Prime money fund assets saw their biggest drop of the year over the past week, losing $61.8 billion, as the "Big Shift" of assets into Government money funds accelerates as we approach October. ICI's latest "Money Market Fund Assets" report shows MMFs overall decreasing $38.5 billion in the latest week, their second sharp drop in a row and 4th in the past 5 weeks. Prime funds fell almost twice as much as the previous week, when they declined by $37.3 billion; they've declined in 15 out of the past 16 weeks (-$436.6B) and have averaged outflows of $27.0 billion a week since June 1, $37.0 billion since August 1, and $47.0 billion since Sept. 1. Since Oct. 29, 2015, Prime assets have fallen by a massive $729.1 billion, or 50.0%, and Tax Exempt funds have declined by another $102.0 billion, or 41.6%. Combined these two sectors have fallen by $831 billion since this giant migration started, and we expect the total shift to break $1.0 trillion ahead of the Oct. 14 MMF Reform "live" deadline.

Government funds gained $30.6 billion in the past week. Govt MMFs have increased by $773.4 billion since last October (up 76.3%) and by $566.1 billion, or 46.4%. (YTD in 2016, Prime MMFs are down by $554.5 billion, or 43.2%.) Over the past 6 weeks, Prime MMFs have fallen by $236.4 billion and they've fallen by $367.9 billion over the past 13 weeks. Govt MMFs have risen $198.5 billion over 6 weeks and $380.9 billion over 13 weeks.

ICI's latest release says, "Total money market fund assets decreased by $38.52 billion to $2.66 trillion for the week ended Wednesday, September 14, the Investment Company Institute reported today. Among taxable money market funds, government funds increased by $30.56 billion and prime funds decreased by $61.75 billion. Tax-exempt money market funds decreased by $7.33 billion."

It continues, "Assets of retail money market funds decreased by $4.43 billion to $929.65 billion. Among retail funds, government money market fund assets increased by $12.37 billion to $517.06 billion, prime money market fund assets decreased by $11.67 billion to $300.10 billion, and tax-exempt fund assets decreased by $5.13 billion to $112.49 billion."

The update adds, "Assets of institutional money market funds decreased by $34.09 billion to $1.73 trillion. Among institutional funds, government money market fund assets increased by $18.19 billion to $1.27 trillion, prime money market fund assets decreased by $50.08 billion to $429.16 billion, and tax-exempt fund assets decreased by $2.20 billion to $30.50 billion." Government assets, including Institutional and Retail (and Treasury and Government) stand at $1.784 trillion, while Prime assets are now at $729.3 billion.

ICI adds, "Notes: In anticipation of the Securities and Exchange Commission's (SEC) new money market fund regulations, many advisers are changing their prime money market funds into government money market funds. As a result, there have been, and will continue to be, large shifts in assets from prime funds to government funds before the October 2016 deadline."

Month-to-date in September, our MFI Daily shows Prime MMF assets down by $98.0 billion and Govt assets up just $51.6 billion. We expect outflows to be even heavier next week, which will include yesterday's September 15 quarterly corporate tax payment date. Overall Prime exits should easily break $200 billion for Sept. overall. Crane Data's latest Money Fund Intelligence XLS showed that Prime MMFs lost $131 billion in August, their third worst month ever. (Prime MMFs lost 142 billion in November 2015 when Fidelity Cash Reserves converted from Prime to Government and they lost 448 billion in September 2008 when Reserve Primary Fund "broke the buck".)

In other news, Fidelity Investments published a new update entitled, "Government Money Market Funds in the New Reality." It reviews the huge asset shift over the past year and the key characteristics of Govt MMFs, mainly the $1.00 NAV and lack of gates and fees. They write, "The relative stability of government money market funds (MMFs) and ease of use make them an attractive short-term investment option for institutional liquidity managers."

The update emphasizes the company's "Size and Scale," saying, "Fidelity is the largest manager of government money market funds, with market share greater than 20% and assets that are more than double that of our nearest competitor <b:>`_. The update emphasizes the company's "Size and Scale," saying, "Fidelity is the largest manager of government money market funds, with market share greater than 20% and assets that are more than double that of our nearest competitor <b:>`_."

Finally, it adds, "Fidelity's government money market funds follow a team-oriented decision-making process, led by portfolio managers that are supported by a highly experienced team of credit analysts and traders. A bottom-up, fundamental investment platform complemented by top-down inputs, results in a robust and durable process.... We use proprietary technology to simulate thousands of scenarios in near-real time to help portfolio managers better understand the sensitivity of fund attributes with respect to changes in major risk factors. We continue to enhance our process as we seek to ensure that the portfolios can withstand market events or other exterior forces."

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