Mutual Funds, Insurance, and Pension Funds

Rajesh Kumar , in Strategies of Banks and Other Fiscal Institutions, 2014

8.1.9.3 Money market place funds

A money market fund is an open-concluded fund that invests in short-term fixed-income securities such every bit Us Treasury bills and commercial papers. Money market funds seek to limit exposure to losses from credit, market, and liquidity risks. Money marketplace funds aim to maintain a stable value of $1 per share. In 2011, according to the ICI Fact Book, there were 632 money marketplace funds in operation with total avails of nigh United states $ii.7 trillion. Money market funds consist of institutional money funds and retail money funds. Institutional money funds are marketed to corporations and authorities bodies. These funds are characterized by loftier minimum investment and depression-expense share classes. The largest institutional money market fund is the JPMorgan Prime Money Market place Fund with over $100 billion in assets. Retail coin funds are offered to individuals and exist in the class of authorities-only funds, nongovernment funds, and tax-free funds. The largest money market mutual fund is Fidelity Investments Cash Reserves with assets exceeding Us $110 billion. Prophylactic and liquidity are the most important advantages of the money market place funds.

Ultrashort bond funds are mutual funds, similar to money market funds, that invest in bonds with extremely brusk maturities. Money market funds consist of retail money market place funds and institutional money market funds. Institutional money marketplace funds are used by businesses, pension funds, state and local governments, and large business relationship investors.

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Indices and the Construction of Benchmarks

Bernd R. Fischer , Russ Wermers , in Performance Evaluation and Attribution of Security Portfolios, 2013

11.4 Money Market Indices

Money market funds are investment funds which invest primarily in term deposits and very curt-dated bonds. The benchmarks used for these funds are therefore based on the reference interest rates for the money market.

Example 11.8 EONIA, EURIBOR, and LIBOR indices, eb.rexx Coin Market

a.

Every day, a group of so-called panel banks report data (full volume, weighted boilerplate lending rate) on their overnight unsecured lending transactions in the interbank market to the European Fundamental Bank. EONIA (Euro Overnight Index Average) is then computed by the ECB every bit the average of these overnight lending rates 43 weighted by the respective transaction volumes.

b.

The same console banks which quote for EONIA besides report daily quotes of the rate that each panel bank believes i prime bank is quoting to another prime number bank for interbank term deposits within the euro zone. The maturity spectrum covers one, two and iii weeks equally well equally the twelve maturities from one to twelve months. The EURIBOR (Euro Interbank Offered Rate) for each maturity is calculated as the equal weighted average of the bank quotes, after eliminating the highest and lowest 15% of these quotes. 44 The so-called EURIBID (Euro Interbank Bid Rate) is a reference charge per unit which is not officially published but often used in practice. It is calculated by subtracting a specifically called cost charge from EURIBOR (e.1000. EURIBOR – xx bps 45 ) and may be interpreted as the involvement rate at which a bank is willing to borrow from other banks.

c.

LIBOR 46 may be regarded equally the counterpart to EURIBOR. LIBOR (London Interbank Offered Charge per unit) is the average involvement rate offered by several commercial banks in the London interbank market. It is calculated for 10 currencies (e.yard. EUR, USD, JPY). The panel banks are chosen individually for each currency. Maturities include one day (overnight), one and two weeks, as well as i to twelve months. Like EURIBID, LIBID (London Interbank Bid Rate) is calculated in practice by subtracting an appropriate cost charge from LIBOR.

d.

Also the above-mentioned bail indices, Deutsche Börse calculates the money market alphabetize eb.rexx Money Market, which includes highly liquid German government bonds. Eligible bonds must have a maturity betwixt ane calendar month and ane year and an amount outstanding of at least EUR 4 billion. The bonds are market capitalization-weighted, with a maximum weight of xxx percent.

Unlike their equity and bond marketplace counterparts, money marketplace benchmarks are initially given only in terms of interests (Figure 11.5). Therefore, the involvement charge per unit serial needs to be transformed into a performance series to obtain an index which can be compared with the share toll series of a portfolio. For that purpose, a given base of operations value (e.thou. 100) is compounded with the 1-twenty-four hours interest rates resulting from the interest charge per unit serial. In doing so, the applicable involvement rate conventions accept to be taken into business relationship (Figure 11.6). 47

Figure xi.5. EURIBOR and LIBOR (USD) Interest Rates by Maturity as at 27/01/2009.

