The Investment Company Institute's latest "Money Market Fund Assets" report shows MMF assets hitting record levels for 6th week out of the past 7 (they were flat last week). ICI's asset series hit a record $5.583 trillion level, and shows MMFs up over $1.0 trillion, or 22.2%, over the past year. Assets are up by $848 billion, or 17.9%, year-to-date in 2023 (and up $762.7 billion, or 15.8%, since 2/22/23), with Institutional MMFs up $438 billion, or 14.3% and Retail MMFs up $411 billion, or 24.5%. Over the past 52 weeks, money funds have risen $1.015 billion, or 22.2%, with Retail MMFs rising by $596 billion (39.9%) and Inst MMFs rising by $420 billion (13.7%). (Note: We're still taking registrations to our upcoming European Money Fund Symposium, which is Sept. 25-26 in Edinburgh, Scotland. We hope to see you there!)
Their weekly release says, "Total money market fund assets increased by $14.37 billion to $5.58 trillion for the week ended Wednesday, August 30, the Investment Company Institute reported.... Among taxable money market funds, government funds increased by $8.44 billion and prime funds increased by $4.13 billion. Tax-exempt money market funds increased by $1.80 billion." ICI's stats show Institutional MMFs rising $10.9 billion and Retail MMFs rising $3.5 billion in the latest week. Total Government MMF assets, including Treasury funds, were $4.590 trillion (82.2% of all money funds), while Total Prime MMFs were $878.4 billion (15.7%). Tax Exempt MMFs totaled $115.1 billion (2.1%).
ICI explains, "Assets of retail money market funds increased by $3.46 billion to $2.09 trillion. Among retail funds, government money market fund assets decreased by $1.69 billion to $1.38 trillion, prime money market fund assets increased by $3.38 billion to $606.43 billion, and tax-exempt fund assets increased by $1.76 billion to $104.23 billion." Retail assets account for over a third of total assets, or 37.4%, and Government Retail assets make up 66.0% of all Retail MMFs.
They add, "Assets of institutional money market funds increased by $10.91 billion to $3.49 trillion. Among institutional funds, government money market fund assets increased by $10.13 billion to $3.21 trillion, prime money market fund assets increased by $745 million to $271.97 billion, and tax-exempt fund assets increased by $37 million to $10.89 billion." Institutional assets accounted for 62.6% of all MMF assets, with Government Institutional assets making up 91.9% of all Institutional MMF totals.
According to Crane Data's separate Money Fund Intelligence Daily series, money fund assets broke the $5.9 trillion level on August 1 and hit a record $5.967 trillion on Tuesday, 8/15, before easing back to $5.959 trillion yesterday. Assets have risen by $77.8 billion in August through 8/30 after rising by $34.7 billion in July. 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, Fitch Ratings published "Local Government Investment Pools:2Q23," which states, "Fitch Ratings' two local government investment pool (LGIP) indices experienced an aggregate asset increase in the second quarter of 2023 (2Q23). Combined assets for the Fitch Liquidity LGIP Index and the Fitch Short-Term LGIP Index were $576 billion at the end of 2Q23, representing increases of $17 billion qoq and $70 billion yoy, respectively. The Fitch Liquidity LGIP Index was up 2.2% qoq and the Fitch Short-Term LGIP Index was up 4.6% qoq, compared to average growth of 5.9% and 7.2%, respectively, in the second quarter over the past three years."
The update tells us, "Weighted average maturities (WAMs) rose in 2Q23 as the Fed slowed the pace of rate hikes. The WAM of the Fitch Liquidity LGIP Index increased to 30 days, still higher than prime '2a-7' money market funds at 27 days. The Fitch Short-Term LGIP Index ended the quarter with a duration of 1.20 years, up 5% since last quarter. Both Fitch indices ended 2Q23 with improved average yield profiles with average net yields of 5.10% for the Liquidity Index and 3.73% for the Short-Term Index. Due to its duration profile, the Liquidity Index is more positively responsive to the Fed's 2Q23 actions in comparison to the Short-Term Index."
It says, "The Fitch Liquidity LGIP Index increased exposure to Treasuries by 7.42% and decreased exposure to Government Agencies by -6.32% qoq. Exposure to CP, Corporates, and ABS cumulatively increased by 4%. This aligns with investor behavior following the resolution of the U.S. debt ceiling, where managers diversified back into U.S. Treasury exposure."
The Public Funds Investment Institute also recently published an update on LGIPs entitled, "LGIP Trends: Higher Yields, Plateauing Assets, a Bit More Risk." They comment, "Moderating asset growth, higher yields, and a move to a somewhat less defensive market risk position sum up local government investment pool fundamentals in the second quarter. Let's look at the numbers: LGIP assets grew modestly, and yields rose apace with rising short-term interest rates according to tracking reports recently published by FitchRatings and S&P Global."
The brief continues, "Several factors are behind the trend in LGIP assets: The sharp rise in short-term rates beginning 18 months ago encouraged investors to pay more attention to reducing uninvested balances.... The inflow of COVID-19 relief funds boosted state and local government financial assets in 2021. The flow is now reversed, with state and local governments required to spend Federal relief funds by 2026; The growth of state and local government tax revenue, which responds to the overfall pace of economic growth [and].... The level of bank deposits, which are the main alternative to LGIP investments for many governments. Deposits grew strongly beginning in 2020 -- from $13.7 trillion to $18.1 trillion in May 2022 when they peaked. They have since declined."
It adds, "To sum it up LGIP asset trends could weaken modestly in coming quarters as local government spending accelerates and banks compete vigorously to attract and hold deposits. Good news on the yield front. LGIP yields topped 5% at quarter-end for the first time in nearly 20 years. Interest earnings are now a meaningful contributor to state and local government revenues, especially for those entities that have significant investment balances."
