Board of Governors of the Federal Reserve System

Financial Accounts of the United States - Z.1

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For more information about the Z.1 Financial Accounts of the United States, please see our interactive Financial Accounts Guide.

This page provides additional information about data in the Board of Governors' statistical release on the Financial Accounts of the United States (Z.1). Most of the information is of a technical nature and represents answers to questions that may be of interest to a range of analysts and researchers. The page will be updated as such questions arise.

Documentation for the data in the Z.1 release is available on the About page on the Board's website.

What were the revisions to the mutual fund sector introduced with the June 9, 2016 release of the Z.1 Financial Accounts of the United States?

Why were debt securities held by mutual funds revised down by such a large amount in the June 9, 2016 release of the Z.1 Financial Accounts of the United States?

Did the mutual fund sector revisions in the June 9, 2016 release of the Z.1 Financial Accounts of the United States affect other sectors?

Data on large publicly traded corporations indicate that their debt growth from 2011 onwards has been much larger than that of the nonfinancial business sector. Can you help explain this gap?

Why is the discrepancy so large for Monetary Authority in 2015:Q4?

Why is the level of total debt outstanding in the September 18, 2015 release of the Z.1 Financial Accounts of the United States so much higher than it was in the previous Z.1 release?

In the September 18, 2015 release of the Z.1 Financial Accounts of the United States, some tables in the summary section on credit market instruments seem to have disappeared. What happened to these tables and where can I find the equivalent data series?

Can you provide some detail on the changes in the Nonfinancial Corporate Business tables (F.102, L.102 and B.102) in the 2014 Second Quarter Z.1 publication?

When a corporate business buys another publicly or privately held corporation in its entirety, is this operation recorded in the "other miscellaneous assets" in the flows and levels tables?

When a corporate business acquires a partial ownership stake in another publicly or privately held corporation, is this operation recorded in the "other miscellaneous assets" in the flows and levels tables?

When a corporate business buys back its own equity, does the difference between the market price it pays and the historical cost appear as goodwill in the other miscellaneous assets flows and levels tables?

How much of the increase in other miscellaneous assets in the levels table is linked to companies buying companies either in full or in part?

When a corporate business buys all the equity of another publicly or privately held corporation, how is this registered in the "net equity issuance" series in the flows table?

How do hedge fund assets of U.S. households show up on the household balance sheet in the Financial Accounts?

How is the Securities Data Corporation (SDC) bond data used to calculate series FA103163003.Q in the Flow of Funds data set? Which categories of the SDC bond data do you focus on, and what are you using as a filter?

I have been looking at the Flow of Funds report Table F.212 - Net Issues and have some questions how the SDC Bond database is used.

 


Q: What were the revisions to the mutual fund sector introduced with the June 9, 2016 release of the Z.1 Financial Accounts of the United States?

Posted: 06/17/2016

In the June 9, 2016 publication there were several revisions to mutual funds data. The main changes include:

  1. Variable annuity mutual funds, which were previously included as corporate equities in the life insurance sector, are now included in the mutual fund sector (see the 2016:Q1 Z.1 release highlights for more details www.federalreserve.gov/apps/fof/FOFHighlight.aspx).
  2. Mutual funds' holdings of debt securities are now reported at market value rather than at book value.
  3. The methodology for computing net flows into assets held by mutual funds was updated (see the online Financial Accounts Guide at www.federalreserve.gov/apps/fof/ for details).

The inclusion of variable annuity mutual funds increased the value of assets held by mutual funds. At the same time, levels of debt securities held by the mutual fund sector were substantially lower than the value of debt securities previously reported, as explained in the answer to the next question. Generally, the two changes had offsetting effects on the total value of assets in mutual funds in 2016:Q1, but altered the composition of mutual fund portfolios by lowering the value of debt securities and raising the value of corporate equities.

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Q: Why were debt securities held by mutual funds revised down by such a large amount in the June 9, 2016 release of the Z.1 Financial Accounts of the United States?

Posted: 06/17/2016

Given that the mutual fund sector was expanded to include variable annuity mutual funds, one might have expected the outstanding amount of long-term debt securities held by mutual funds to be revised up in the June 9, 2016 publication. Instead, the levels of long-term debt securities (including U.S. government bonds, municipal bonds, and corporate and foreign bonds) held by mutual funds were revised down by a substantial amount.

