The Investment Company Institute's latest weekly "Money Market Fund Assets" report shows money market mutual fund assets rising another $11.3 billion to a record $6.474 trillion, following an increase of $38.7 billion the week prior and a jump of $120.8 billion two weeks prior -- the 6th largest weekly increase ever and the largest non-Covid or non-SVB related increase. Assets have risen in 20 of the last 25 weeks, increasing by $496.9 billion (or 8.3%) since April 24. MMF assets are up by $588 billion, or 12.4%, year-to-date in 2024 (through 10/9/24), with Institutional MMFs up $272 billion, or 8.9% and Retail MMFs up $316 billion, or 18.8%. Over the past 52 weeks, money funds have risen by $768 billion, or 13.5%, with Retail MMFs up by $434 billion (20.0%) and Inst MMFs rising by $334 billion (9.4%). (Note: Crane Data's separate and more comprehensive asset series shows money funds hitting a record $6.816 trillion on October 3 but closing just shy of this mark on Wednesday, 10/9.)
ICI's weekly release says, "Total money market fund assets increased by $11.26 billion to $6.47 trillion for the week ended Wednesday, October 9, the Investment Company Institute reported.... Among taxable money market funds, government funds increased by $4.72 billion and prime funds increased by $7.22 billion. Tax-exempt money market funds decreased by $675 million. " ICI's stats show Institutional MMFs rising $3.2 billion and Retail MMFs rising $8.1 billion in the latest week. Total Government MMF assets, including Treasury funds, were $5.292 trillion (81.7% of all money funds), while Total Prime MMFs were $1.052 trillion (16.3%). Tax Exempt MMFs totaled $130.3 billion (2.0%).
ICI explains, "Assets of retail money market funds increased by $8.07 billion to $2.61 trillion. Among retail funds, government money market fund assets increased by $3.81 billion to $1.66 trillion, prime money market fund assets increased by $4.76 billion to $829.72 billion, and tax-exempt fund assets decreased by $493 million to $119.26 billion." Retail assets account for over a third of total assets, or 40.2%, and Government Retail assets make up 63.6% of all Retail MMFs.
They add, "Assets of institutional money market funds increased by $3.19 billion to $3.87 trillion. Among institutional funds, government money market fund assets increased by $915 million to $3.64 trillion, prime money market fund assets increased by $2.46 billion to $222.58 billion, and tax-exempt fund assets decreased by $181 million to $11.06 billion." Institutional assets accounted for 59.8% of all MMF assets, with Government Institutional assets making up 94.0% of all institutional MMF totals.
According to Crane Data's separate Money Fund Intelligence Daily series, money fund assets have risen by $44.9 billion in October (through 10/9) to $6.810 trillion. Assets rose by $149.8 billion in September, $109.7 billion in August, $16.6 billion in July, $15.7 billion in June and $91.4 billion in May, but they fell $15.8 billion in April and $68.8 billion in March. They rose $72.1 billion in February, $93.9 billion in January, $32.7 billion in December and $226.4 billion in November. MMF totals fell by $31.9 billion last October. Note that ICI's asset totals don't include a number of funds tracked by the SEC and Crane Data, so they're over $300 billion lower than Crane's asset series.
In other news, ICI also wrote a comment letter to ESMA, the European Securities and Markets Authority titled, "Re: Draft Regulatory Technical Standards and Guidelines on Liquidity Management Tools under the AIFMD and UCITS Directive. They state, "The Investment Company Institute is submitting its views on the European Securities and Markets Authority's (ESMA) consultations regarding draft regulatory technical standards (RTS) and guidelines on liquidity management tools (LMTs), which have been proposed as part of the amendments to the Alternative Investment Fund Management Directive (AIFMD) and Undertakings for Collective Investment in Transferrable Securities (UCITS) Directive (the Directives)."
The letter tells us, "Our comments specifically address UCITS, ETFs, and related fund structures, including money market funds (MMFs), that our members manage in the European Union and in global markets. These funds are integral in supporting economic growth, fostering capital formation, and providing the benefits of collective investment to a wide range of investors, particularly long-term individual investors."
