ICI released its latest monthly "Trends in Mutual Fund Investing" and "Month-End Portfolio Holdings of Taxable Money Funds" for May 2022 Wednesday. The "Trends" report shows that money fund assets decreased $8.0 billion in May to $4.515 trillion. This follows a decrease of $71.0 billion in April, an increase of $9.6 billion in March, a decrease of $38.3 billion in February, a decrease of $136.1 billion in January and increase of $136.1 billion in December (coincidentally the exact same size as January's decline). For the 12 months through May 31, 2022, money fund assets decreased by $92.4 billion, or -2.0%.
The monthly release states, "The combined assets of the nation's mutual funds decreased by $98.96 billion, or 0.4 percent, to $23.63 trillion in May, according to the Investment Company Institute's official survey of the mutual fund industry. In the survey, mutual fund companies report actual assets, sales, and redemptions to ICI.... Bond funds had an outflow of $85.74 billion in May, compared with an outflow of $56.14 billion in April..... Money market funds had an outflow of $8.86 billion in May, compared with an outflow of $67.69 billion in April. In May funds offered primarily to institutions had an outflow of $28.96 billion and funds offered primarily to individuals had an inflow of $20.10 billion."
The Institute's latest statistics show that Taxable funds and Tax Exempt MMFs moved in different directions last month. Taxable MMFs decreased by $15.1 billion in May to $4.415 trillion. Tax-Exempt MMFs increased $7.2 billion to $99.8 billion. Taxable MMF assets decreased year-over-year by $99.3 billion (-2.2%), and Tax-Exempt funds rose by $6.9 billion over the past year (7.4%). Bond fund assets decreased by $73.1 billion in May to a $4.970 trillion, and they've decreased by $470.5 billion (-8.6%) over the past year.
Money funds represent 19.1% of all mutual fund assets (up 0.1% from the previous month), while bond funds account for 21.0%, according to ICI. The total number of money market funds was 300, down 1 from the prior month and down from 316 a year ago. Taxable money funds numbered 241 funds, and tax-exempt money funds numbered 59 funds.
ICI's "Month-End Portfolio Holdings" confirms another plunge in Treasuries and jump in Repo last month. Repurchase Agreements remained the largest composition segment in May, increasing $51.6 billion, or 2.4%, to $2.228 trillion, or 50.5% of holdings. Repo holdings have increased $877.3 billion, or 65.0%, over the past year. (See our June 10 News, "June MF Portfolio Holdings: NY Fed Repo Now Bigger Than US Treasuries.)
Treasury holdings in Taxable money funds fell sharply again last month, though they remained the second largest composition segment. Treasury holdings decreased $110.3 billion, or -7.1%, to $1.450 trillion, or 32.8% of holdings. Treasury securities have decreased by $768.2 billion, or -34.6%, over the past 12 months. U.S. Government Agency securities were the third largest segment; they increased $28.4 billion, or 8.0%, to $385.4 billion, or 8.7% of holdings. Agency holdings have fallen by $155.0 billion, or -28.7%, over the past 12 months.
Certificates of Deposit (CDs) remained in fourth place; they dropped by $4.9 billion, or -2.8%, to $168.6 billion (3.8% of assets). CDs held by money funds shrank by $25.1 billion, or -13.0%, over 12 months. Commercial Paper remained in fifth place, up $777 million, or 0.6%, to $128.6 billion (2.9% of assets). CP has decreased by $40.0 billion, or -23.7%, over one year. Other holdings decreased to $22.5 billion (0.5% of assets), while Notes (including Corporate and Bank) rose to $2.5 billion (0.1% of assets).
The Number of Accounts Outstanding in ICI's series for taxable money funds increased to 57.503 million, while the Number of Funds decreased by one this past month to 241. Over the past 12 months, the number of accounts rose by 13.569 million and the number of funds decreased by 10. The Average Maturity of Portfolios was a record low 28 days, unchanged from April. Over the past 12 months, WAMs of Taxable money have decreased by 9.
In other news, a press release entitled, "MSRB Research Reveals Significant Shifts in Municipal Securities Ownership," explains, "In its latest research report, the Municipal Securities Rulemaking Board (MSRB) examines trends in municipal securities ownership since 2004, revealing a continuous decline in individual investor direct ownership of municipal securities while ownership through funds has steadily risen. Looking at Federal Reserve data from 2004 through the first quarter of 2022, the MSRB found that ownership among banks, insurance companies, money market funds and foreign investors has also shifted, with various factors driving these trends, including changes in U.S. tax law, the prevailing interest rate environment, and the availability of taxable securities, among other changes."
It tells us, "While gaining approximately 47% since 2004, overall growth of the municipal securities market has slowed substantially in recent years. Ownership of municipal securities has changed significantly during that time period, with ownership through funds -- primarily mutual funds and exchange-traded funds (ETFs) -- taking a significant share from direct ownership as individual investor product preferences have shifted.... Other key developments since 2004 include: A substantial decline in money market fund ownership of municipal securities, from an all-time high of 15.6% of the market in 2008 to just 2.5% of the market in 2022."
The full report, "Trends in Municipal Securities Ownership," says about "Money Market Funds," "Many of the holding classes covered thus far have either increased their share of the municipal market over the past 17 years, or at least mostly retained their share. Some of the gains in these classes' municipal market share can be attributed to the massive decline in holdings of money market funds, a classification of mutual funds that are invested in securities that are liquid, have short-term effective maturities and are viewed as having minimal credit risks. Tax-exempt money market funds were developed as an option for investors to purchase a pool of securities that generally provided higher returns than interest-bearing bank accounts, as well as exemption from certain income taxes."
It tells us, "Holdings of municipal securities by money market funds hit their all-time high during Q4 of 2008 when they reached $519 billion, or 15% of the total market. The period of 2005 through 2008 saw massive inflows from money market funds, totaling $187 billion or an average of $47 billion per year. This was by far the highest level of inflows for any holding class during the four-year period, with the second-strongest inflows coming from P&C insurers at $108 billion. Beginning in 2009, this trend reversed. During 12 of the past 13 years, money market funds have seen net losses of an average of $31 billion per year, totaling $399 billion. From 15.6% of the market in 2008, money market funds now account for just 2.5% of the municipal securities market."
The MSRB adds, "This trend has begun to reverse in Q4 of 2021 and Q1 of 2022, with money market funds' share growing by over $7 billion during this period. According to ICI data, while mutual fund outflows have intensified during 2022, shedding $78 billion between the weeks of January 5 and June 15, money market funds have seen net inflows, increasing their holdings by $16 billion during the same time frame."
