The Investment Company Institute and its ICI Global subsidiary published the press release, "UCITS Weathered COVID-19 Market Crisis Well," and the paper, "Experiences of European Markets, UCITS, and European ETFs During the COVID-19 Crisis." The paper's Introduction says, "The European Union has the second-largest regulated fund industry in the world with €10.1 trillion of total net assets in Undertakings for Collective Investment in Transferable Securities (commonly referred to as UCITS) as of September 30, 2020. During the stressed period in March, the experiences of EU markets and UCITS (including money market funds) were similar to those in the United States. This paper will explore in greater detail the unfolding of the pandemic in Europe (including governmental responses), the EU market reaction to the pandemic and to government interventions, the experience of UCITS and their investors, and UCITS' use of liquidity management tools during the stressed period."
In the section on "UCITS Money Market Funds," they write, "UCITS money market funds are used by both institutional and retail investors to manage liquidity. At the end of February 2020, just before the COVID-19 crisis hit markets with full force, net assets in UCITS money market funds domiciled in the European Union totaled €1.3 trillion -- with 44 percent domiciled in Ireland, 26 percent in France, 25 percent in Luxembourg, and the remainder in the United Kingdom and other EU countries. Based on data from Morningstar, 47 percent of total net assets in UCITS money market funds were in institutional share classes; 53 percent were in retail share classes."
The paper continues, "UCITS money market funds are classified into four different categories, each with specific regulatory requirements, based on their assets and treatment of their NAV: public debt constant NAV (CNAV) money market funds, low volatility NAV (LVNAV) money market funds, short-term variable NAV (VNAV) money market funds, and standard VNAV money market funds. Public debt CNAV and LVNAV money market funds are primarily used by institutional investors." (Note: Crane Data tracks these funds in its Money Fund Intelligence International product. Let us know if you'd like to see the latest.)
ICI comments, "Like US money market fund investors, European investors sought to protect or build liquidity in March. [T]he net assets of UCITS money market funds that are domiciled in Ireland, Luxembourg, the United Kingdom, and France ... total €1,076 billion, or 84 percent of the EU market, at the end of February. By the end of March, total net assets fell to €1,009 billion as outflows from LVNAV money market funds denominated in US dollars and French VNAV funds -- which are predominantly denominated in euros and sold to French residents -- were only partly offset by inflows to public debt CNAV funds. In March, LVNAV funds denominated in US dollars had outflows of €83 billion or 28 percent of their February month-end assets, and French VNAV funds had outflows of €53 billion or 16 percent of their February assets. In contrast, public debt CNAV funds experienced inflows of €63 billion, or 65 percent of their February assets."
They add, "During the first week of March, UCITS money market funds domiciled in Ireland, Luxembourg, the United Kingdom, and France saw outflows of €18 billion, or 1.7 percent of their February month-end assets, which primarily reflected outflows from sterling- and euro-denominated LVNAV funds.... During the second week of March, UCITS money market funds experienced inflows of €20 billion, or 1.9 percent of previous month-end assets, most of which was attributable to sterling and euro LVNAV money market funds, which had inflows of €23 billion, or 7.6 percent of their February assets. The significant inflows into sterling and euro LVNAV funds were driven by gains from derivatives margins."
The section tells us, "In the third and fourth weeks of March, outflows from UCITS money market funds totaled €96 billion, or 9.0 percent of their February assets.... For sterling and euro LVNAV funds, the gains from derivatives in the prior week reversed, which resulted in outflows of €41 billion. At the same time, LVNAV funds denominated in US dollars and French VNAV funds had outflows of €69 billion and €39 billion, respectively. In contrast, public debt CNAV funds had inflows of €55 billion during this period."
Lastly, it explains, "Outflows from LVNAV funds denominated in US dollars likely were related to inflows into public debt CNAV funds, which are primarily denominated in US dollars. In the United States, net assets shifted from prime money market funds, which have floating NAVs and the ability to invest in short-term high-quality corporate securities, to government money market funds, which have a constant NAV and primarily hold US Treasury securities. In the same way, some investors in dollar-denominated UCITS money market funds likely shifted from LVNAV funds, which have exposure to short-term corporate credits, into public debt CNAV funds. As financial markets began stabilizing toward the end of March and into April following monetary and fiscal interventions, UCITS money market funds, in aggregate, experienced inflows in each week." (See also our Crane Data News, "European Fund Association EFAMA Comments on Crisis; First Stress Test" (12/2/20), and "ICI: Prime Didn't Cause Crisis; N-MFP Holdings: Treasuries Still Half" (11/10/20).)