The large downward revision to mutual funds' holdings of bonds is due to an improvement to our previous perpetual inventory method for estimating the book levels of bonds in the mutual fund sector, which did not fully account for retirements, and therefore overstated the value of bonds, particularly since 2012. The move to market-value reporting of bonds had relatively little effect on our estimates compared with the difference between the old and new book value measures. Hence, the bond levels reported now are lower than previously published levels, especially in recent years.

Note that although the total level of U.S. government bonds was revised down, the share of total U.S. government bonds allocated to Treasury securities was revised up due to major revisions in source data from the Center for Research in Security Prices' CRSP Survivor-Bias-Free U.S. Mutual Fund Database.

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Q: Did the mutual fund sector revisions in the June 9, 2016 release of the Z.1 Financial Accounts of the United States affect other sectors?

Posted: 06/17/2016

Yes, several sector tables in the Financial Accounts are affected by the revisions to the mutual fund sector. Variable annuity mutual funds were previously accounted for as corporate equity on the life insurance, tables but are now included in the mutual fund holdings of life insurers. As a result, table L.116 now shows significantly lower levels of corporate equity and substantially higher levels of mutual fund holdings. On the household balance sheet, B.101, the holdings of mutual funds are now substantially lower than previously published estimates, while the holdings of corporate bonds, agency securities, and municipal securities are higher.

The asset composition of certain pension sectors were affected by a change in our treatment of CREF, a variable annuity mutual fund. Previously, the financial instruments underlying CREF mutual funds were shown on the state and local government employee defined contribution retirement fund tables (F.120.c and L.120.c) and the private defined contribution pension plan tables (F.118.c and L.118.c). With the mutual fund revision, the underlying financial instrument detail for CREF is no longer shown on the pension tables; instead, aggregate CREF assets are now shown as mutual fund holdings on the pension tables.

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Q: Data on large publicly traded corporations indicate that their debt growth from 2011 onwards has been much larger than that of the nonfinancial business sector. Can you help explain this gap?

Posted: 05/26/2016

Data from the Financial Accounts indicate that the debt of the nonfinancial business sector grew by 30% from 2010Q4 to 2015Q4. In comparison, data on the largest 3000 nonfinancial firms in Compustat indicate that their debt grew by around 80% over this period. Measured in percentage points, the proportion of the debt owed by the largest 3000 firms as a share of nonfinancial business debt has increased over this period from around 27% in 2010Q4 to 37% in 2015Q4.

This difference reflects, in part, the fact that over this period, much of the growth in debt has come from corporate bonds and other debt instruments that are mostly issued by large corporations, as these firms took advantage of supportive market conditions to issue debt. By contrast, there has been little growth in bank loans to small firms and in mortgages to noncorporate businesses over this period.

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Q: Why is the discrepancy so large for Monetary Authority in 2015:Q4?

Posted: 03/10/2016

The monetary authority discrepancy is calculated as the difference between gross saving and gross investment. As of December 4, 2015, the Fixing America's Surface Transportation Act (FAST) limits the Federal Reserve Bank aggregate surplus amount to $10 billion. Any excess surplus is to be remitted to the United States Treasury Department. In compliance with FAST, a 2015:Q4 payment of approximately $19.3 billion to the U.S. Treasury was necessary to reduce the aggregate Reserve Bank surplus. This surplus payment is recorded as an increase in deposits in the Treasury general deposit account (table F.109, line 35) which, in turn, increased the sector discrepancy.

Further information can be found at the following link: http://www.federalreserve.gov/releases/h41/20151231/

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Q: Why is the level of total debt outstanding in the September 18, 2015 release of the Z.1 Financial Accounts of the United States so much higher than it was in the previous Z.1 release?

Posted: 10/09/2015

Total debt outstanding was revised upwards due to methodology changes to both Treasury securities and security credit. Total debt outstanding is now the sum of two new instrument categories: debt securities (table L.208) and loans (table L.214). The aggregate of these instrument categories was previously called credit market instruments (see the 2015:Q2 Z.1 release highlights: http://www.federalreserve.gov/apps/fof/FOFHighlight.aspx).

