On the Liberty Street Economics blog,
First, institutional prime and muni funds—but not retail or government funds—must now compute their net asset values (NAVs) using market-based factors, thereby abandoning the fixed NAV that had been a hallmark of the MMF industry. Second, all prime and muni funds must adopt a system of gates and fees on redemptions, which can be imposed under certain stress scenarios.
Investors adjusted their portfolios in response to these changes:
… investors’ shift from prime and muni funds to government—and, in particular, agency—funds means that a large segment of the industry still operates under a stable NAV (and therefore is, in principle, vulnerable to runs). … Since the new regulations have resulted in a very large shift of assets into relatively safe government funds, the SEC’s reforms have made runs on MMFs less likely and the industry itself more resilient.
In the NZZ, Michael Schaefer reports on a study about the performance of Swiss portfolio managers in 2016.
- The median portfolio returns in all investment strategies except those not investing in stocks fell short of the corresponding benchmark returns.
- Only a fifth of the portfolios generated returns in excess of their benchmark.
- These numbers do not yet account for management fees.
- No portfolio manager generated high returns across all strategies.
- But some managers consistently generate high returns in certain strategies.
On the FT’s Alphaville blog, Matthew Klein reports about discrepancies between IMF and Greek (and EU) assessments of Greek net indebtedness. The IMF appears to report lower Greek financial asset holdings than the Greek Central Bank.
Matthew Klein quotes the Greek Central Bank:
We would like to clarify that the Bank of Greece compiles its financial accounts, from which data on the general government’s net debt are derived, according to European standards. The Bank of Greece’s data are compatible with the ECB’s and Eurostat’s rules (ESA 2010) regarding financial accounts and are used as an integral part in the production of the Monetary Union’s Financial Accounts. These data can also be accessed through the ECB’s Statistical Data Warehouse at http://sdw.ecb.europa.eu/reports.do?node=1000002429.
The IMF’s series on the general government’s net debt come from its WEO database and are not necessarily based on official statistics provided by Greek Statistical authorities. We understand that they may be compiled by IMF’s desk economists (and not its Statistics Department) and we cannot vouch for their accuracy, since they are adjusted according to the programming needs of the IMF. At first glance, they appear to be based on outdated information contained in past EDP [excessive deficit procedure] documentation.
In the NZZ, Michael Schaefer reports about a study that analyzes the portfolio composition of public sector entities and social security institutions. Cantons and the Federation mostly hold cash. The SNB’s portfolio is among the riskiest.
In the 17th Geneva Report on the World Economy (Low for Long? Causes and Consequences of Persistently Low Interest Rates), Charles Bean, Christian Broda, Takatoshi Ito and Randall Kroszner take up the theme of a recent report by the White House Council of Economic Advisors (see previous blog post). In the abstract, some of the authors’ conclusions are summarized as follows:
… aggregate savings propensities should fall back as the bulge of high-saving middle-aged households moves through into retirement and starts to dissave; this process has already begun. And though Chinese financial integration still has some way to run, the net flow of Chinese savings into global financial markets has already started to ebb as the pattern of Chinese growth rotates towards domestic demand rather than net exports. Finally, the shifts in portfolio preferences may partially unwind as investor confidence slowly returns. But … the time scale over which such a rebound in real interest rates will be manifest is highly uncertain and will be influenced by longer-term fiscal and structural policy choices.
One chapter in the report discusses the Japanese experience.