As we wrote in the March issue of our flagship Money Fund Intelligence, another piece of evidence showing the shift into money funds by corporations comes from the Federal Reserve's recently-released quarterly Z.1. statistical series. Crane Data noted the massive buildup in securities lending and funding corporation dollars last quarter (see MFI 12/07), but the fourth quarter also showed a huge increase, a rise to $592 billion.
While the household sector remains the largest demographic in the Fed's series, nonfinancial corporate businesses continue to rank second. Corporations hold $592 billion, up 10% in the fourth quarter and up 37.4% in 2007. Life insurance companies too show a significant increase in money fund holdings.
Though the increases in assets to money market funds are no doubt inflated by temporary flight-to-safety factors, they occur within the context of a decades-long increase in money fund usage by corporations and other institutions. Thus, while we can't expect the 40% growth rates of institutional money fund assets to continue, we do expect most of the recent gains in assets to remain in funds.
Look for more statistics on corporate usage in money market mutual funds in coming months, as the Investment Company Institute prepares to release its annual Fact Book, which includes a number of statistics on institutional money fund investors.
