Less than two weeks after Federated filed the adoption paperwork on Fifth Third's money funds, the darkest hour for sponsors of money fund may have arrived. With earnings for money fund sponsors are poised to rise in Q1, Federated CEO Chris Donahue is shaking the trees to get more deals to fall into his hands.

What are the signs of a possible bottom in the value of money funds?

The WSJ picks up on Charles Schwab [profile] spending "$165 million to $170 million a quarter this year" to subsidize its money funds. That is a lot of dough compared to Schwab's earnings of $200 million to $250 million per quarter.

Yet, the paper spins the spending in a positive direction:

"But near-zero rates won't last forever... Last quarter's 13 cents a share would be nearly three times higher at 37 cents. Each one-percentage-point increase in short-term rates adds about 19 percent to net interest income."

Federated Investors [profile] is already expected to see a better bottom line during the first quarter thanks to a 15 basis point rise in interest rates.

Reuters reports on data from Garban ICAP that shows rates rising to 25 basis points at March 30 from a low 10 basis points during the end of 2011.

This rise is "enough to bring the patient off the critical list," Peter Crane of CraneData.com tells Reuters.

Crane's estimates that Federated may have earned an extra $15 million in fees during the first quarter because of higher yields.

Crane adds that Charles Schwab Corp may have earned an extra $19 million.

That all means that Federated's Donahue may need to move quickly to close a deal at the lowest price.

Donahue told InvestmentNews the SEC's look at tightening the screws on money fund regulations is causing sponsors to be "more open" to selling.

Still, he is taking no chances and going on the offensive to grow Federated's nine percent market share in money funds.

"We're not only keeping our eyes on banks to see if they're looking to sell, we're calling them all the time to stimulate the conversation," he told the publication.

BlackRock plans to report its earning on April 18, which will be followed by T. Rowe Price Group and Janus Capital on the 24th. 

Edited by: HFD


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