Figure xi.6. EONIA from 31 December 2005 to 31 December 2008 and the Corresponding Functioning Index (left hand scale).

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Cases on Investment Management Companies

Rajesh Kumar , in Strategies of Banks and Other Fiscal Institutions, 2014

iv.2.1.ane Money market common funds

The Vanguard Admiral Treasury Money Market Fund is a conservative investment option offered past Vanguard that invests in US Treasury securities. The fund maintains a share price of $1 and the strategic objective is to provide electric current income to investors. The income received by shareholders depends on the electric current interest rate environs.

The Vanguard California Tax-Exempt Money Market Fund is designed merely for California residents and seeks to provide federal and California Country tax-exempt income and preserve shareholders' master investment by maintaining a share price of $1. This fund is considered ane of the most conservative investment options offered past Vanguard. Although the fund invests in short-term, high-quality securities, the corporeality of income that shareholders may receive is largely dependent on the current interest rate surroundings and the availability of eligible California municipal securities. Investors in a college tax bracket who have a brusque-term savings goal and seek a competitive tax-free yield may wish to consider this option.

The Vanguard Federal Coin Market Fund and Vanguard New Bailiwick of jersey Taxation-Exempt Money Market Fund in US government securities are also conservative Vanguard investment options.

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Caps/Floors and Swaptions with an Application to Mortgages

Salih Northward. Neftci , in Principles of Financial Technology (Second Edition), 2008

Reading 2

This reading refers to Part II of the case study.

Dynamic funds middle dislocation opportunities

With curt-term yields continuing to fall across Europe, coin market funds are increasingly targeting college yields through structured products. Generally, they are lifting returns by selling volatility through corridor structures. (i) More specifically, they are taking advantage of hedge fund-induced market dislocations in Danish mortgage markets and sterling bandy spread markets. „In the concluding few weeks funds have substituted a little credit risk for a chip more market chance" said i market professional at a major European banking concern. He added that funds saw the increasing confidence in financial markets as an opportunity to generate higher yields from market dislocations.

In detail dealers said funds were looking to purchase Danish mortgage bonds together with balance-protected swaps (2). The balance-protected swap guarantees the bond buyer the coupons only still leaves the holder with duration risk—the risk that the instrument will accept a shorter duration if prepayment increases. With unswapped Danish mortgage bonds, the holder is exposed to the risk that prepayment rates increase and that coupons levels are reduced.

In add-on to specific dislocation-related trades (3), market place professionals said there was a general trend for funds to motility away from standard commercial paper and asset-swap investments towards higher-returning, more structured products. Whereas traditional funds buy floating-rate instruments and are only exposed to the credit risk of the instrument, dynamic money market funds purchase instruments that are exposed to interest charge per unit and volatility risks.

One structurer last week said the dynamic fund sector had been growing for some time, and added that some European funds had more than funds under management in dynamic instruments than traditional instruments. „In that location's lots of excitement surrounding money market place funds and their attempts to churn yield," he said.

Typical dynamic money market fund trades are corridors, (4) with popular contempo trades being based on ii Libor rates remaining within the band. One bank structurer said he had recently traded a annotation that offered higher coupons, provided both Us dollar Libor and French franc Libor remained inside gear up limits. Majuscule repayment was guaranteed, but coupon payments were contingent. Past ownership structures such as these, funds are in result going short Libor volatility and using the earned premium to enhance their received coupon levels. (5) The size of the enhanced coupon typically depends on the width of the corridor, with extra yields of up to 200 bp generated past a tight corridor and boosted yields of around 50 bp delivered by a wider corridor. Dealers said funds preferred to be more cautious and favored the wider corridor, lower yield products.

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Household Finance: An Emerging Field

Luigi Guiso , Paolo Sodini , in Handbook of the Economics of Finance, 2013

A.1 Definitions of Variables in the 2007 Moving ridge of the SCF

Pension Savings: retirement savings

Current Savings: all savings that are not pension savings

Cash , current savings in, checking accounts, money market and savings accounts, money market funds, cash and call accounts at brokerages, certificates of deposits, treasuries, cash n.e.c.

