前报社同事、目前就职于Bloomberg的曾牛人，花费两个月的心血写成一分析美国金融货币市场之大作，日前该文在纽约时报之子报International Herald Tribune（国际先驱论坛报）上发表，可喜可贺。
Funds: Rising rates give money market funds new popularity
By Min Zeng Bloomberg News
THURSDAY, DECEMBER 15, 2005
NEW YORK －As interest rates rise, U.S. investors are returning to formerly spurned money market funds, sending assets in the funds up for the first time since 2001.
Investors channeled $95.7 billion into the funds - which invest in short-term instruments like U.S. Treasury bills - this year through Dec. 6 as the Federal Reserve raised interest rates seven times. Total assets rose 5.1 percent, to $1.985 trillion, according to the Money Fund Report, an industry newsletter that has tracked the funds since 1975.
Money funds are emerging from a three-year slump as higher rates raise returns nearer to those of riskier assets like stocks and bonds. The Fed has raised its benchmark rate to 4.25 percent from 1 percent in June 2004, pushing the yield advantage of money funds over bank savings accounts to its widest level since 2001. The funds' average yield as of Dec. 6 was 3.48 percent, up from a record low of 0.51 percent in May 2004.
"When interest rates rise, you want to have a very secure and liquid asset so you can take advantage of the rate increases," said Michael Sheridan, a senior portfolio manager at Reserve Management, which created the first money market fund in 1971. "Money market funds are the ideal place."
Sheridan said investors poured $12.3 billion into Reserve Management's 17 money market funds between July 31 and Nov. 30, pushing up the firm's money fund assets to $30.4 billion. Sheridan has managed money funds since 1991.
The higher returns let Paul McCulley of Pacific Investment Management. outperform his boss, Bill Gross. Pimco's Money Market Fund, geared toward institutional investors and managed by McCulley, returned 2.61 percent this year through Nov. 30.
That was more than the firm's Total Return Fund, the world's biggest bond fund, which is managed by Gross. It returned 1.86 percent, according to data compiled by Bloomberg. Pimco is based in Newport Beach, California. McCulley and Gross were not immediately available for comment.
Money market funds are considered to be among the safest of investments, according to Peter Crane, managing editor of the Money Fund Report in Westborough, Massachusetts. Crane has tracked the money funds industry since 1993.
They are regulated by the U.S. Securities and Exchange Commission, which requires them to keep their assets in debt that matures in 13 months or less, with a weighted average maturity of 90 days or less. The debt also must have top short-term corporate debt ratings, Crane said.
Funds are managed so that investors get $1 back for each $1 they put in, keeping the share price, or net asset value, at $1. If a fund cannot give investors their principal back, it is liquidated. But that has happened only once, in 1994, when investors in the Community Bankers U.S. Government Fund got 96 cents on the dollar. Unlike bank accounts, the funds are not insured by the U.S. government.
The market tends to reflect changes to the Fed's benchmark rate more quickly than savings accounts, whose rates are set by individual banks, Crane said. That is why money funds' yields can rise higher and more quickly than rates on bank accounts, widening the yield gap between the two.
U.S. money funds returned 2.4 percent in the year through Dec. 6 after fees and expenses were subtracted, according to Crane. That performance beat the 1.9 percent gain in U.S. Treasury securities, including reinvested interest, over the same period, according to Merrill Lynch's U.S. Treasury master index. Still, Treasury bills, the shortest-maturity debt issued by the U.S. government, returned 2.9 percent in the same period.
The benchmark Standard & Poor's 500-stock index returned 6.1 percent, including reinvested dividends, and stocks in the Dow Jones industrial average returned 2.9 percent in the same period.
U.S. Treasury inflation-linked debt returned 1.7 percent through Dec. 6, while investment-grade corporate bonds returned 1 percent and high-yield, high-risk corporate debt gave investors a 1.8 percent gain, according to Merrill's data.
Some investors cautioned that gains in money funds may be limited because yields still lag behind inflation, leaving investors to suffer losses in real terms.
The average December yield of 3.48 percent in the money funds market compares with an increase of 4.3 percent in the October consumer price index from the same month last year.
"The money funds' yields barely keep up with the rate of inflation," said Robert Mecca, a financial planner in Mount Prospect, Illinois, who manages $65 million in assets for 140 clients. "Though the yields are moving up in a rising interest rate environment, they still have a long way to go."
Money funds yielded 173 basis points, or 1.73 percentage points, more than bank savings accounts with a $50,000 minimum deposit as of Dec. 6, according to Crane. An investor who put $1 million in an average money fund instead of a savings account would gain $17,300 more in yield, based on the rate gap.
By contrast, savings accounts yielded more than money funds by as much as 28 basis points during mid- to late 2003.
"The differential between money funds and bank products is beginning to be measured in percentage points instead of basis points," Crane said. "Expect money funds to begin attracting assets big-time in coming months."
Money fund assets swelled to a record $2.23 trillion in 2001 and then tumbled to $1.91 trillion by the end of 2004 as the Fed cut its benchmark rate to a 46-year low of 1 percent by June 2003 from 6.5 percent in 2000 and kept it there for a year.
The rate cut forced some money funds to reduce fees to maintain clients.
Ivy Money Fund cut its expense ratio for Class C shares to 0.67 percent in June 2004 from 1.15 percent in December 2003. Pioneer Cash Reserves Fund lowered its ratio for Class B shares to 1.12 percent from 1.16 percent in the same period, according to the Money Fund Report.
Those that could not survive closed up shop.
The Eureka money funds were liquidated in September 2004, and the Safeco money market funds closed in December 2004, according to the Money Fund Report.
A $9.4 billion decline in 2002 was the first annual drop in money funds since a 20 percent slide in 1983, when total assets were less than $200 billion.
Mecca, the financial planner in Illinois, said he had been buying money market funds since July, when yields rose to 2.7 percent, the highest since October 2001.
"I am more apt to go into the money funds market today than last year because of rising yields," said Mecca.
He bought more money funds for his own account and advised clients, who range from age 22 to 92, to park cash in the funds for expenses like tuition for higher education or health care.
Fed policy makers, who raised the benchmark rate Tuesday to 4.25 percent, will meet next on Jan. 31.