Treasury securities, part of the debt securities instrument category, now include nonmarketable Treasury securities held by federal government defined benefit retirement plans (FL343061145). The inclusion of federal government defined benefit retirement plans resulted in an upward revision to the level of federal government debt of about $1.408 trillion for 2014:Q4. See the published FEDS Note "Federal Government Defined Benefit Retirement Plans" for more details http://www.federalreserve.gov/econresdata/notes/feds-notes/2015/federal-debt-in-the-financial-accounts-of-the-united-states-20151008.html.

In the domestic financial sector, borrowing previously classified as security credit liabilities (see release highlights) are now included as part of loans for the securities brokers and dealers sector. These are: (1) U.S.-chartered depository institutions loans for purchasing or carrying securities (FL763067003); (2) foreign banking offices in the U.S. loans for purchasing or carrying securities (FL753067003); and (3) Households and nonprofit organizations cash accounts at brokers and dealers (FL153067005). The revision to broker dealer debt for 2014:Q4 was roughly $962 billion.

Similarly, borrowing previously classified as security credit liabilities of the household sector are now classified as loan liabilities. Margin accounts at brokers and dealers (FL663067003) are now included in the household sector's other loans and advances instrument category. This change resulted in an upward revision of $370 billion to the outstanding amount of household sector loans for 2014:Q4.

The total revision to the level of debt outstanding (debt securities plus loans) due to these methodology changes is approximately $2.74 trillion 2014:Q4.

Prior to the September 18, 2015 Z.1 release of the Financial Accounts of the United States, "total credit market instrument" assets and liabilities by sector could be found on tables L.1 and F.1. These tables have been eliminated from the Financial Accounts, along with the usage of the term "credit market instruments". The equivalent data series are available by combining corresponding line items from the two new instrument tables: debt securities (L.208) and loans (L.214). Additionally, a list of the aggregated debt securities and loans series can be found in the Technical Q&A on September 18, 2015 release table changes: "In the September 18, 2015 release of the Z.1 Financial Accounts of the United States, some tables in the summary section on credit market instruments seem to have disappeared. What happened to these tables and where can I find the equivalent data series?"

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Q: In the September 18, 2015 release of the Z.1 Financial Accounts of the United States, some tables in the summary section on credit market instruments seem to have disappeared. What happened to these tables and where can I find the equivalent data series?

Posted: 10/09/2015

With the September 18, 2015 Z.1 release, the classic presentation of the instrument category "credit market instruments" has been discontinued and replaced with two new instrument categories, "debt securities" and "loans".  Reporting debt securities and loans separately brings the Financial Accounts more in line with the international standards for national accounts. The debt securities instrument includes open market paper, Treasury securities, agency- and GSE-backed securities, municipal securities, and corporate and foreign bonds. The new loans instrument includes depository loans not elsewhere classified, other loans and advances, mortgages, and consumer credit. Together, debt securities plus loans include all of the financial assets or liabilities previously included in credit market instruments. While the underlying instrument categories that make up the sum of debt securities and loans are the same as those in old "credit market instruments" concept, changes to a few of these categories make the new sum of debt securities and loans larger than in previous publications.  For more details on these revisions please see the Technical Q&A on revisions to total debt: "Why is the level of total debt outstanding in the September 18, 2015 release of the Z.1 Financial Accounts of the United States so much higher than it was in the previous Z.1 release?"

This change has had three major impacts on the table structure of the publication: (1) summary tables focusing on "credit market instruments" have been eliminated; (2) remaining summary tables have been renumbered; and (3) new instrument tables for debt securities (tables F.208 and L.208) and loans (tables F.214 and L.214) have been created. 

For the most part, combining line items from the new debt securities tables with the corresponding line items on the new loans tables will yield the equivalent concept as the old credit market instruments. A complete list of table changes, including deletions and renumbering, with notes describing how to find line items from eliminated tables in the current publication can be found at the end of this Technical Q&A. Additionally, series for the sum of debt securities and loans, referred to as "debt," are still available, some of which appear on tables D.1, D.2 and D.3 (D.3 shows seasonally adjusted levels). Debt series for sectors that do not appear on table D.1, D.2 or D.3 are available from the DDP (http://www.federalreserve.gov/datadownload/Choose.aspx?rel=Z.1) "build your package" option using the "Z.1 Underlying Detail" data set selection (unless otherwise noted below). Please note that "Z.1 Underlying Detail" is available up to 72 hours after the main publication release. A table of total debt series mnemonics by sector is shown below. Please note, some sectors only borrow/lend through debt securities or loans, not both.