Fixed Income Instruments: electric current savings in, directly held bonds autonomously from treasuries, bonds held in not-pension annuities (annuities not purchased using settlements from pension accounts), bonds held in trust and managed accounts, bond funds apart from treasuries, 50% balanced funds

Directly Held Equity: electric current savings directly held in equity (stocks)

Indirectly held equity, current savings held in equity through mutual funds, not-pension annuities, and trust or managed accounts, 50% of balanced funds

Cash Value Life Insurance: Electric current liquidation value of life insurance policies that build up a cash value. These are sometimes called "whole life", "straight life", or "universal life" policies. They are different from traditional "term" policies which instead pay a claim only upon early on premature death.

Alimony Fixed Income: alimony savings in retirement accounts and pension annuities held direct or indirectly in fixed income instruments

Pension equity, alimony savings in retirement accounts and pension annuities held directly or indirectly in disinterestedness

Other Financial Wealth: other alimony savings and other non-alimony annuities, other trust and managed investment accounts, futures contracts, stock options, derivatives, oil/mineral/gas leases, or other land leases, loans and debts owed to the household, deferred compensation, etc.,

Primary Residence: own business firm, lot, apartment, farm, ranch, and parts of condo, co-op, townhouse association. The category besides includes mobile homes and their sites every bit well as the part of the ranch that is not used for business purposes

Investment in Real Estate: residential and non-residential real manor which is non a part of the master residence and that is not owned by a business

Other Real Estate: artworks, precious metals, jewelry, antiques, coin collections, etc.

Vehicles: all types of vehicles including motor homes (that are non primary residence), boats, airplanes, etc.

Business Wealth: internet equity in all kinds of privately owned businesses, limited partnerships, and corporations that are not publicly traded. The value of the part of the farm or ranch that is used for business less associated debt is also included

Credit Card Debt: outstanding balance after the last payment was made on general purpose cards, banking concern-type cards, store, gasoline cards, etc.

Consumer Debt: vehicle loans, other installment loans, lines of credit other than home disinterestedness, loans confronting pension and life insurance, loans made for home improvements that are not collateralized by existent estate

Mortgages: mortgages on primary residence, other real manor, other loans using property as collateral, or dwelling house equity lines of credit, land contracts

Pupil Debt: loans for teaching attainment

Other debt, margin loans and other debt not recorded before

Financial Investment: pension and current fixed income instruments, pension and current directly and indirectly held equity, cash value life insurance, other trusts, and managed investment accounts, other pension savings, and pension and non-alimony annuities

Current gross Financial Wealth: greenbacks, fixed income instruments, directly and indirectly held equity, other financial avails

Retirement Wealth: pension fixed income and alimony equity, other pension wealth

Total Gross Financial Wealth: current gross financial wealth plus retirement wealth

Gross Real Estate: primary residence, investment in existent manor, other existent estate

Gross Real Wealth: gross real manor, business wealth, vehicles

Full Gross Wealth: total gross fiscal wealth, gross existent wealth

Total Debt: credit carte, consumer and student debt, mortgages

Cyberspace Wealth Measures: gross wealth measures minus full debt

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The Behavior of Individual Online Investors Before and Subsequently the 2007 Financial Crisis: Lessons From the French Case

Daniel Haguet , in Handbook of Investors' Behavior During Financial Crises, 2017

20.4.2 General Behavior

Our file contains each individual trade per day. The full of the trades was summarized on a daily basis in order to have, for each twenty-four hour period: the number of purchases, the number of sales, the volume of the purchases, and the volume of the sales. We have 766 daily observations from which nosotros excluded Saturdays and Sundays and got 634 observations. We also take the breakdown between French stocks and coin market common funds. Those could exist of interest to look at the breakup between the flows in risky avails and in nonrisky assets.

In the first part, we will look at the general behavior of our sample, and then the breakdown between stocks and money market place funds. The third function volition nowadays the buy and sell transactions past number.

one.

General volume and number of transactions: Fig. xx.four shows the volume of the purchases and sales on a monthly footing. The volume of purchases and the volume of sales are strongly correlated (correlation coefficient = 0.84) and the book of buys is greater than the volume of sells each month.

Effigy twenty.4. Evolution of the Purchases and Sales in French Stocks (Volume).
2.

Breakdown between risky assets and nonrisky avails: In this section, nosotros also took the book of purchases and sales in money market funds (as a proxy of nonrisky nugget) to compare with the volume of purchases and sales in stocks (every bit a proxy of risky avails). Nosotros present in Figs. xx.iv and twenty.5, the percentage of each asset course in the total period of sales (Fig. twenty.5) and purchases (Fig. 20.6).

