As we wrote last Wednesday, the Investment Company Institute recently published its "2023 Investment Company Fact Book," an annual compilation of statistics and commentary on the mutual fund industry. We reviewed much of the money fund content in our May 24 News, "ICI Publishes 2023 Fact Book, Reviews US, Worldwide Money Funds in '22." But below we focus on the numerous "Data Tables" involving "Money Market Mutual Funds." ICI lists annual statistics on shareholder accounts, the number of funds, net assets, net new cash flows, paid and reinvested dividends, composition of prime and government funds, and net assets of institutional investors by type of institution. (Note: Please register ASAP for our Money Fund Symposium show, which will be held June 21-23, 2023 in Atlanta, Ga!)
ICI's annual statistics show that there's been a steady decline in the number of money market mutual funds over the last 16 years. (See Table 35 in the Data Tables.) In 2022, according to the Fact Book, there were a total of 291 money funds, down from 305 in 2021, 340 in 2020, 364 in 2019, 802 in 2007, and down from 1,014 in 2001. The number of share classes stood at 1,045 in 2022, down from 1,061 in 2021, 1,108 in 2020, 1,126 in 2018 and 1,998 in 2008.
Table 36, "Money Market Funds: Total Net Assets by Type of Fund," shows that total net assets in taxable U.S. money market funds increased $21.0 billion to a record $4.777 trillion in 2022. At year-end 2022, $3.081 trillion (64.5%) was in institutional money market funds, while $1.696 trillion (35.5%) was in retail money market funds. Breaking the numbers down by fund type, $669.7 billion (14.0%) was in prime funds, $3.995 trillion (83.6%) was in government money market funds, and $112.4 billion (2.4%) was in tax-exempt accounts.
Also, Table 37, "Money Market Funds: Net New Cash Flow by Type of Fund," shows that there was a -$3.9 billion in net new cash flow into money market funds last year. A closer look at the data shows $258.1 billion in net cash outflows into institutional funds and a $254.3 billion cash inflow into retail funds. There were also $252.5 billion in net outflows from Government funds, versus $223.7 billion in net inflows from Prime funds.
Table 39, "Money Market Funds: Paid and Reinvested Dividends by Type of Fund," shows dividends paid by money funds were $26.6 billion, $13.9 billion of which was reinvested (52.2%). Dividends have been as high as $127.9 billion in 2007 (when rates were over 5%), and as low as $5.2 billion in 2011 (when rates were 0.05%). Reinvestment rates were 64.4% in 2007 and 62.3% in 2011, so they've remained relatively stable over the past decade.
ICI's Tables 40 and 41, "Taxable Government Money Market Funds: Asset Composition as a Percentage of Total Net Assets" and "Taxable Prime Money Market Funds: Asset Composition," show that of the $3.995 trillion in taxable government money market funds, 13.3% were in U.S. government agency issues, 59.1% were in Repurchase agreements, 17.1% were in U.S. Treasury bills, 10.1% were in Other Treasury securities, and 0.0% was in "Other" assets. The average maturity was 15 days, down 20 days from the end of 2021.
The second table shows that of the $669.7 billion in Prime funds at year-end 2022, 25.3% was in Certificates of deposit, 25.5% was in Commercial paper, 45.2% was in Repurchase agreements, 0.2% was in US government agency issues, 0.2% was in Other Treasury securities, 0.2% was in Corporate notes, 0.2% percent was in Bank notes, 0.1% was in US Treasury bills, 0.2% was in Eurodollar CDs, and 2.8% was in Other assets (which includes Banker's acceptances, municipal securities and cash reserves).
Table 60, "Total Net Assets of Mutual Funds Held in Individual and Institutional Accounts," shows that there was $1.750 trillion of assets in money funds with Institutional investors, and $3.027 trillion in MMF assets in Individual accounts in 2022.
Finally, Table 62, "Total Net Assets of Institutional Investors in Taxable Money Market Funds by Type of Institution and Type of Fund," shows of the total of $1.743 trillion in Total Institutional assets ($1.641 trillion in Institutional funds and another $102.4 billion in Retail funds), $738.5 billion were held by business corporations (42.4%), $757.2 billion were held by financial institutions (43.4%), $172.4 billion were held by nonprofit organizations (9.9%), and $75.4 billion were held by Other (4.3%).
In other news, The Wall Street Journal writes, "Tech Stocks Are Hot But Cash Is Cool." The Jason Zweig column tells us, "It's time for investors to change how they think about cash. The ultimate defensive asset, cash has always been the refuge from a storm in any market. For most of the past 15 years, though, cash has been trash -- almost literally. It earned you nothing, and it dragged down the rest of your portfolio as just about every other asset soared. By keeping interest rates at or near zero, the Federal Reserve was all but ordering you to move your money out of cash."
He writes, "This year, though, cash is far from trash, and it isn't just for defense anymore either. It's become an offensive weapon. You can earn more than 5% on U.S. Treasury bills and on bank certificates of deposit. Although that return doesn't count inflation, it's high enough not only to protect you from a drop in other assets, but to be competitive with them."
The article adds, "Being able to earn 5%-plus with a government guarantee is an advantage investors haven’t had since before the 2008-09 financial crisis. When the risk-free rate is this high, you should think twice about taking risk.... For maturities under one year, Treasurys and money-market funds tend to offer higher returns than CDs, at least for the time being. Even if you're the longest of long-term investors, every once in a while it pays to snap up short-term opportunities."