Debt securities and loans; liabilities; by sector:

FL894104005 All sectors; debt securities and loans; liability

FL154104005 Households and nonprofit organizations; debt securities and loans; liability

FL144104005 Nonfinancial business; debt securities and loans; liability

FL104104005 Nonfinancial corporate business; debt securities and loans; liability

FL114123005 Nonfinancial noncorporate business; loans; liability (Financial Accounts data set)

FL364104005 General government; debt securities and loans; liability

FL214104005 State and local governments, ex. employee retirement funds; debt securities and loans; liability

FL314104005 Federal government; debt securities and loans; liability

FL704104005 Private depository institutions; debt securities and loans; liability

FL413065005 Agency-and GSE-backed mortgage pools; total mortgages; asset (Financial Accounts data set)

FL404104005 Government-sponsored enterprises; debt securities and loans; liability

FL614104005 Finance companies; debt securities and loans; liability

FL543169373 Life insurance companies, general accounts; FHLB advances; liability (Financial Accounts data set)

FL674122005 Issuers of asset-backed securities; debt securities; liability (Financial Accounts data set)

FL644104005 Real estate investment trusts; debt securities and loans; liability

FL664104005 Security brokers and dealers; debt securities and loans; liability

FL734104005 Holding companies; debt securities and loans; liability

FL504104005 Funding corporations; debt securities and loans; liability

FL264104005 Rest of the world; debt securities and loans; liability

Debt securities and loans; assets; by sector:

FL384004005 Domestic nonfinancial sectors; debt securities and loans; asset

FL154004005 Households and nonprofit organizations; debt securities and loans; asset

FL144004005 Nonfinancial business; debt securities and loans; asset

FL104004005 Nonfinancial corporate business; debt securities and loans; asset

FL114004005 Nonfinancial noncorporate business; debt securities and loans; asset

FL314004005 Federal government; debt securities and loans; asset

FL214004005 State and local governments, excluding employee retirement funds; debt securities and loans; asset

FL794004005 Domestic financial sectors; debt securities and loans; asset

FL704004005 Private depository institutions; debt securities and loans; asset

FL764004005 U.S.-chartered depository institutions; debt securities and loans; asset

FL744004005 Banks in U.S.-affiliated areas; debt securities and loans; asset

FL754004005 Foreign banking offices in the U.S.; debt securities and loans; asset

FL474004005 Credit unions; debt securities and loans; asset

FL584004005 Insurance companies and pension funds; debt securities and loans; asset

FL634022005 Money market mutual funds; debt securities; asset (Financial Accounts data set)

FL644004005 Real estate investment trusts; debt securities and loans; asset

FL554022005 Closed-end funds; debt securities; asset (Financial Accounts data set)

FL564022005 Exchange-traded funds; debt securities; asset (Financial Accounts data set)

FL654004005 Mutual funds; debt securities and loans; asset

FL674004005 Issuers of asset-backed securities; debt securities and loans; asset

FL614004005 Finance companies; debt securities and loans; asset

FL504004005 Funding corporations; debt securities and loans; asset

FL734004005 Holding companies; debt securities and loans; asset

FL664004005 Security brokers and dealers; debt securities and loans; asset

FL714004005 Monetary authority; debt securities and loans; asset

FL424004005 Government-sponsored enterprises and federally related mortgage pools; debt securities and loans; asset

List of table changes:

Renamed: D.1 Credit Market Debt Growth by Sector to: D.1 Debt Growth by Sector

  • Methodology change resulting in upward revision to debt (see Technical Q&A on revisions to total debt)

Renamed: D.2 Credit Market Borrowing by Sector to: D.2 Borrowing by Sector

  • Methodology change resulting in upward revision to debt (see Technical Q&A on revisions to total debt)

Renamed: D.3 Credit Market Debt Outstanding by Sector to: D.3 Debt Outstanding by Sector

  • Methodology change resulting in upward revision to debt (see Technical Q&A on revisions to total debt)

Deleted: F.1 Total Credit Market Borrowing and Lending

  • "Credit market borrowing" line items on the old table can be found by combining total liability items from new tables F.208 Debt securities and F.214 Loans.
  • "Credit market lending" line items on the old table can be found by combining total assets items from new tables F.208 Debt securities and F.214 Loans.