Figure 20.5. Breakdown Between Stocks and Monetary Funds (Flow of Sales).

Figure 20.six. Breakup Betwixt Stocks and Budgetary Funds (Period of Purchases).

On boilerplate, money market funds represent 10.18% of the buy flows and 11.14% of the sale flows (the difference is nonsignificant) and a correlation coefficient equal to 0.39.

Nosotros regressed the per centum of money marketplace fund in purchase transactions and in auction transactions with two explaining variables. The first one is the daily modify of the CAC twoscore and the second one is a dummy variable equal to "one" after the fiscal crisis and "zero" before. Table 20.viii displays the coefficients.

Table 20.viii. Regression of flows of money market funds.

Explained Variable Percentage Money Market Fund in Purchase Transactions Percentage Money Market Fund in Sale Transactions
Explaining variables
Constant (t-stat) 0.100 (24.331) 0.098 (24.938)
Daily changes of the CAC 40 (t-stat) 0.341 (one.253) −0.709*** (−2.742)
Binary variable "crisis" (t-stat) 0.015 (ii.394) 0.020*** (3.391)

** and *** denote pregnant at the 5% and 10% levels, respectively.

The main upshot of Table 20.8 is that the flow of sales in coin market funds is influenced by the binary variable "fiscal crisis" but nosotros did not find a significant coefficient with the daily performance of the French market.

three.

Number of sales and number of purchases: We utilize the number of purchases and the number of sales to measure the trading behavior of our sample (Fig. xx.7).

Figure 20.7. Evolution of the Number of Purchases and the Number of Sales.

The two series are strongly correlated (correlation coefficient equal to 0.90) but we come across that the number of purchases is always greater than the number of sales. Nosotros employ the ratio between the number of purchases and the number of sales to measure the trading behavior compared to the market place returns. Our two proxies for the French domestic stock market are the return of the CAC 40 on a daily basis and the same return of the CAC 40 on a continuous 12-months period (annual ground). The get-go i gives the influence of the short-term return of the market and the 2nd one gives the influence of the long-term return of the market place.

Our regression is as follows:

y i = a i Ten one + a two Ten 2 + a 3 10 3 + ɛ i

Where y i is the ratio betwixt the number of purchases and the number of sales, X i is the daily return of the CAC 40, X 2 the yearly render of the CAC xl, and X iii is a binary variable equal to 1 afterwards June 2007 ("bear" period) and equal to 0 earlier June 2007 ("bull" menstruation). Results are displayed in Tabular array 20.nine.

Table 20.9. Regression on the sample equally a whole.

Explained Variable Number of Purchases/Number of Sales
Explaining variables
Abiding (t-stat) 1.116 (23.799)
CAC 40 daily (t-stat) −xiv.258 (−9.097)***
CAC 40 12 months (t-stat) 49.598 (1.324)
Binary variable "crisis" (t-stat) 0.120 (2.209)**
Number of observations 634

** and *** denote significant at the 5% and x% levels, respectively.

Merely one coefficient of the regression is pregnant; it shows a negative correlation between the ownership and selling behavior of the whole sample and the daily changes of the CAC 40 alphabetize. Information technology means that when the render of the market increases, the number of sales increases compared to the number of purchases. When the market return decreases, we have more purchases than sales.

The long-term return of the CAC 40 is nonsignificant for the whole sample; the binary variable "crisis" is nonsignificant likewise.

We volition now expect more closely at the selling behavior of our sample in the context of the financial crisis.

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Investment Banks and Finance Companies

Rajesh Kumar , in Strategies of Banks and Other Financial Institutions, 2014

7.1.4 Investment Depository financial institution Participation in Financial Markets

Investment banks have active participation in the coin, bail, mortgage stock, and derivatives markets. Many investment banks through money market mutual funds invest in coin market securities. Investment banks also underwrite commercial papers. Investment banks actively participate in the bond market through underwriting bond problems in the primary market and provide advisory services for clients for bond purchases and sales. Investment banks as well play a role in the bond marketplace by facilitating the raising of funds for corporate restructuring activities such every bit mergers and acquisitions, leveraged buyouts, and other activities. Investment or securities firms also play a role in the mortgage market place by underwriting securities that are backed by mortgages for various fiscal institutions. In stock markets, the investment banks play the major roles of underwriters in the primary market, advisors and brokers in the secondary marketplace. In derivatives markets of futures, options and swaps, investment banks act every bit financial intermediaries or brokers.

