Crane Data Subscribers
Institutional Investors Shift to Money Funds from Direct Investments. Companies have made significant shifts in their short-term investment portfolios since the ABCP Panic began in August. While a flight-to-quality has been evident, less noted has been the massive shift into money market mutual funds of all types and away from direct money market investments, particularly asset-backed commercial paper, CP and more illiquid offerings like auction-rate securities. Money fund assets have increased by $418 billion, or 16%, since August 1, with over half of these gains going to "Prime" money funds. A recent presentation, "So Much Cash, So Little Time," at a Treasury Management Association of New England (TMANE) meeting by Greg Fortuna of State Street's Globallink discussed the trend. Fortuna estimated that the typical developing company has reduced its allocation to CP/Repo from 50-60% pre-credit crunch to 20-25% post-credit crunch with almost all of the decrease moving to money market funds. State Street Global Markets's "Cash Positioning" illustration shows money funds now accounting for 30-35% of the average company's holdings, while demand deposit accounts (DDA) have remained steady at 4-7% and externally managed cash has increased from 35-40% to 40-45%.