Deleted: F.2 Credit Market Borrowing by Nonfinancial Sectors

  • "By instrument" line items on the old table can be found on table F.100 Domestic Nonfinancial Sectors as debt securities and loans liabilities.
  • "By sector" line items on the old table can be found by combining total liability items from new tables F.208 Debt securities and F.214 Loans.

Deleted: F.3 Credit Market Borrowing by Financial Sectors

  • "By instrument" line items on the old table can be found on table F.108 Domestic Financial Sectors as debt securities and loans liabilities.
  • "By sector" line items on the old table can be found by combining total liability items from new tables F.208 Debt securities and F.214 Loans.

Deleted: F.4 Credit Market Borrowing, All Sectors, by instrument

  • Line items can be found by combining "by instrument" items from new tables F.208 Debt securities and F.214 Loans.
  • Memo line items can be found on table F.223 Corporate Equities or table F.224 Mutual Fund Shares.

Deleted: F.5 Net increase in Liabilities and Its Relation to Net Acquisition of Financial Assets

  • Individual line items can be found in a number of places, but the most comprehensive view can be found on the Flow of Funds All Sectors -- Flows Matrix.
  • "Liabilities not identified as assets" and "Floats not included in assets" are included in the "instrument discrepancy" column of the Flow of Funds Matrix.

Deleted: L.1 Credit Market Debt Outstanding

  • "Total credit market debt owed by" line items on the old table can be found by combining total liability items from new tables L.208 Debt securities and L.214 Loans.
  • "Total credit market assets held by" line items on the old table can be found by combining total assets items from new tables L.208 Debt securities and L.214 Loans.

Deleted: L.2 Credit Market Debt Owed by Nonfinancial Sectors

  • "By instrument" line items on the old table can be found on table L.100 Domestic Nonfinancial Sectors as debt securities and loans; total liabilities.
  • "By sector" line items on the old table can be found by combining total liability items from new tables L.208 Debt securities and L.214 Loans.

Deleted: L.3 Credit Market Debt Owed by Financial Sectors

  • "By Instrument" line items on the old table can be found on table L.108 Domestic Financial Sectors as debt securities and loans liabilities.
  • "By sector" line items on the old table can be found by combining total liability items from new tables L.208 Debt securities and L.214 Loans.

Deleted: L.4 Credit Market Debt, All Sectors, by Instrument

  • Line items can be found by combining "by instrument" items from new tables F.208 Debt securities and F.214 Loans.
  • Memo line items can be found on table L.223 Corporate Equities or table L.224 Mutual Fund Shares.

Deleted: L.5 Total Liabilities and Its Relation to Total Financial Assets

  • Individual line items can be found in a number of places, but the most comprehensive view can be found on the Flow of Funds All Sectors -- Assets and Liabilities Matrix.
  • "Financial assets not identified as liabilities," "Liabilities no identified as assets," and "Floats not included in assets" are included in the "instrument discrepancy" column of the Flow of Funds All Sectors -- Assets and Liabilities Matrix

Renumbered: F.6 Distribution of Gross Domestic Product as table F.2 Distribution of Gross Domestic Product

Renumbered: F.7 Distribution of National Income as table F.3 Distribution of National Income

Renumbered: F.8 Saving and Investment as table F.4 Saving and Investment

Renumbered: F.9 Net Capital Transfers as tableF.5 Net Capital Transfers

Renumbered: F.10 Derivation of Measures of Personal Saving as table F.6 Derivation of Measures of Personal Saving

Renumbered: L.10 Assets and Liabilities of the Personal Sector as table L.6 Assets and Liabilities of the Personal Sector

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Q: Can you provide some detail on the changes in the Nonfinancial Corporate Business tables (F.102, L.102 and B.102) in the 2014 Second Quarter Z.1 publication?

