The slow but steady return of assets into Prime money market funds finally caught the attention of someone in the media world. The Wall Street Journal's CFO Journal blog featured the article, "Prime Money Funds Show Signs of Life," yesterday, saying, "Corporate treasurers are returning to so-called prime money-market funds, which invest in short-term corporate debt. Cash is trickling back into the funds after they lost more than a trillion dollars last year, because new rules made them less attractive as repositories for corporate cash." We quote from the CFO Journal piece below, and we also review the latest asset flow figures, which show that Prime assets have resumed their gradual but relentless climb higher in 2017.
The Journal's Vipal Monga, who covers "Corporate Cash," writes, "Assets under management at prime funds totaled $405.9 billion at the end of May, a 6% increase from Jan. 18, according to the Investment Company Institute, a trade group. Meanwhile, money managed by funds that invest in government and agency debt totaled $1.54 trillion, a 2.3% decrease. 'Prime funds have formed a solid base, said Peter Crane, president of Crane Data LLC, which tracks the funds."
He explains, "Prime funds used to be one of the preferred investment vehicles for short-term cash. But a series of reforms by the Securities and Exchange Commission made them less popular with treasurers.... Treasurers who like to protect their principal at all costs, and who don’t want to lose access to their money, consequently sought other places to park their cash. According to SEC statistics, prime fund assets under management dropped $1.02 trillion in 2016."
The piece continues, "Only 37% of money-fund investors are invested in prime funds, according to a survey of 134 U.S. chief investment officers, treasurers and other cash managers conducted between January and March by J.P. Morgan Asset Management. But of those who moved money out of prime into government funds in reaction to the reforms, half said they would move money back. Money managers are becoming more comfortable with the new rules, said John Tobin, global head of liquidity portfolio management at J.P. Morgan Asset Management." (See our June 6 News, "JPMAM Investment PeerView Survey Says Money Funds Gain on Deposits.")
Finally, the CFO Journal article adds, "No money funds have yet lowered their share prices below $1 and none have had to impose gates and fees, he noted. Crane Data's numbers show that prime funds yields are roughly 21 basis points more than government, making them more attractive for cash managers. Mr. Tobin said the results suggest more money will seep into the funds. Many companies still need to finalize new investment guidelines that will allow them to put money in the new funds, he said. Once they do, the amounts flowing into prime funds could grow."
The latest weekly figures show that Prime money market fund assets rose after dipping last week (the dip followed five straight weeks of gains). ICI's "Money Market Fund Assets" report shows Prime assets rose by $2.4 billion to $408.3 billion. Year-to-date, Prime assets have increased by $30 billion, or 8.5%. (Note: Crane Data's totals show Prime assets increasing by $121.3 billion, or 26.3%, to $581.7 billion, YTD. But our figures have been inflated by the addition of a number of internal money funds to our collections. See our Jan. 5, 2017 News, "Internal and Private Money Funds Revealed.")
ICI writes, "Total money market fund assets increased by $5.47 billion to $2.66 trillion for the week ended Wednesday, June 7, the Investment Company Institute reported today. Among taxable money market funds, government funds increased by $2.21 billion and prime funds increased by $2.41 billion. Tax-exempt money market funds increased by $848 million." Total Government MMF assets, which include Treasury funds too, stand at $2.121 trillion (79.8% of all money funds), while Total Prime MMFs stand at $408.3 billion (15.4%). Tax Exempt MMFs total $129.9 billion, or 4.9%.
They explain, "Assets of retail money market funds increased by $2.41 billion to $960.42 billion. Among retail funds, government money market fund assets increased by $1.05 billion to $584.85 billion, prime money market fund assets increased by $726 million to $251.47 billion, and tax-exempt fund assets increased by $626 million to $124.09 billion." Retail assets account for over a third of total assets, or 36.1%, and Government Retail assets make up 60.9% of all Retail MMFs.
Finally, ICI's release adds, "Assets of institutional money market funds increased by $3.07 billion to $1.70 trillion. Among institutional funds, government money market fund assets increased by $1.16 billion to $1.54 trillion, prime money market fund assets increased by $1.69 billion to $156.86 billion, and tax-exempt fund assets increased by $221 million to $5.85 billion." Institutional assets account for 63.9% of all MMF assets, with Government Inst assets making up 90.4% of all Institutional MMFs.
