ICI's latest weekly "Money Market Fund Assets" report shows money fund assets bouncing back to record levels following two weeks of modest declines. Money funds saw their biggest weekly increase since April 29, 2020 during the first week of 2023, and they've risen by $235.0 billion (or 5.1%) over the past 13 weeks. Over the past 52 weeks, money fund assets are up by $174 billion, or 3.7%, with Retail MMFs rising by $258 billion (17.5%) and Inst MMFs falling by $69 billion (-2.2%). ICI shows assets up by $84 billion, or 1.8%, year-to-date in 2023, with Institutional MMFs up $14 billion, or 0.5% and Retail MMFs up $56 billion, or 3.3%. (Note: Please join us for our upcoming Bond Fund Symposium, which will take place March 23-24, 2023 at the Boston Hyatt Regency in Boston, Mass. See the latest agenda and information here.)
The weekly release says, "Total money market fund assets increased by $16.07 billion to $4.82 trillion for the week ended Wednesday, January 25, the Investment Company Institute reported.... Among taxable money market funds, government funds increased by $6.79 billion and prime funds increased by $14.08 billion. Tax-exempt money market funds decreased by $4.79 billion." ICI's stats show Institutional MMFs rising $8.5 billion and Retail MMFs increasing $7.6 billion in the latest week. Total Government MMF assets, including Treasury funds, were $3.982 trillion (82.6% of all money funds), while Total Prime MMFs were $719.9 billion (14.9%). Tax Exempt MMFs totaled $116.9 billion (2.4%).
ICI explains, "Assets of retail money market funds increased by $7.61 billion to $1.75 trillion. Among retail funds, government money market fund assets decreased by $1.56 billion to $1.18 trillion, prime money market fund assets increased by $12.99 billion to $460.67 billion, and tax-exempt fund assets decreased by $3.82 billion to $104.67 billion." Retail assets account for over a third of total assets, or 36.2%, and Government Retail assets make up 67.6% of all Retail MMFs.
They add, "Assets of institutional money market funds increased by $8.46 billion to $3.07 trillion. Among institutional funds, government money market fund assets increased by $8.35 billion to $2.80 trillion, prime money market fund assets increased by $1.08 billion to $259.27 billion, and tax-exempt fund assets decreased by $970 million to $12.21 billion." Institutional assets accounted for 63.8% of all MMF assets, with Government Institutional assets making up 91.2% of all Institutional MMF totals.
Month-to-date in January 2023 (through 1/25/23), money fund assets have increased by $9.2 billion, according to Crane Data's Money Fund Intelligence Daily. (Note that ICI's asset totals don't include a number of funds tracked by the SEC and Crane Data, so they're over $400 billion lower than Crane's asset series.)
In other news, CNBC Pro published a piece entitled, "High yields have investors piling into money market funds. Here's what you need to know." They explain, "High yields and a volatile stock market have investors piling into money market mutual funds. Holdings were near a record of $4.8 trillion in the week ended Jan. 18, according to the Investment Company Institute. That's off from the high of $4.814 trillion in total net assets the week ended Jan. 4 and above the prior peak of $4.79 trillion reached during the Covid-19 pandemic month of May 2020. Yet for retail funds, inflows are still climbing -- the week ended Jan. 18 saw a $4.97 billion increase into those money market funds, to bring net assets to a total of $1.74 trillion."
They quote ICI's Shelly Antoniewicz, "We have seen a lot of money coming into retail money market mutual funds since the Fed started tightening monetary policy." CNBC writes, "In fact, about $300 billion has flowed into retail money market funds since the end of February 2022, right before the Federal Reserve started ramping up interest rates, she said. As the central bank began hiking rates, the overnight federal funds rate followed. The Fed's last hike in December brought the rate to a targeted range between 4.25% and 4.5%. Another quarter-point increase is expected when the central bank meets next week."
They explain, "Retail assets make up about a third of the total money market fund pie, according to Peter Crane, founder of Crane Data, a firm that tracks money markets. The average yield on his Crane 100 list of the 100 largest taxable money funds is 4.13% and Crane expects soon after the next Fed rate hike, some money market funds will start breaking 5%."
The article says, "The poor performance of both the stock and bond markets in 2022 also made the funds more appealing, Antoniewicz noted. Another rocky year for stocks is expected, at least in the first half. A large majority of Americans may decide to just sit it out, according to the Allianz Life Quarterly Market Perceptions Study for the fourth quarter of 2022. Some 64% of those polled said they would rather have their money sit in cash than endure market swings, the study found."
CNBC also comments on MMFs, "[T]he yield on the product already takes into account the fees, Crane said. 'The yield tells you everything you need to know about anything,' he said. 'If your money market fund yield is lagging, you probably have a high expense money fund.' ... Crane's advice is to stick with funds that have yields that aren't too high and aren't too low. 'Be safely within the herd, toward the middle,' he said."
They add, "Also think about what you are going to do with the money and how quickly you have to access it. For instance, it may be worth giving up a quarter percentage point if it is with the same institution as your other bank accounts so that transfers can be quick and easy, Crane said.... As far as inflows are concerned, the mutual fund market is hitting a weak seasonal period now through Tax Day on April 15, Crane said."
Finally, CNBC's article tells us, "Those yields should stick around for a while, ICI's Antoniewicz said. Fed officials have indicated they expect to keep rates higher through the year, with no reductions until 2024. 'Usually when rates are moving up and level up at a relatively decent interest rate, which it appears that is where we are going, they will be attractive to retail investors,' she said."
