Money fund assets rose for the 12th week in a row and broke back above the $3.25 trillion level for the first time since January 2010. The Investment Company Institute's latest "Money Market Fund Assets" series shows that MMF assets have increased by $209.6 billion, or 6.9%, since April 17, and they've increased by $205 billion, or 6.7%, year-to-date. Over the past 52 weeks, ICI's money fund asset series has increased by $402 billion, or 14.1%, with Retail MMFs rising by $206 billion (19.8%) and Inst MMFs rising by $196 billion (10.8%). We review the latest asset totals and also quote from a new article on Robinhood's ill-fated entry into the checking and savings marketplace, below.
They write, "Total money market fund assets increased by $14.14 billion to $3.25 trillion for the eight-day period ended Wednesday, July 10, the Investment Company Institute reported today. Among taxable money market funds, government funds increased by $8.34 billion and prime funds increased by $5.62 billion. Tax-exempt money market funds increased by $182 million." ICI's weekly series shows Institutional MMFs rising $9.7 billion and Retail MMFs rising $4.4 billion. Total Government MMF assets, including Treasury funds, stood at $2.431 trillion (74.7% of all money funds), while Total Prime MMFs rose to $682.0 billion (21.0%). Tax Exempt MMFs totaled $139.2 billion, or 4.3%.
ICI states, "Assets of retail money market funds increased by $4.42 billion to $1.24 trillion. Among retail funds, government money market fund assets increased by $1.38 billion to $706.53 billion, prime money market fund assets increased by $2.70 billion to $409.67 billion, and tax-exempt fund assets increased by $334 million to $127.56 billion." Retail assets account for over a third of total assets, or 38.2%, and Government Retail assets make up 56.8% of all Retail MMFs.
The release adds, "Assets of institutional money market funds increased by $9.73 billion to $2.01 trillion. Among institutional funds, government money market fund assets increased by $6.96 billion to $1.72 trillion, prime money market fund assets increased by $2.92 billion to $272.37 billion, and tax-exempt fund assets decreased by $153 million to $11.62 billion." Institutional assets accounted for 61.8% of all MMF assets, with Government Institutional assets making up 85.9% of all Institutional MMF totals.
Crane Data's separate and broader Money Fund Intelligence Daily series shows money fund assets rising by $45.8 billion to $3.396 trillion in the week through July 10, 2019. Our latest Money Fund Intelligence and MFI XLS, which went out to subscribers on Monday morning and which track a broader set of funds than our MFI Daily, show assets rising $42.4 billion to $3.544 trillion in June. We expect asset inflows to remain strong in coming months, particularly in the fourth quarter.
In other news, Business Insider writes about, "The inside story of how Robinhood, a $6 billion investing app for millennials, blew a huge launch so badly that Congress got involved." The article, which was mentioned on CNBC yesterday, explains, "Business Insider spoke with 10 former Robinhood employees and contractors, who agreed to speak anonymously for fear of retaliation. They described a workplace in which [CEOs] Bhatt and Tenev brushed aside regulatory concerns in pursuit of flashy new products to attract users, culminating in the embarrassing debacle in December 2018 of its new checking and savings service, which the company was forced to abandon after its false assurance that the accounts were insured sparked a congressional outcry."
It continues, "Like Theranos, 23andMe, and Uber before it, Robinhood sought to disrupt a highly regulated industry with the 'move fast and break things' startup playbook, only to learn that the rules are there for a reason, and that breaking them has consequences. Business Insider has learned that the company was warned that the checking and savings accounts might not meet regulatory scrutiny but pressed ahead anyway." (See our June Money Fund Intelligence article, "Fin-Tech Invasion Targets Low Bank Deposit Rates, our May 13 News, "Investment News on Fin-Techs Invading Cash Mgmt," and our Dec. 17 Link of the Day, "SIPC Concerns About Robinhood.")
The piece tells us, "By December 2018, Bhatt found the 'wow' moment he'd been looking for. Robinhood announced that it would launch a checking and savings product that paid 3% interest -- a huge uptick from the average US savings and checking account interest rates of 0.10% and 0.08% respectively. Even digital banks, which have made a name for themselves in recent years as an alternative to nominal rates offered by big banks, fell shy of Robinhood's proposal, at the time topping out at 2.02% and 2.25% for checking and savings accounts, respectively. 'Three percent was a magic number,' one former employee told us. [Bhatt] thought it would make people say 'Wow.' But in the weeks following the champagne toasts, reality set in."
It explains, "During one meeting, the former executive said, product managers raised concerns with Bhatt about naming the product checking and savings. The trouble, they argued, was that the money was not in a checking account or in a savings account: It was in a brokerage account. And unlike traditional bank accounts, brokerage accounts aren't insured by the Federal Deposit Insurance Corp. Pitching the product as a bank account could mislead customers."
Business Insider writes, "Robinhood's brokerage accounts were already insured by the Securities Investor Protection Corp., but that covers only cash 'from the sale of or for the purchase of securities.' Using the account as a place to park cash for checking and savings was a far cry from using it to buy stock. Within a day of launch, articles began to surface calling into question how the new accounts would be insured."
They add, "Stephen Harbeck, the president and CEO of SIPC at the time, told several media outlets that Robinhood had not contacted SIPC beforehand about the product and said unequivocally that Robinhood's claims that the accounts were SIPC-insured were false: The money in the accounts wasn’t covered. Hundreds of thousands of users, many of them young, unsophisticated investors, had rushed to sign up for a new account based in part on the understanding that, if Robinhood went belly up, their money would be protected. It wouldn't be."
The article continues, "Within a day of its announcement, checking and savings was all but dead. The blog post on Robinhood's site announcing the news was deleted. Instead, Bhatt and Tenev published a new post announcing the team was going back to the drawing board.... 'We plan to work closely with regulators as we prepare to launch our cash management program, and we're revamping our marketing materials, including the name,' the post read."
Finally, the piece tells us, "Six months later, Robinhood's pursuit of customers' deposits remains very much up in the air. 'Checking and savings' was rebranded 'cash management.' The product has yet to launch, and users can no longer sign up for the waitlist. Details on how long it will function, or be insured, have yet to be released. In the meantime, checking and savings accounts have become table stakes among startups in personal wealth management. Wealthfront, Acorns, and SoFi are among a number of fintechs that have announced some type of cash-management offering with higher interest rates than traditional banks. The motivation is simple: As fintechs fight to survive in crowded space, handling more of their clients money is key to their growth."
