in the prior quarter and from 93.3 percent in June 2016.

 

iMoneyNet data recorded boosts in expenses charged to Government Institutional fund investors as those funds continued to amass assets, while Prime Institutional funds began registering the lowest expense charges on an asset-weighted basis for all Taxable funds beginning in March 2016 as they struggled to hold onto investor dollars against the tide of investor switches to Government Institutional fund alternatives which were allowed to continue with amortized-cost values for portfolio securities and operate with stable NAVs. 

 

On an asset-weighted basis during this year’s April-to-June quarter, Prime Institutional funds charged 15 basis points compared to the all All-Taxable average of 27 basis points and the 20 basis points charged by Government Institutional funds.

 

The Prime funds experienced an 86.7 percent or $802.70 billion decline in total assets through 2016 as Government Institutional funds added $739.57 billion, a rise of 84.2 percent, to finish 2016 at $1.618 trillion. Through July 25, Prime Institutional funds have recouped $45.48 billion for gains of 36.5 percent year-to-date as Government Institutional funds are off by 5.1 percent for a decline of $81.06 billion.

 

s.h. Rising Rates, Higher Charges

 

Four rate hikes by the Federal Reserve in short-term interest rates since December 2015 continue to be reflected in higher charges being assessed to fund investors.   

 

The unweighted charged-expense ratio for all MMFs as of June 30 was 0.46 percent compared to 0.43 percent in March and to 0.34 percent one year ago. The unweighted charged-expense ratio for all Taxable funds was 0.45 percent, up from 0.42 percent during the prior quarter and from 0.33 percent during second-quarter 2016; for all Tax-Free funds it was 0.52 percent, up from 0.49 percent in the first quarter and from 0.36 percent in the same quarter last year.

 

Government and Prime Institutional funds reported unweighted expense ratios of 0.35 percent during this year’s second quarter, while each category had reported below-average levels of 0.28 percent and 0.30 percent, respectively, in the year-ago period.

 

The second-quarter average charged-expense ratio for all funds on an asset-weighted basis was 0.28 percent compared to 0.27 percent during the first quarter and to 0.25 percent during second-quarter 2016.

 

s.h. Top Gross Returns Cited 

 

Goldman Sachs FS MMF/Inst and Goldman Sachs FS Prime Oblig/Inst led a field of 27 Prime Institutional funds with identical gross quarterly returns of 1.25 percent. JPMorgan Prime MMF/Capital followed with a gross return of 1.24 percent. Ivy VIP Govt Money Market (restricted) and PIMCO Govt MMF/Cl M tied for best-in-class among 108 total funds in the Government Institutional category with gross quarterly returns of 0.93 percent. Four funds followed at 0.89 percent.

 

The number of funds reporting to MFER as of June 30 was 1,079, down from 1,090 during the previous quarter and from 1,155 in last year’s second quarter. Total quarterly assets settled at $2.611 trillion, lower by $37.99 billion or 1.4 percent compared to the year’s initial quarter.

 




Unweighted Expense Ratios (%)

% of Funds Waiving




2nd Qtr

1st Qtr

2nd Qtr

2nd Qtr

2nd Qtr




2016

2017

2017

2016

2017

TAXABLE MMFs








Government Retail

0.35

0.52

0.60

97.2

64.4


Prime Retail

0.48

0.55

0.55

88.1

68.8


Government Institutional

0.28

0.33

0.35

90.3

79.4


Prime Institutional

0.30

0.34

0.35

86.6

92.4


Taxable (All)

0.33

0.42

0.45

90.8

75.4









TAX-FREE MMFs








Natl Retail

0.39

0.46

0.48

97.1

88.3


Natl Inst


0.30

0.29

0.29

95.2

78.9


State Retail

0.37

0.56

0.59

89.2

71.8


Tax-Free (All)

0.36

0.49

0.52

93.3

79.7


MMFs (All)

0.34

0.43

0.46

91.4

76.3

                                                                                                                                                                                                                                   

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