Commercial banks and thrift institutions are major competitors for investment banks in providing brokerage and merger advisory services. Some investment banks own mutual funds. Mutual funds likewise depend on securities firms such every bit investment banks for informational services related to the execution of stock trades. Investment banks provides advisory services to insurance companies for executing securities transactions and hedging risks. Alimony funds also receive advisory services from investment banks with respect to securities transactions related to buying and selling securities. Pension funds and insurance funds invest in new issues, which are underwritten by securities firms.

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Foreword

Dr. Jeffrey R. Bohn , in Credit Engineering for Bankers (Second Edition), 2011

As the credit markets have evolved, nonbank financial institutions have become an of import part of credit markets. Sometimes these institutions (e.g., AIG, large insurance companies, big coin market funds, etc.) are said to constitute a shadow banking system. In the previous edition's foreword, I wrote, "Engineering and deregulation have enabled nonbank financial institutions to enter the credit markets in unprecedented ways." The practiced news is that shadow banks add to the market's liquidity. The bad news is that shadow banks—with AIG at the heart—are also non immune to failure arising from concentration risk. Shadow banks suffer from the same kinds of systemic ailments every bit the regular cyberbanking system. We discovered in this latest crisis that concentration adventure can develop anywhere cyberbanking-type activities are undertaken. We at present sympathise how important it is for analysts and regulators to rails nonbank fiscal institutions. Executives of these institutions will also benefit from learning and implementing the tools discussed in this book.

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The Nature and Variety of Financial Intermediation

In Contemporary Financial Intermediation (Fourth Edition), 2019

Mutual Funds

Along with pension funds, mutual funds have been major market-share winners over the past 40 years. Essentially a mail-World War II miracle, common funds (including money market place funds) have risen from an inconsequential share of the intermediation market in 1950 to attain a 6% market share in 1990, and a 25% market share in 2010 (measured based on total assets). Its significant growth tin can besides be gleaned from the penetration of mutual funds among U.S. households, which increased from 25% in 1990 to 44% in 2012 (see Tabular array ii.2).

Mutual funds come in 2 bones varieties: open up- and closed-cease. Closed-end funds have a preestablished number of shares and the fund'south initial resource typically are not augmented with the subsequent sale of shares. A closed-end fund is typically traded as a unmarried security on organized exchanges, for example, the New York Stock Exchange, and its shares are priced directly in the marketplace like the shares of any other company. As a consequence, the market price of closed-terminate fund shares can deviate, often widely, from the liquidation value of the securities they hold. Open-end funds operate on very unlike rules. Their shares are continuously liquidated and augmented by a specialized management visitor that offers shares for greenbacks, and greenbacks for shares at net nugget value (NAV). NAV is the estimated liquidation or marketplace value of the fund's assets divided by the number of shares the fund has outstanding. Thus, unlike airtight-terminate fund shares, the prices of open-terminate fund shares cannot deviate from the value of underlying assets.

The open-finish funds have given ascent to big specialized fund management companies, like Allegiance, DWS Scudder, Vanguard, and Dreyfus. Each of these manages and markets a broad range of different funds, each of which is defined in terms of specific investment objectives. These investment companies earn their keep by levying fees confronting the funds it manages. The funds, of grade, are owned past their investors. Were you to consult the financial pages of any major paper, you lot would find a section headed mutual funds wherein yous could discover the NAV of any of the numerous common funds managed by Merrill Lynch, or any of the very large number managed by Allegiance. These larger mutual fund companies typically have tens of billions of dollars nether direction. The fundamental financial intermediation services provided past mutual funds include transactions services, screening, and certification.

At that place is aught terribly new near common funds, except their explosive growth in recent decades. At that place are at least three reasons for the current popularity of the funds. Kickoff, money-marketplace common funds, which were introduced in the 1960s, rapidly became the instrument of choice for circumventing Regulation Q deposit involvement rate ceilings. As aggrandizement accelerated in the 1970s and marketplace interest rates soared, the spread between these rates and deposit rates gaped ever wider. The bloated opportunity cost of holding bank deposits increased the entreatment of coin-market place funds. The rest is history! Despite the competitive disadvantage of operating without a government guarantee, the common funds grew spectacularly, underscoring that there are limits to what the public is willing to pay for governmental deposit insurance.