Posted: 09/19/2014

We incorporated new data on corporate bond retirements from the Mergent Fixed Income Securities Database into the publication. This new data indicated that we have previously been understating corporate bond retirements, leading us to overstate net issuance of corporate bonds. As a result of this data revision, we have revised net corporate bond issuance (line 43 of F.102) from 1995Q2 onwards.

We calculate the level of corporate bond issuance as the level outstanding during the previous quarter plus net issuance during the current quarter. As such, the revision to the net issuance series also resulted in a revision to the level of corporate bonds (line 26 of L.102).

The other miscellaneous liabilities series (line 36 of L.102) are calculated residually as total liabilities (line 22 of L.102) minus the identified liabilities. As such the revision to the level of corporate bonds lead to an offsetting revision to the level of other miscellaneous liabilities.

We have revised the method used to measure gross equity issuance to incorporate additional data from Compustat. As a result of this data, we have revised the net new equity issuance series from 2002Q1 onwards. The market value of equities outstanding (line 39 of B.102) is calculated using separate data sources, and as such, this series is unchanged.

We have also moved U.S. direct investment abroad (line 22 of B.102) and Foreign direct investment in U.S. (line 34 of B.102) to their own data lines. Previously, they had been included as part of Miscellaneous assets and liabilities, respectively.

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Q: When a corporate business buys another publicly or privately held corporation in its entirety, is this operation recorded in the "other miscellaneous assets" in the flows and levels tables?

Posted: 05/07/2014

The difference between the purchase price of the target corporation and the book value of the target corporation is recorded in the balance sheet of the acquirer as "goodwill". This goodwill from the acquisition will be recorded in the other miscellaneous assets category of F.102 and L.102.

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Q: When a corporate business acquires a partial ownership stake in another publicly or privately held corporation, is this operation recorded in the "other miscellaneous assets" in the flows and levels tables?

Posted: 05/07/2014

A corporation taking a partial ownership stake in another corporation is considered an "inter-corporate holding," and as such, should be excluded from the nonfinancial corporate business sector. However, due to data limitations, we have little information on this type of transaction, and it is likely that the measure of inter-corporate holdings we exclude in the Financial Accounts understates the true value of such holdings. As other miscellaneous assets are calculated residually in F.102 and L.102, this measurement problem with inter-corporate holdings likely causes the reported other miscellaneous assets series to be higher than what it should be.

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Q: When a corporate business buys back its own equity, does the difference between the market price it pays and the historical cost appear as goodwill in the other miscellaneous assets flows and levels tables?

Posted: 05/07/2014

When a corporation buys back its own equity with cash, the entire amount of the transaction is recorded as an equity retirement. This transaction is not counted as goodwill, nor does it appear in the other miscellaneous assets series.

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Q: How much of the increase in other miscellaneous assets in the levels table is linked to companies buying companies either in full or in part?

Posted: 05/07/2014

A sizeable portion of the increase in other miscellaneous assets is linked to goodwill from acquisitions and to partial ownership stakes in other companies, although the latter should, in principle, be excluded from the nonfinancial corporate business sector.

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Q: When a corporate business buys all the equity of another publicly or privately held corporation, how is this registered in the "net equity issuance" series in the flows table?

Posted: 05/07/2014

The recording of this transaction depends on the method of payment. If a corporation buys the equity of another corporation using its own equity, the transaction has no effect on net equity issuance, as the value of the equity retired in the target corporation is offset by an equal value of issuance by the acquirer. This reflects the fact that there is no cash exchanged in the transaction. However, if the acquirer paid in cash, the value of the transaction would show as a negative item in net equity issuance offset by a decline in cash holdings.

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Q: How do hedge fund assets of U.S. households show up on the household balance sheet in the Financial Accounts?

Posted: 02/26/2014

The answer depends on whether the hedge fund is onshore (domestic) or offshore (foreign). The following answer is also predicated on the assumption that all transactions are carried out through U.S. brokers.

Onshore: If the hedge fund is domestic (located in the U.S.) then it is easiest to think of them as being consolidated on the household balance sheet (like nonprofits). That is, the household balance sheet will pick up the portfolio holdings of hedge funds in bonds, stocks and any other financial instruments held by the hedge fund, but those holdings cannot be distinguished from direct household holdings of those financial instruments.

