Assets Gain for First Time in '15
Money fund assets ended their slide this past week, increasing for the first time this year, says ICI in its latest weekly "Money Market Mutual Fund Assets" report. The release says, "Total money market fund assets increased by $4.28 billion to $2.69 trillion for the week ended Wednesday, February 11, the Investment Company Institute reported today. Among taxable money market funds, Treasury funds (including agency and repo) decreased by $7.38 billion and prime funds increased by $12.44 billion. Tax-exempt money market funds decreased by $780 million." Money fund assets had dropped each of the first five weeks of 2015. "Assets of retail money market funds decreased by $1.01 billion to $898.47 billion. Among retail funds, Treasury money market fund assets increased by $570 million to $197.62 billion, prime money market fund assets decreased by $1.18 billion to $511.76 billion, and tax-exempt fund assets decreased by $400 million to $189.09 billion. Assets of institutional money market funds increased by $5.29 billion to $1.79 trillion. Among institutional funds, Treasury money market fund assets decreased by $7.96 billion to $778.60 billion, prime money market fund assets increased by $13.62 billion to $940.29 billion, and tax-exempt fund assets decreased by $380 million to $72.37 billion." In other news, Euromoney writes, "Short Term Bank Funding Costs Hit By Fidelity Move." The article says, "Fidelity Investments has announced plans to convert up to $125 billion-worth of prime US money market funds (MMFs) into government-only funds -- a move that is a direct consequence of the new SEC regulations covering this business that were announced in July. The move is significant not only because of the numbers involved but because the asset manager is making the move 18 months before the SEC's deadline of October 2016. If other prime MMF managers decide to do the same, there could be worrying implications for the non-government short-term funding markets.... The liquidity mismatch between prime MMFs, which offer daily liquidity, and many of the assets in which they invest has been one of the more worrying consequences of the global hunt for yield. It was also the impetus behind the SEC's new rules.... One puzzling aspect of the move is why Fidelity has decided to act so early, deciding to change fund mandates rather than wait for signs of investors moving from prime and muni funds into government funds.... However, as with so much in the US market, the extent of the impact on bank funding costs will depend on the extent and timing of any rate rises. If rates do rise, then the returns on offer from prime institutional funds might become sufficient for investors to stick with them rather than switch to government funds, because the return for the risk of fees and gates will be worth it."