It continues, "While we are generally supportive of the draft RTS and Guidelines set forth in the Consultations, which are aligned with the recent international work on LMTs, we have concerns about prescriptive and rigid elements of the approach that ESMA may be considering. In addition to our detailed responses to the Consultations' questions, we offer the following overarching comments on themes that arise across our responses."
These include: "1. Use of LMTs should be consistent with the fund's policies and legal requirements..... 2. The mechanistic approaches in the draft Guidelines and RTS lack flexibility and feasibility. We support ESMA's recognition that anti-dilution LMTs do not need to be permanently activated. ICI research shows that the average dilution for UCITS is minimal, and applying anti-dilution tools daily would increase costs without substantial benefits. However, we do not endorse mandatory or automatic activation thresholds, especially for quantitative LMTs, which are deployed only after a fund manager conducts a fact-specific analysis in response to unpredictable and unusual events."
They also include: "3. Prescriptive LMT requirements could constrain effective liquidity risk management. We acknowledge ESMA's recognition of fund managers' responsibility for managing liquidity risk, including decisions around the selection, calibration, and activation/deactivation of LMTs. We support the flexible aspects of the draft RTS and Guidelines that recognise there is no homogeneous approach to liquidity risk management, as Article 18a of the Directive states that ESMA 'should not restrict the ability of UCITS to use any appropriate liquidity management tool for all asset classes, jurisdictions and market conditions.'"
It adds, "4. Disclosures should avoid triggering opportunistic investor behaviour. We fully support ESMA's objective of promoting fairness and transparency to protect investors. However, it is crucial that disclosures do not unintentionally trigger counterproductive investor behaviour, such as premature redemptions in anticipation of LMT activation. To mitigate this risk, we recommend that the disclosure provisions be revised. Instead of requiring disclosure of specific activation thresholds (e.g., for imposing gates), funds would provide general factors they would consider when making LMT decisions, including activation. This approach would enable funds to offer useful guidance to investors regarding LMTs without setting and disclosing rigid thresholds that could prompt premature investor actions."
The original press release, "ESMA consults on Liquidity Management Tools for funds," explains, "The European Securities and Markets Authority (ESMA), the EU's financial markets regulator and supervisor, is seeking input on draft guidelines and technical standards under the revised Alternative Investment Fund Managers Directive (AIFMD) and the Undertakings for Collective Investment in Transferable Securities (UCITS) Directive. Both Directives aim to mitigate potential financial stability risks and promote harmonisation of liquidity risk management in the investment funds sector."
Verena Ross, ESMA Chair, comments, "The revised AIFMD and UCITS Directive have introduced long-awaited provisions on the availability and use of Liquidity Management Tools. ESMA is now consulting on how to apply these provisions in practice. These new rules being proposed are in line with the latest global standards provided by the FSB and IOSCO, and will contribute to the strengthening of the EU regulatory and supervisory regime for investment funds. By having the right implementing rules in place, we can make the EU framework for investment funds both more resilient and more efficient, supporting the development of attractive, effective and stable EU capital markets."
The release adds, "In the draft Regulatory Technical Standards (RTS) on the characteristics of Liquidity Management Tools (LMTs) ESMA defines the constituting elements of each LMT, such as calculation methodologies and activation mechanisms. ESMA also publishes draft Guidelines on LMTs of UCITS and open-ended AIFs, providing guidance on how managers should select and calibrate LMTs, in light of their investment strategy, their liquidity profile and the redemption policy of the fund. These draft RTS and guidelines are designed to promote convergent application of the Directives for both UCITS and open-ended AIFs and make EU fund managers better equipped to manage the liquidity of their funds, in preparation for market stress situations. Additionally, they intend to clarify the functioning of specific LMTs, such as the use of side pockets, a practice that currently varies significantly across the EU."
Finally, under "Next Steps," they state, "The publication of the two consultations is a key step in the implementation of the new AIFMD and UCITS Directive. ESMA welcomes responses to the consultations by 8 October. Following this, ESMA will deliver the final RTS and guidelines by 16 April 2025."
