Money market mutual fund assets broke the $5.0 trillion level for the first time ever on Tuesday, April 27, according to Crane Data's Money Fund Intelligence Daily publication. Money fund assets continued to rise sharply in April, up an enormous $432.9 billion month-to-date through April 28 to $5.023 trillion, after a breathtaking increase of $624.9 billion in March. In March and April combined, money fund assets have risen by an eye-popping $1.058 trillion! Government funds jumped $349.4 billion MTD in April to $3.870 trillion (after a surge of $790.4 billion in March), Prime funds saw assets rise $76.4 billion, retaking the $1.0 trillion level early this week, to $1.012 trillion in April through 4/28 (after falling $159.6 billion in March). Tax-Exempt assets increased $7.1 billion to $141.0 billion MTD (after falling $5.8 billion in March).
Mutual fund news source ignites wrote about recent MMF asset trends in a piece entitled, "As Money Fund Assets Surge, Fidelity's Line Nears $1T," and ignites also hosted a webinar featuring Crane Data's Pete Crane and Dechert's Steve Cohen entitled, "Market Turmoil and Money Funds: What's Ahead?" The article tells us, "Money market fund assets climbed to record highs in March, pushed by volatile markets stemming from the coronavirus pandemic. Across all sponsors, the funds added net $700 billion during the month, putting assets at $4.6 trillion, according to Crane Data. Institutional government funds pulled in the largest chunk amid investors' broader flight to safety."
The article explains, "The largest sponsors captured the lion's share of those assets: The 25 top fund groups hauled in about $640 billion in March, according to Crane Data. And Fidelity, the biggest money fund sponsor, pulled in more than $100 billion during the month, bringing the firm's total assets in the products to $914 billion." They quote our Peter Crane, "March was unprecedented.... It blows away previous asset inflow numbers."
It tells us, "Money fund assets have continued to climb in April, attracting $403 billion through April 24, Crane Data's figures show. Nearly all of the net inflows have gone to the biggest players. Institutional investors account for about two thirds of all assets invested in money funds, making scale a major factor in winning assets, industry observers say.... Nine of the 10 largest money fund sponsors as of March 31 were on the top-10 list in 2008.... Each financial crisis has brought greater concentration of investor assets among the largest firms, Crane says." Crane comments, "It's always the same story in the money fund space. He who has the biggest buckets wins."
The ignites piece continues, "[Crane] adds, the money fund business is quite cyclical, and the makeup of a firm's product line also factors into who wins or loses assets at different times.... But Fidelity has gained market share 'over and above' just being the biggest sponsor, Crane says. 'Whether that's a function of bigger investors' needing bigger buckets, or whether they're doing anything better than others, is tough to tell.' The biggest investors are typically clients of all the largest money fund sponsors, Crane adds."
Finally, ignites adds, "The breadth of Fidelity's business, including its retail brokerage, also buoys its money fund offerings. Fidelity last year made its Government Money Market Fund the cash sweep default for retail retirement accounts. The fund has been the default cash vehicle for the firm's brokerage account customers since 2015, Ignites reported last year. Fidelity does not disclose its sweep assets, according to [a] spokesman. Fidelity does not offer a proprietary money market portal to corporate treasurers. The firm's institutional money market funds are available on most independent and bank portals, the company spokesman says."
On yesterday's ignites webcast, Crane reviewed the "March Madness in Money Markets," saying, "The liquidity buildup that we saw during March was just unprecedented. The flows into government money funds and into bank deposits, a trillion dollars each ... are unprecedented. They're three times as big as anything historically we've ever seen. So that giant liquidity build was happening while the commercial paper and the prime funds were certainly starting to see some danger.... Everybody went to the 2008 playbook and thankfully the regulators did as well, and the Fed started announcing support programs like the Money Market Liquidity Facility.... That, and a couple of support actions by advisors before that program kicked in, stopped the run. By the end of that week, the outflows were pretty much over and there's been a slow steady recovery in prime since that point."
He continues, "Prime money fund assets, which Crane Data says are $1 trillion (ICI's numbers are a couple hundred billion lower because we count some internal funds and other funds that don't report to ICI), showed a $150 billion decline in March, almost half of that has come back in April. The flows in April, month-to-date, show Prime up $76.4 billion. There has been a nice little recovery. Government assets, including Treasury money funds, jumped by $813 billion in March, according to Crane Data's number, and they're up another $350 billion in April. The heavy inflows continue but they've slowed from the manic levels of March. Government funds are still seeing big, big inflows.... Looking at Crane Data's daily data money fund assets went above $5 trillion yesterday.... They have just smashed through record levels."
Crane explains, "The market NAVs, the four digit NAVs for prime, they were showing erosion, they were going down. I joke, a number of funds 'bent the buck'. You couldn't break the buck I guess if you're a floating NAV. With some of the retail tax exempt funds, you were seeing NAVs tick down the shadow prices underneath, everything stayed a dollar on the transactional level and the official price. But you were seeing erosion and that has sort of gone away as the Fed programs added municipal securities as well. They certainly came in and saved a lot of things."
He states, "The weekly liquid assets -- the 30 percent liquidity level had a lot of people watching during that week. You did have one fund dip below that and not implement gates and fees, presumably the board met and they ignored it. They said we're going to survive ... because they knew the Fed program was coming online. You could argue that the regulations and the changes that we saw performed well because funds sort of bent but didn't break."
Finally, Crane says, "About 10 percent of money funds are yielding 0.00 or 0.01 percent. That's the floor that funds put in there. They tend to waive any fees above the level that would put them at zero or below. In 2009 through 2015, nobody went negative. We don't expect anyone to go negative this time. But if you get another shock, if you get another push lower, we've learned in the last decade that the Fed is very powerful ... but if the market says we're going negative, at some point we're going negative. We don't think that's going to happen, funds don't think it's going to happen.... More and more funds are still digesting that big hundred basis point Fed cut that happened during the emergency week in March. Zero yields are a big deal, fee waivers and then theoretically negative yield."
