The Investment Company Institute's latest weekly "Money Market Fund Assets" report shows money market mutual fund assets fell $6.6 billion to $6.468 trillion, following an increase of $11.3 billion the week prior and a jump of $120.8 billion three weeks prior -- the 6th largest weekly increase ever and the largest non-Covid or non-SVB related increase. Assets have risen in 9 of the last 11 and 20 of the last 26 weeks, increasing by $490.3 billion (or 8.2%) since April 24. MMF assets are up by $581 billion, or 12.3%, year-to-date in 2024 (through 10/16/24), with Institutional MMFs up $258 billion, or 8.4% and Retail MMFs up $324 billion, or 19.3%. Over the past 52 weeks, money funds have risen by $860 billion, or 15.3%, with Retail MMFs up by $432 billion (19.8%) and Inst MMFs rising by $428 billion (12.5%). (Note: We look forward to seeing those of you headed down to Nashville for AFP's Annual Conference! Come visit us at booth #432!)
ICI's weekly release says, "Total money market fund assets decreased by $6.56 billion to $6.47 trillion for the week ended Wednesday, October 16, the Investment Company Institute reported.... Among taxable money market funds, government funds decreased by $8.11 billion and prime funds increased by $1.51 billion. Tax-exempt money market funds increased by $43 million. " ICI's stats show Institutional MMFs decreasing $14.6 billion and Retail MMFs rising $8.0 billion in the latest week. Total Government MMF assets, including Treasury funds, were $5.284 trillion (81.7% of all money funds), while Total Prime MMFs were $1.054 trillion (16.3%). Tax Exempt MMFs totaled $130.4 billion (2.0%).
ICI explains, "Assets of retail money market funds increased by $8.00 billion to $2.61 trillion. Among retail funds, government money market fund assets increased by $5.60 billion to $1.66 trillion, prime money market fund assets increased by $2.25 billion to $831.97 billion, and tax-exempt fund assets increased by $145 million to $119.40 billion." Retail assets account for over a third of total assets, or 40.4%, and Government Retail assets make up 63.6% of all Retail MMFs.
They add, "Assets of institutional money market funds decreased by $14.56 billion to $3.85 trillion. Among institutional funds, government money market fund assets decreased by $13.71 billion to $3.62 trillion, prime money market fund assets decreased by $743 million to $221.84 billion, and tax-exempt fund assets decreased by $102 million to $10.96 billion." Institutional assets accounted for 59.6% of all MMF assets, with Government Institutional assets making up 94.0% of all institutional MMF totals.
According to Crane Data's separate Money Fund Intelligence Daily series, money fund assets have risen by $29.1 billion in October through 10/16 to $6.794 trillion. Assets rose by $149.8 billion in September, $109.7 billion in August, $16.6 billion in July, $15.7 billion in June and $91.4 billion in May, but they fell $15.8 billion in April and $68.8 billion in March. They rose $72.1 billion in February, $93.9 billion in January, $32.7 billion in December and $226.4 billion in November. MMF totals fell by $31.9 billion last October. Note that ICI's asset totals don't include a number of funds tracked by the SEC and Crane Data, so they're over $300 billion lower than Crane's asset series.
In other news, Yahoo wrote earlier this week that, "Cash doesn't always come off the sidelines." They explain, "The Federal Reserve held interest rates at a multi-decade high for more than a year. `Investors took notice, piling into money market accounts to grab yields that haven't been available in more than a decade. But since the Fed slashed rates by half a percentage point on Sept. 18, the flows into money market accounts haven't stopped. In fact, through Oct. 10, research provided to Yahoo Finance from Crane Data shows that money market fund assets have increased by about $180 billion since the Fed began cutting rates."
The piece says, "This reveals several truths about the surge of 'cash on the sidelines' some have argued could be a reason for the stock market rally to continue. For starters, it could be a nod to the uncertainty some feel about where things will head over the next year. On Friday, Goldman Sachs chief equity strategist David Kostin wrote in a note to clients that 'history does not lend much support to expectations of a cash-to-equity rotation.' Kostin's research shows that since 1984, over the first three-, six-, and 12-month periods after the Fed begins cutting, flows into money market funds are greater than into equity or bond funds."
They quote Kostin, "Money market funds have historically experienced inflows following rate cuts regardless of the economic backdrop.... On the other hand, equity funds typically recorded inflows if the US economy avoided a recession and outflows if the US economy entered a recession shortly after the start of the cutting cycle."
The piece tells us, "This would tell us that some folks in cash may just be in wait-and-see mode. Just because the Fed is cutting doesn't mean the money needs to leave the sidelines and play in the game. The continued surge into money market funds is also a reminder that while rates are lower than they were a month ago and are expected to continue falling, they're still higher than they've been in years. For instance, a Fidelity Government Money Market Fund is currently offering an average annual return of more than 4.5%, compared to the 10-year average of about 1.4%."
The article says, "Dating back to 1980, on average, flows into cash start declining 14 months after the Fed starts cutting. Cash on the sidelines is often referred to as a reason to be bullish about the backdrop for future buying of equities. The logic is that all this money moving into money market funds will eventually be put to work. And while Cox believes this argument could go on a list of reasons to be bullish about the stock market, 'it's not at the top. There's a lot of opportunistic cash in money markets that could make its way out over time but I think that's when people have overestimated the effects of that,' Cox said."
Finally, it adds, "So eventually, the money usually leaves cash. It could either move into bonds as the economic backdrop weakens and investors want to grab an attractive yield before they fall lower. Or, it could move into equities if the fundamental story surrounding the Fed's rate-cutting cycle continues to scream soft landing. If the prospect of not knowing which scenario will win out scares you, there is still a reasonable option to earn nearly 5% a year. And you don't have to look beyond the growing pile of cash on the sidelines to see that plenty of investors are continuing to choose that path."
