ICI's latest weekly "Money Market Fund Assets" report shows MMF assets plummeting after breaking the $5.7 trillion level two weeks ago. ICI's weekly asset series plunged $98.8 billion, the second largest drop ever (the biggest was the week ended 9/18/08) to $5.608 trillion. We believe the drop is temporary and was caused by the Microsoft takeover of Activision and tax payments. Assets are still up by $873 billion, or 18.4%, year-to-date in 2023, with Institutional MMFs up $369 billion, or 12.1% and Retail MMFs up $504 billion, or 30.0%. Over the past 52 weeks, money funds have risen a massive $1.023 trillion, or 22.3%, with Retail MMFs rising by $611 billion (38.9%) and Inst MMFs rising by $412 billion (13.7%). (Note: We hope to see you at the AFP 2023 in San Diego, Oct. 22-24! Visit us at Booth #749.)
The release says, "Total money market fund assets decreased by $98.84 billion to $5.61 trillion for the week ended Wednesday, October 18, the Investment Company Institute reported <b:>_.... Among taxable money market funds, `government funds decreased by $106.50 billion and prime funds increased by $8.51 billion. Tax-exempt money market funds decreased by $841 million." ICI's stats show Institutional MMFs crashing $108.8 billion and Retail MMFs rising $10.0 billion in the latest week. Total Government MMF assets, including Treasury funds, were $4.574 trillion (81.6% of all money funds), while Total Prime MMFs were $914.9 billion (16.3%). Tax Exempt MMFs totaled $118.7 billion (2.1%).
ICI explains, "Assets of retail money market funds increased by $9.98 billion to $2.18 trillion. Among retail funds, government money market fund assets increased by $5.92 billion to $1.43 trillion, prime money market fund assets increased by $5.69 billion to $647.15 billion, and tax-exempt fund assets decreased by $1.62 billion to $106.53 billion." Retail assets account for over a third of total assets, or 38.9%, and Government Retail assets make up 65.5% of all Retail MMFs.
They add, "Assets of institutional money market funds decreased by $108.82 billion to $3.43 trillion. Among institutional funds, government money market fund assets decreased by $112.42 billion to $3.15 trillion, prime money market fund assets increased by $2.82 billion to $267.75 billion, and tax-exempt fund assets increased by $782 million to $12.17 billion." Institutional assets accounted for 61.1% of all MMF assets, with Government Institutional assets making up 91.8% of all Institutional MMF totals.
According to Crane Data's separate Money Fund Intelligence Daily series, money fund assets hit a record $6.113 trillion on Oct. 5, before easing back then plunging on Friday the 13th. Assets have fallen by $87.3 billion in October through 10/18 after rising by $93.9 billion in Sept., $98.3 billion in August and $34.7 billion in July. Note that ICI's asset totals don't include a number of funds tracked by the SEC and Crane Data, so they're over $400 billion lower than Crane's asset series.
In related news, ICI also published a press release entitled, "Average UCITS Ongoing Charges Continue Downward Trend." It explains, "UCITS investors continue to benefit from lower ongoing charges, according to an updated report from the Investment Company Institute (ICI) -- Ongoing Charges for UCITS in the European Union, 2022. This year's report will help inform European policy makers as they consider UCITS costs as an element of the Retail Investment Strategy's (RIS) value-for-money framework. Average UCITS ongoing charges have trended downwards for nearly a decade, driven in large part by two important factors: First, greater access to funds that are commission-free, meaning that investors pay for advice directly through an asset-based fee. Second, the increasing popularity of index tracking UCITS and ETFs, underlining a broader trend of assets shifting to lower-cost funds."
While very thin on money fund information, it has one table titled, "UCITS Ongoing Charges Vary Across Investment Objectives." It shows Money Market charges averaging 0.14% (median), while the 10th percentile was at 0.05% and the 90th percentile was at 0.45%. The asset-weighted average was 0.13% and the simple average was 0.21%. For more on money fund expense ratios, see these Crane Data News stories: "Oct. Form N-MFP Data: MMFs Hit Record $6.1T, Revs $16.0B; T-Bills Up (10/11/23) and "ICI Expense Study Shows Money Fund Ratios 0.13%, Waivers Down in '22 (4/3/23).
In other news, Federal Reserve Chair Jerome Powell's spoke at the "Economic Club of New York Thursday and indicated that more interest rate hikes could be coming. He says, "Turning to monetary policy, the FOMC has tightened policy substantially over the past 18 months, increasing the federal funds rate by 525 basis points at a historically fast pace and decreasing our securities holdings by roughly $1 trillion. The stance of policy is restrictive, meaning that tight policy is putting downward pressure on economic activity and inflation. Given the fast pace of the tightening, there may still be meaningful tightening in the pipeline."
He explains, "My colleagues and I are committed to achieving a stance of policy that is sufficiently restrictive to bring inflation sustainably down to 2 percent over time, and to keeping policy restrictive until we are confident that inflation is on a path to that objective. We are attentive to recent data showing the resilience of economic growth and demand for labor. Additional evidence of persistently above-trend growth, or that tightness in the labor market is no longer easing, could put further progress on inflation at risk and could warrant further tightening of monetary policy."
Powell states, "Along with many other factors, actual and expected changes in the stance of monetary policy affect broader financial conditions, which in turn affect economic activity, employment and inflation. Financial conditions have tightened significantly in recent months, and longer-term bond yields have been an important driving factor in this tightening. We remain attentive to these developments because persistent changes in financial conditions can have implications for the path of monetary policy."
Finally, he adds, "My colleagues and I remain resolute in our commitment to returning inflation to 2 percent over time. A range of uncertainties, both old and new, complicate our task of balancing the risk of tightening monetary policy too much against the risk of tightening too little. Doing too little could allow above-target inflation to become entrenched and ultimately require monetary policy to wring more persistent inflation from the economy at a high cost to employment. Doing too much could also do unnecessary harm to the economy. Given the uncertainties and risks, and how far we have come, the Committee is proceeding carefully. We will make decisions about the extent of additional policy firming and how long policy will remain restrictive based on the totality of the incoming data, the evolving outlook, and the balance of risks."