More often than not, the coin-market place funds were managed conservatively, and some fifty-fifty restricted themselves to holding directly debt of the U.S. government. More unremarkably, the funds held negotiable big-denomination certificates of eolith of banks, commercial paper, bankers' acceptances, mortgage, and other asset-backed securities, and government agency debt. Almost all of these assets were less than 1 year to maturity, and the funds traded at a constant one dollar per share.

Moreover, the money-market funds are sustained by implicit guarantees of their managers. In at least three cases, management companies made practiced on asset losses in order to protect their own reputations and the viability of the money funds they managed. For case, Value Line manages a money-marketplace fund that held the commercial paper of Integrated Resource, a company that defaulted on its debt. Rather than reverberate this loss in its money-market fund, which nearly certainly would have meant the fund's demise, Value Line management bought the Integrated Resources commercial paper from its money-market fund at par. Notably, there was no legal or even moral obligation to protect the fund'south investors, merely the action was presumably motivated past the desire to maintain and build upon Value Line'southward reputation in managing money-market funds. Clearly, the money-market funds offered a compelling package of substitutes for the governmental deposit guarantee. Low-risk investment strategies, combined with implicit guarantees of reputable management companies, and substantially higher yields permitted the money-market funds to ravage the banking company and thrift deposit markets and relish meteoric growth. As we will meet in Affiliate fourteen, the low (or no) risk paradigm got battered during the 2007–2009 fiscal crisis. Explicit government guarantees were needed to ensure the survival of money marketplace mutual funds.

The 2nd and third reasons for the recent growth of mutual funds are less dramatic, but however noteworthy. In contempo decades, the public has gradually get persuaded of the improbability of consistently "beating" the stock market place. A sea of research, much of it academic, has demonstrated that over nearly extended spans of time asset managers do less well than the widely watched stock marketplace indices, for case, Dow Jones, and Standard and Poor'southward. The reasons are numerous and circuitous, but the facts seem plain. The widespread acceptance of this thought has had a profound effect on investment behavior, and in particular it has led to the idea that if you cannot beat the averages, y'all can do no better than to buy the averages. Buying the averages is known as passive investment. This is done by purchasing a portfolio of securities that behave like (clone) the averages. Since this strategy typically requires belongings a substantial number of securities, it is often infeasible for smaller wealth holders, and uneconomic for about. However, mutual funds can provide such a service at low cost. Thus, the popularity of passive investment strategies provides a second reason for the contempo growth of mutual funds.

Finally, the past six decades take witnessed the much-heralded globalization of fiscal markets. Many investors believe it is as important to diversify across economies (currencies) as it is to diversify across industries. Furthermore, diversification across economies has been massively simplified in recent decades, as regulatory and tax barriers take been dismantled. However, information nearly strange investment opportunities is even so relatively expensive. Hence, the common fund has go the instrument of selection for investing abroad. Many "country funds" are closed-end and listed on the New York Stock Exchange, but there are likewise many open up-end funds that specialize in countries and regions of the world. To mix a metaphor, as the pie of foreign indirect investment has grown larger, the bologna of specialization among funds has been sliced always thinner.

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The Deposit Contract, Deposit Insurance, and Shadow Banking

In Contemporary Financial Intermediation (Fourth Edition), 2019

The Role of Commercial Banks in Shadow Banking

Commercial banks get involved in shadow banking in diverse ways. The most obvious is that commercial banks are owned by banking company holding companies (BHCs). A BHC might own a wealth direction unit of measurement with a money market mutual fund, that is, a shadow bank inside the BHC. Another example is triparty repo funding by the broker–dealer subsidiary of a BHC. Similarly, a BHC might have an ABCP conduit, which would be off-residue-sheet to the BHC, but may be supported by a commercial bank subsidiary of the BHC through loan commitments. 48 Another connexion is that commercial banks originate the loans whose securitization creates the securities that shadow banks hold and then borrow against these securities which are used as collateral in repo transactions.

In the future, as BHCs are subjected to more stringent and liquidity requirements, some shadow-banking activities may drift out of BHCs into the shadow-banking arrangement.

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