Money market mutual fund assets broke above the $3.5 trillion level for their first time ever, reports the Investment Company Insitute in its latest weekly survey. Money funds grew by $37.93 billion to a record $3.506 trillion in the week ended March 26 as the Federal Reserve's 75 basis point rate cut drove yet another surge of interest rate sensitive cash into the higher-yielding money funds. Year-to-date, money fund assets have grown by $361.5 billion, or 11.5%, while over 52 weeks money fund assets have skyrocketed $1.074 trillion, or 44.1%. Money fund assets broke through $3.0 trillion in November 2007, broke the $2.0 trillion barrier in 2001 (and again in 2005), and broke above $1.0 trillion in 1997.

Institutional assets rose by $37.9 billion to a record $2.243 trillion. Following two weeks of outflows, general purpose (or "prime") institutional money fund assets rebounded by $24.5 billion, to $1.311 trillion, as the two-week surge into government institutional funds begins to subside. Government instutional funds (including Treasury) rose by $7.5 billion to $745.6 billion, following a two-week surge of $40.6 billion. Tax-exempt inflows also rebounded, with these funds rising $4.0 billion, or 2.22%, to $185.7 billion.

Retail money fund assets rose by $1.9 billion to a record $1.263 trillion. Prime and government funds saw inflows while tax-exempt funds saw outflows. Money market fund assets have increased for an unprecedented 14 weeks in a row and have yet to show a weekly decline in 2008.

Crane Data estimates of money fund asset growth of 20% in 2008 and we expect 15% annualized growth for money fund assets over the next 4 years (including '08). This would put total money fund assets at an astounding $7 trillion by 2012. Not only is the flight to safety and interest rate arbitrage driving flows, but money funds continue to benefit from a decades-long neglect of cash, a shift away from bank accounts, brokerage deposits, and direct investments, and a total meltdown of competing higher-risk, ultra-short market sectors.

Our Crane 100 Money Fund Index fell sharply, as would be expected during a week following a 75 basis point rate cut. The Crane 100 dropped from 3.04% to 2.74% from March 19 through Wednesday, March 26. The benchmark of the 100 largest taxable money funds tracks $1.67 trillion, or 60.6% of all taxable money fund assets.

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