MarketWatch: Inst to Join MMF Inflows
MarketWatch posted the piece, "When Fed rates plateau, expect these key investors to join the $6 trillion charge into money-market funds." It says, "Like Taylor Swift, assets in money-market funds keep setting records this year. But a key group of investors isn't even leading the charge, said Deborah Cunningham, chief investment officer, global liquidity markets at Federated Hermes. Cranes data tracked total assets in the industry as topping $6 trillion for the first time ever in August, with those levels potentially eclipsing $7 trillion by year's end. 'Retail flows have fueled the asset growth in this cycle,' Cunningham said ahead of the Federal Reserve's rate decision on Wednesday, when its policy rate is expected to remain unchanged at a 22-year high. 'Institutional flows will happen at the end of this year, and into 2024,' she said, should historical patterns in the half-century-old industry end up repeating." The article explains, "That's because institutions in Fed hiking cycles tend to buy Treasury bills and other cash-like investments directly from the source, she said. 'It's only when rates plateau, then stay there for a while, and then start to go down the other side, that you see institutional demand go into money-market funds,' she said. 'The reason for that is funds have a weighted average maturity that is 30, 40 or 50 days, so they lag the direct market, and keep rates higher for longer when interest rates are going down.' Cunningham heads the roughly $530 billion cash management effort at Federated Hermes, a unique group that is both women-led and longstanding, with its leadership climbing the ranks of the firm through the 1980s and '90s. Paige Wilhelm heads prime liquidity for the group, while Susan Hill leads government liquidity and Mary Jo Ochson oversees tax-free liquidity investments and short-term municipal bonds." Marketwatch adds, "Money-market funds started seeing more inflows in mid-2022 when the Fed first began lifting its rate from a 0%-0.25% range. They shot higher this March after the collapse of Silicon Valley Bank, while hitting a record $6 trillion of assets (see chart) after July when the Fed bumped up its rate to a current 5.25%- 5.5% range. While institutional assets tend to migrate into money-market funds when Fed rates start falling, other factors, including the typically strong year-end period for inflows and fears of uninsured bank deposits, could play prominent roles in the coming months, said Peter Crane, president and publisher of Crane Data and Money Fund Intelligence."
