ICI's latest "Money Market Fund Assets" report shows assets inching higher over the latest week, their third tiny increase in a row and fifth over the past six weeks. The release says, "Total money market fund assets increased by $4.25 billion to $4.53 trillion for the week ended Wednesday, August 25, the Investment Company Institute reported today. Among taxable money market funds, government funds increased by $2.16 billion and prime funds increased by $2.29 billion. Tax-exempt money market funds decreased by $208 million." Money fund assets are up by $229 billion, or 5.3%, year-to-date in 2021. Inst MMFs are up $329 billion (11.9%), while Retail MMFs are down $100 billion (-6.6%). (Month-to-date in August through 8/25, money fund assets have declined by $6.1 billion to $4.940 billion, according to Crane Data's MFI Daily collection.)
ICI's stats show Institutional MMFs increasing $6.3 billion and Retail MMFs decreasing $2.1 billion in the latest week. Total Government MMF assets, including Treasury funds, were $3.961 trillion (87.5% of all money funds), while Total Prime MMFs were $475.0 billion (10.5%). Tax Exempt MMFs totaled $91.0 billion (2.0%). Over the past 52 weeks, money fund assets have decreased by $13 billion, or -0.3%, with Retail MMFs falling by $107 billion (-7.0%) and Inst MMFs rising by $94 billion (3.1%). (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.)
They explain, "Assets of retail money market funds decreased by $2.06 billion to $1.43 trillion. Among retail funds, government money market fund assets decreased by $349 million to $1.13 trillion, prime money market fund assets decreased by $1.37 billion to $219.15 billion, and tax-exempt fund assets decreased by $338 million to $79.44 billion." Retail assets account for just under a third of total assets, or 31.5%, and Government Retail assets make up 79.1% of all Retail MMFs.
ICI adds, "Assets of institutional money market funds increased by $6.31 billion to $3.10 trillion. Among institutional funds, government money market fund assets increased by $2.51 billion to $2.83 trillion, prime money market fund assets increased by $3.67 billion to $255.84 billion, and tax-exempt fund assets increased by $130 million to $11.55 billion." Institutional assets accounted for 68.5% of all MMF assets, with Government Institutional assets making up 91.4% of all Institutional MMF totals.
In other news, BNY Mellon also submitted a comment letter to the Financial Stability Board in response to the FSB's "Policy proposals to enhance money market fund resilience: Consultation Report". They write, "BNY Mellon Investment Management welcomes the opportunity to respond to this Consultation Report on policy proposals to enhance money market fund resilience. BNY Mellon Investment Management is one of the world's leading investment management organizations and one of the top U.S. wealth managers, encompassing BNY Mellon's affiliated investment management firms, wealth management services and global distribution companies."
They explain, "Our input reflects perspectives from an asset management lens, in particular BNY Mellon Investment Adviser, Inc., which is registered with the U.S. Securities and Exchange Commission as an investment adviser under the Investment Advisers Act of 1940. As of July 31, 2021, BNYM Investment Adviser managed 119 domestic investment company portfolios with approximately $324 billion in assets, for approximately 211 thousand investor accounts nationwide. As of the same date, BNYM Investment Adviser managed approximately $234.4 billion invested in 17 domestic money market mutual funds structured within the confines of Rule 2a-7 under the Investment Company Act of 1940."
CEO Hanneke Smits comments, "BNY Mellon supports the following overarching goals for money market fund reform: Effectively address the structural vulnerabilities in money market funds that have been impacted by stress in short-term funding markets, Improve the resilience and functioning of short-term funding markets, and Reduce the likelihood that interventions and taxpayer support would be needed to prevent future money market fund runs or address stresses in short-term funding markets."
He tells us, "Due to the breadth of suggestions offered in the FSB Consultation, we are focusing on the recommendations that we believe would have the greatest potential to support the continued smooth functioning of the money market fund industry in various jurisdictions and market environments: 1. Decouple link between regulatory liquidity thresholds and imposition of fees and gates. 2. Enhance liquidity requirements, such as limits on eligible assets. These reforms should be aimed at prime MMFs rather than public debt MMFs, which did not suffer the same liquidity outflows that were witnessed in other parts of the market."
BNY Mellon says, "Other recommendations, such as the move from constant net asset value ('NAV') to floating NAV, swing pricing, minimum balance at risk, and capital buffer would fundamentally change the nature and attractiveness of the underlying MMF relative to other types of investment funds (e.g., short-term bond funds) or cash and cash substitutes (e.g., bank deposits, government funds where available in the US and UK).... We would note that swing pricing would have a particularly detrimental impact.... We expect reforms that materially change the attractiveness of prime money market funds will push assets into stable NAV government only funds and less regulated products such as separately managed accounts and private liquidity pools."
Finally, they add, "We appreciate the FSB's efforts in proposing different mechanisms for enhancing the resilience of the money market fund industry. While each proposal presents an opportunity to enhance the resilience of the market and reduce the likelihood of government interventions and taxpayer support, we believe that decoupling regulatory liquidity minimum from the imposition of fees and gates presents the greatest opportunity to enhance the resilience of MMFs, reduce the likelihood of government interventions and taxpayer support, and preserve the attractiveness of non-public debt MMFs. In addition, enhanced liquidity requirements, such as limits on eligible assets, would reduce liquidity transformation depending on the MMF jurisdiction and market."
