The Investment Company Institute's latest weekly "Money Market Fund Assets" report shows MMFs increasing for their 4th week in a row, inching up $3.4 billion following last week's huge increase of $67.7 billion. The release says, "Total money market fund assets increased by $3.35 billion to $4.61 trillion for the week ended Wednesday, June 2.... Among taxable money market funds, government funds increased by $1.74 billion and prime funds increased by $663 million. Tax-exempt money market funds increased by $938 million." ICI's weekly "Assets" release shows money fund assets up $315 billion, or 7.3%, year-to-date in 2021. Inst MMFs are up $404 billion (14.6%), while Retail MMFs are down $90 billion (-5.9%). (Note: Register here for our next webinar, "Asian Money Fund Symposium," which is June 17 from 10am-12pm EDT.)

ICI's stats show Institutional MMFs increasing $8.5 billion and Retail MMFs decreasing $5.1 billion in the latest week. Total Government MMF assets, including Treasury funds, were $4.023 trillion (87.2% of all money funds), while Total Prime MMFs were $495.2 billion (10.7%). Tax Exempt MMFs totaled $94.1 billion (2.0%). Over the past 52 weeks, money fund assets have decreased by $140 billion, or -2.9%, with Retail MMFs falling by $131 billion (-8.4%) and Inst MMFs falling by $8 billion (-0.3%). (Note that ICI's asset totals don't include a number of funds tracked by the SEC and Crane Data, so they're almost $400 billion lower than our asset series.)

It explains, "Assets of retail money market funds decreased by $5.13 billion to $1.44 trillion. Among retail funds, government money market fund assets decreased by $3.97 billion to $1.12 trillion, prime money market fund assets decreased by $1.06 billion to $234.01 billion, and tax-exempt fund assets decreased by $96 million to $82.60 billion." Retail assets account for just under a third of total assets, or 31.1%, and Government Retail assets make up 78.0% of all Retail MMFs.

ICI adds, "Assets of institutional money market funds increased by $8.47 billion to $3.18 trillion. Among institutional funds, government money market fund assets increased by $5.72 billion to $2.90 trillion, prime money market fund assets increased by $1.72 billion to $261.20 billion, and tax-exempt fund assets increased by $1.03 billion to $11.45 billion." Institutional assets accounted for 68.9% of all MMF assets, with Government Institutional assets making up 91.4% of all Institutional MMF totals.

In other news, fund news source ignites writes, "Boston Fed Officials Float Killing Prime, Muni Money Funds." The article tells us, "Two Boston Federal Reserve officials last month proposed a drastic change for money market funds. Regulators should consider requiring that prime and municipal money funds convert to government funds, which would reduce 'the vulnerabilities' stemming from the sector, argue Kenechukwu Anadu and Siobhan Sanders in a May 21 article. Converting all 'non-government funds' -- both retail and institutional -- to government money funds would also lessen 'the likelihood of future official sector support,' they wrote in their paper, 'Money Market Mutual Funds: Runs, Emergency Liquidity Facilities, and Potential Reforms.'" (See our May 27 News, "Boston Fed Paper Proposes Requirement to Convert All MMFs to Govt.")

The piece continues, "Prime and municipal money funds made up about 20% of the $4.9 trillion in total money fund assets as of April 30, according to Crane Data. Prime funds represented about $914 billion and municipal funds had $105 billion, the money fund tracker's data shows. In March 2020, investors pulled about $100 billion from institutional prime funds in a two-week period. The outflows abated after the government intervened in several ways that directly and indirectly helped money funds."

The ignites explains, "The conversion to government funds would be 'relatively simple to implement, and market adjustment to this change could be facilitated by an appropriately lengthy transition period,' the Boston Fed officials said.... 'Notably, the largest prime fund sponsor did so on its own last year,' the paper's authors note, referring to Vanguard. The fund giant last August announced it would reorganize its $125 billion retail prime fund into a government fund.... Fidelity announced a year ago that it would liquidate two institutional prime funds with nearly $14 billion in assets at the time. Northern Trust said in December that it would exit prime and municipal funds because the 'risk-reward [balance]' had become 'misaligned.'"

It states, "Eliminating prime and municipal money market funds was not part of the potential reforms that the President's Working Group on Financial Markets outlined in December. Two months later, the SEC requested public comment on the suggested reforms. But the paper by Boston Fed officials 'legitimizes' the idea of doing away with prime and municipal money funds, says Peter Crane, CEO of Crane Data. However, opposition to killing the two money fund categories is strong, he notes. '[I]f they try to go that route, they're going to meet some fierce resistance,' Crane says."

The article says, "In fact, a May 24 comment letter penned by nearly 40 high-profile executives, academics and former regulators cites the Boston Fed officials' paper and mounts a defense to that proposal. 'We ... do not support abolishing prime money market funds,' the Committee on Capital Markets Regulation wrote. Members include Barbara Novick, former vice chair at BlackRock, as well as two former SEC commissioners, Daniel Gallagher and Roel Campos. 'Prohibiting prime [money market funds] would ... have unclear effects on financial stability as institutional investors could shift their assets to less-regulated alternatives,' the research group wrote. 'Abolishing prime [money market funds] could also have unintended consequences, including increasing funding costs for issuers of short-term debt and reducing returns for investors in prime [money market funds].'"

It adds, "Some of the possible reforms included in the President's Working Group report would ultimately result in eliminating prime and municipal funds, Crane notes. For example, the group proposed requiring that money funds hold capital in reserve to meet redemptions or that sponsors commit to supporting troubled products. The President's Working Group said it aimed to facilitate discussion and did not endorse any specific proposals."

Finally, ignites comments, "Many in the fund industry are lobbying for a more targeted reform: that the SEC reconsider its current practice of linking requirements for weekly liquid assets to the possibility of imposing liquidity fees and redemption gates. There is 'widespread agreement' that the link between the two 'exacerbated outflows from institutional prime funds during March 2020,' ICI Chief Economist Sean Collins said in a statement. 'It follows that regulators should focus their efforts on delinking.'"

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