MMF Assets Down $4.2 Billion
ICI's latest "Money Market Fund Assets" report shows money fund assets down slightly in the latest week. The release says, "Total money market fund assets decreased by $4.18 billion to $2.75 trillion for the week ended Wednesday, February 3, the Investment Company Institute reported today. Among taxable money market funds, government funds decreased by $7.11 billion and prime funds increased by $2.67 billion. Tax-exempt money market funds increased by $260 million." It explains, "Assets of retail money market funds decreased by $870 million to $1.02 trillion. Among retail funds, government money market fund assets increased by $390 million to $367.66 billion, prime money market fund assets decreased by $1.12 billion to $468.44 billion, and tax-exempt fund assets decreased by $140 million to $181.99 billion. Assets of institutional money market funds decreased by $3.31 billion to $1.73 trillion. Among institutional funds, government money market fund assets decreased by $7.50 billion to $865.65 billion, prime money market fund assets increased by $3.79 billion to $801.58 billion, and tax-exempt fund assets increased by $400 million to $66.77 billion." Year-to-date through Feb 3, MMF assets are down $7 billion. In other news, the Cato Institute posted a blog entry entitled, "Can Money-Market Mutual Funds Reliably Avoid the Problem of Runs?" Author Lawrence White concludes, "In summary, we learned in August 2008 that MMMFs using certain accounting rules are not run-proof For 24 hours The Reserve Primary Fund carried a diminished asset portfolio without either topping it up or diminishing the claims against it, and consequently was rationally run upon. We did not learn that MMMFs are inherently fragile, but rather that run-proneness depends on the accounting practices that a fund uses. From this diagnosis, no policy intervention is indicated. What follows is rather that in a market where losses remain private, investors can be expected to consider the relative fragility under certain circumstance of funds that opt to use potentially run-incentivizing accounting practices. Such funds, if they do not offer some fully compensating advantage, should be expected to lose their market share. Money-market mutual funds that instead credibly bind themselves to thoroughgoing mark-to-market accounting and other run-proofing practices (such as perhaps a pre-funded commitment by the parent company to shelter shareholders from losses), and advertise that fact, should be expected to flourish in the marketplace. Such MMMFs remain an available payment mechanism that is not susceptible to runs and therefore has no need for guarantees at taxpayer expense."
