ICI's most recent "Money Market Fund Assets" report shows money fund totals jumping $121 billion in the latest week, breaking over the $5.0 trillion barrier for the first time ever. It was the 5th largest weekly increase ever and the largest in history if you exclude 4 coronavirus lockdown panic weeks in March and April 2020. The failure of Silicon Valley Bank has raised concerns over uninsured bank deposits, and large investors are fleeing into money funds. Over the past 52 weeks, money fund assets have risen $456 billion, or 10.0%, with Retail MMFs rising by $408 billion (28.3%) and Inst MMFs rising by $48 billion (1.5%). ICI shows assets up by $280 billion, or 5.9%, year-to-date in 2023, with Institutional MMFs up $111 billion, or 3.6% and Retail MMFs up $169 billion, or 10.1%. (Reminder: We're still taking registrations for Crane's Bond Fund Symposium, which is next week, March 23-24, in Boston. We hope to see you there!)
The weekly release says, "Total money market fund assets increased by $120.93 billion to $5.01 trillion for the week ended Wednesday, March 15, the Investment Company Institute reported.... Among taxable money market funds, government funds increased by $144.65 billion and prime funds decreased by $18.05 billion. Tax-exempt money market funds decreased by $5.66 billion." ICI's stats show Institutional MMFs surging $100.8 billion and Retail MMFs rising $20.2 billion in the latest week. Total Government MMF assets, including Treasury funds, were $4.128 trillion (82.3% of all money funds), while Total Prime MMFs were $776.2 billion (15.5%). Tax Exempt MMFs totaled $110.6 billion (2.2%).
ICI explains, "Assets of retail money market funds increased by $20.15 billion to $1.85 trillion. Among retail funds, government money market fund assets increased by $34.17 billion to $1.23 trillion, prime money market fund assets decreased by $9.63 billion to $515.66 billion, and tax-exempt fund assets decreased by $4.39 billion to $98.89 billion." Retail assets account for over a third of total assets, or 36.8%, and Government Retail assets make up 66.8% of all Retail MMFs.
They add, "Assets of institutional money market funds increased by $100.78 billion to $3.17 trillion. Among institutional funds, government money market fund assets increased by $110.48 billion to $2.90 trillion, prime money market fund assets decreased by $8.42 billion to $260.50 billion, and tax-exempt fund assets decreased by $1.27 billion to $11.67 billion." Institutional assets accounted for 63.2% of all MMF assets, with Government Institutional assets making up 91.4% of all Institutional MMF totals.
ICI Chief Economist Sean Collins comments, "Investors flocked to US government money market funds in the past week, apparently looking for an alternative to some banks. In addition, prime money market funds saw small outflows."
According to Crane Data's separate Money Fund Intelligence Daily series, money fund assets increased by $67.4 billion for the month of February (through 2/28/23), and they've risen another $135.2 billion over the first 15 days of March to a record $5.388 trillion. (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, Bloomberg writes about money market funds in two articles: "You Can Trust Your Money Fund Not to Fail This Time" and "Schwab Clients Shift From Prime Funds to Safer Portfolios." The former says, "In recent history, when there have been tremors in the banking system, money-market funds have shuddered.... If anyone is worried this time around -- as would be natural -- they can rest a bit easier. In 2008, the Reserve Primary Fund, a money-market fund, 'broke the buck'.... But we've come a long way. As investors second-guess the safety of just about everything after the failure of three regional US banks and the nosedive of Credit Suisse Group AG, there's no reason to think money-market funds are poised for another reckoning."
They explain, "First, the landscape has changed. Just before the Great Recession, prime money-market funds, or those that mostly invested in corporate debt such as the kind issued by Lehman, comprised almost 60% of total money fund assets, according to Crane Data. Now, the majority of money-market funds, or 76%, only hold Treasuries or government bonds -- that's it.... In fact, some US money-market funds don't even buy the debt of US banks because their ratings often aren't high enough. European banks may be excluded, too. Federated Hermes Inc., which is one of the biggest providers of money-market funds, said this week during a webinar that debt from Credit Suisse, Deutsche Bank AG and Commerzbank AG weren't on 'approved' lists of corporate paper -- and hadn't been for some time."
Bloomberg adds, "Another thing that's different this time around: the maturity of the debt held by most money-market funds. In the Lehman era, it was common for funds to hold debt that matured in six months or even a year. That's changed. The average weighted maturity for a holding is now just two weeks, meaning everything is a lot more liquid and investors can more easily get their money back."
Their article on Schwab's money funds tells us, "Charles Schwab Corp. was hit with $8.8 billion in net outflows from its prime money market funds this week as investors scrutinized the brokerage's resilience amid questions about the health of the wider financial industry. Clients pulled money from two Schwab Value Advantage Money funds, which had a combined $195 billion of assets as of March 15, representing the largest redemptions in at least six months, according to company data compiled by Bloomberg. The data cover the three days through March 15."
It continues, "Schwab's money market funds are stress-tested for their exposure to interest rate changes and have daily and weekly liquidity levels above regulatory requirements, according to Mike Peterson, a company spokesman. The company's prime funds have seen significant growth in assets over the last year, he said. 'In a rising interest rate environment, we had clients taking advantage of fast-rising yields and now with market volatility, as we would expect, clients are seeking the relative safety of government funds,' Peterson said in an email."
The piece adds, "Investors have rushed into Treasury and government money market funds in the last week, pushing combined money fund assets to a record $5.39 trillion as of March 15, according to Crane Data, a firm that specializes in monitoring the industry. More than $100 billion has flowed into money funds in the last week, according to the firm."