In a separate release, ICI says, "Retirement Assets Total $33.1 Trillion in Third Quarter 2020." Accompanying data tables show that money funds held in retirement accounts total $582 billion, or 13% of the total $4.404 trillion in money funds. MMFs represent just 2.0% of the total $22.154 trillion of mutual funds in retirement accounts. The release says, "Total US retirement assets were $33.1 trillion as of September 30, 2020, up 4.0 percent from June 30, 2020. Retirement assets accounted for 34 percent of all household financial assets in the United States at the end of September 2020."
It continues, "Assets in individual retirement accounts (IRAs) totaled $11.3 trillion at the end of the third quarter of 2020, an increase of 5.1 percent from the end of the second quarter 2020. Defined contribution (DC) plan assets were $9.3 trillion at the end of the third quarter, up 4.4 percent from June 30, 2020. Government defined benefit (DB) plans -- including federal, state, and local government plans -- held $6.7 trillion in assets as of the end of September 2020, a 3.8 percent increase from the end of September 2020. Private-sector DB plans held $3.4 trillion in assets at the end of the third quarter of 2020, and annuity reserves outside of retirement accounts accounted for another $2.4 trillion."
The ICI tables also show money funds accounting for $393 billion, or 8%, of the $4.925 trillion in IRA mutual fund assets and $189 billion, or 4%, of the $5.143 trillion in defined contribution plan holdings. Among the DC plan holdings, $127 billion is in money fund assets, making up 3% of the total $4.016 trillion in 401(k) plan mutual fund assets. Money funds saw $16 billion of inflows in Q3'20 into retirement accounts vs. outflows of $96 billion for all long-term funds. Money funds in non-retirement account variable annuities totaled just $29 billion, or 2% of the $1.291 trillion of mutual funds in these VAs.
Finally, ICI's weekly "Money Market Fund Assets" report shows that money fund assets plunged in the latest week, the 17th decrease in the past 20 weeks. Assets have fallen $500 billion since May 20, when they were at a record $4.789 trillion. ICI says, "Total money market fund assets decreased by $54.40 billion to $4.29 trillion for the week ended Wednesday, December 16.... Among taxable money market funds, government funds decreased by $39.39 billion and prime funds decreased by $15.26 billion. Tax-exempt money market funds increased by $250 million." ICI's stats show Institutional MMFs decreasing $53.6 billion and Retail MMFs decreasing $776 million. Total Government MMF assets, including Treasury funds, were $3.633 trillion (84.7% of all money funds), while Total Prime MMFs were $547.3 billion (12.8%). Tax Exempt MMFs totaled $108.5 billion (2.5%). (Note that ICI's asset totals don't include a number of funds tracked by the SEC and Crane Data.)
ICI shows money fund assets up a still massive $657 billion, or 18.1%, year-to-date in 2020, with Inst MMFs up $505 billion (22.3%) and Retail MMFs up $152 billion (11.1%). Over the past 52 weeks, ICI's money fund asset series has increased by $689 billion, or 19.6%, with Retail MMFs rising by $163 billion (12.2%) and Inst MMFs rising by $526 billion (24.2%). (Crane Data's separate and broader Money Fund Intelligence Daily data series shows total MF assets are down $38.8 billion in December, as of 12/16, to $4.680 trillion.)
They explain, "Assets of retail money market funds decreased by $776 million to $1.52 trillion. Among retail funds, government money market fund assets increased by $1.74 billion to $1.14 trillion, prime money market fund assets decreased by $1.83 billion to $282.53 billion, and tax-exempt fund assets decreased by $688 million to $96.23 billion. Retail assets account for just over a third of total assets, or 35.5%, and Government Retail assets make up 75.2% of all Retail MMFs.
ICI adds, "Assets of institutional money market funds decreased by $53.62 million to $2.77 trillion. Among institutional funds, government money market fund assets decreased by $41.13 billion to $2.49 trillion, prime money market fund assets decreased by $13.43 billion to $264.77 billion, and tax-exempt fund assets increased by $938 million to $12.24 billion. Institutional assets, which broke below the $3.0 trillion level for the first time since April 22 at the end of August, accounted for 64.5% of all MMF assets, with Government Institutional assets making up 90.0% of all Institutional MMF totals.