Offshore: If the hedge fund is located offshore (like in the Cayman Islands), then the hedge fund itself is part of the rest of the world sector. That is, purchases of U.S. stocks and bonds by an offshore hedge fund would show up in our estimate of net purchases of U.S. stocks and bonds by the rest of the world (thereby reducing U.S. households' direct holdings of those assets). These data on portfolio holdings are collected for the balance of payments statistics by surveying transactions of U.S. brokers/dealers.

If a U.S. household purchases a share of an offshore hedge fund, then it should show up in the data as an issuance of equity by the rest of the world, and therefore, by the residual calculation, it flows through as a purchase of equity by the household sector. This is clearly not ideal; we would much rather have a sector "hedge funds", which--like mutual funds--holds financial assets and issues hedge fund shares that are then held by the household sector and other institutional sectors that are reportedly participating in the market. However, including foreign hedge funds in equity holdings is probably better than missing them altogether.

Caveats/Concerns: Because the data collection process relies on brokers, the financial accounts do not include transactions in offshore hedge funds that do not involve brokers. For example, if a high net worth household bypasses a broker and buys a hedge fund share directly from the offshore hedge fund, then we would presumably not see the issuance of the hedge fund share in equity issuance by the rest of the world (and therefore, the purchase would not be on the household balance sheet). However, if that same hedge fund used a broker to buy U.S. assets, those assets would still be in the rest of the world sector, thereby reducing the assets held on the household balance sheet.

Similarly, any domestic hedge funds that are purchased by foreigners would show up in net purchases of U.S. equity by the rest of the world. However, because equity issuance measured in the U.S. does not include hedge funds, these purchases would distort downward U.S. households' direct equity holdings.

In addition, the level of foreign equity (ROW liability) is calculated based on a perpetual inventory calculation which moves the level forward with price changes based on a foreign equity index (which should not include hedge funds) as well as the flow of equity (which should include the hedge fund issuance by the rest of the world).

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Q: How is the Securities Data Corporation (SDC) bond data used to calculate series FA103163003.Q in the Flow of Funds data set? Which categories of the SDC bond data do you focus on, and what are you using as a filter?

Posted: 03/07/2013

For the Flow of Funds data, we use SDC to track bonds of nonfinancial U.S. firms issued in U.S. and foreign markets. A firm is a U.S. firm if issuing subsidiary's domicile is the United States. We include both convertible and non-convertible debt issues but exclude medium-term notes (MTNs), Certificates of Deposit, Bank Notes, and government and agency bonds. MTN net issuance is tracked using a separate data source.

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Q: I have been looking at the Flow of Funds report Table F.212 - Net Issues and have some questions how the SDC Bond database is used.

Posted: 03/07/2013; Revised: 04/05/2013

The SDC Bond data from CM is used only to calculate 103163003 (corporate sector) issuance.

  1. Do you filter the SDC database on U.S.-owned corporates targeting U.S. markets, or do you filter on all (no matter if they are primarily owned by another country) corporate targeting U.S. markets?
    1. We filter the SDC database on U.S.-owned corporates targeting U.S. and foreign markets, with the domicile determined by the issuing subsidiary's domicile.
  2. Do you use the SDC database for Financial Companies?
    1. No, the financial sectors bond issuance series are not from the SDC data.1
  3. What sectors in SDC do you classify as 'Financial' (if you use SDC) and 'Non-Financial'?
    1. We use the Standard Industrial Classification (SIC) code of the issuer (not the parent) to distinguish between financial and non-financial firms. (http://www.osha.gov/pls/imis/sic_manual.html)
  4. What instruments do you consider to be asset-backed securities (ABS)?
    1. We only use the SDC bond data from Capital Markets to calculate 103163003 (corporate sector) issuance, so since this is nonfinancial data, it does not include ABS.1
  5. How are the maturity dates handled when using SDC?
    1. We do not filter out any issues based on time to maturity.
  6. How is Depository Trust and Clearing Corporation (DTCC) used
    1. DTCC is used for MTN net issuance data.

1. The answers to questions 2 and 4 originally suggested that the Flow of Funds Accounts excluded financial bonds. The text has been updated to say that the Flow of Funds Accounts do contain financial bonds, but the SDC bond data from Capital Markets is used only for the "Nonfinancial corporate business" line of table 212, which only includes nonfinancial bonds.

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Last update: September 9, 2016