Invesco, the 11th largest manager of money market funds, reported its Q3 2026 earnings yesterday (see the earnings call transcript here), and the Atlanta-based firm discussed money market funds several times. President & CEO Andrew Schlossberg says, "Moving on to fundamental fixed income, within these capabilities, we had net outflows of $2.6 billion for the quarter, but this was heavily driven by a few relatively large institutional reallocations out of stable value and low-fee investment-grade index-oriented mandates. However, looking more broadly across all fixed-income products managed throughout Invesco, including strategies reported within ETFs and our China JV, we generated a more respectable $1.3 billion of net inflows for the quarter. We continue to see strong inflows for active fixed income ETFs and SMAs within the wealth management channels. Our entire SMA platform, which also includes a portion of equity assets, now stands at nearly $41 billion in AUM."
CFO Allison Dukes explains, "Strong organic growth and money market inflows more than offset a negative market impact in the third quarter and drove nearly a 3% increase in assets under management over the second quarter. Net long-term asset inflows were $35 billion in the third quarter, a 6% annualized organic growth rate, marking the 13th consecutive quarter of net inflows. Net flows into money market funds were very strong at $53 billion, while the negative market impact was $26 billion for the quarter. AUM at the end of the quarter increased to over $2.5 trillion, 19% higher than the third quarter of last year."
She continues, "Secular shifts in client demand continue to drive strong growth in lower fee products such as ETFs, including the QQQ, while the demand for higher fee products, such as fundamental equities, has not been as strong. We have seen the impact of the asset mix shift moderate over the past several quarters, resulting in a more modest decline in the net revenue yield. Strong global liquidity growth through our money market funds did impact our net revenue yield trend to a greater degree in the third quarter than in recent quarters. We did see the net revenue yield stabilize towards the end of the third quarter."
Asked about a Canadian money fund closing, Dukes replies, "The Canadian sale did have some impact on the net revenue yield, maybe about 0.2 of a basis point, 0.7 or so would've been really just driven by mix shift. That mix shift would include the really strong growth we saw in money market funds in the quarter. Nothing in there that I would say is especially concerning. The money market fund growth certainly came with revenue, and the organic revenue growth in the quarter was very strong. I would point us all back to the organic revenue growth that we continue to generate, even as the net revenue yield grinds tighter. That's what we’re trying to manage. That's what we're focused on. A net revenue yield is the outcome of where we’re seeing the growth coming from. But it was about 0.7 from that mix shift."
Another analyst asked about the firm's digital asset strategy. Schlossberg comments, "We think the tokenized fund market is going to continue to grow, and we think it is important. As you would have recalled a quarter or two ago, we took on our first tokenized money market type fund, an on-chain U.S. Treasury fund that we took over with Superstate for about $1 billion. That was our first foray. We are looking at some other stablecoin reserve money market fund tokenizations.... Then, of course, we are looking at ETFs, potentially traditional funds. That tokenization trend is going to happen not just overseas, it is going to happen in the U.S. We think it is very early. It is going to take time for it to develop, but through these partnerships, and through some launches on our own, we are absolutely going to participate."
A UBS Analyst, Mike Brown, says during the Q&A, "Obviously, we've seen interest rates really spike, and they've come down a bit from the recent highs. This quarter, you had really strong money market fund flows. Fixed income saw some net outflows. But Andrew, as you talked about, there's some unique dynamics underneath the surface.... As you think about clients, and how they allocate here, [I'd] love some thoughts on maybe where do ... the cash and fixed income flows go [from] here. Are clients starting to reallocate after that move, and how do they think about maybe a higher for longer global interest rate environment?"
Schlossberg replies, "I'll make a couple comments on liquidity.... Just to recall, `our liquidity or money funds business is largely an institutional business. Those flows that came in are from platforms and portals and corporate treasurers, and those flows were a function of good performance in our liquidity business as well. But they're not indicative, necessarily, of cash allocations increasing, and we wouldn't want to overstate that too much. In terms of where those flows are going, I think we're at an inflection point. If you look at where our flows have been, the trends are going towards the vehicles we mentioned before, SMAs, ETFs, model portfolios."
Finally, he adds, "There is much more activity, I'd say, in markets like the U.K., out in Asia, institutionally, with money just being in motion for different pension reform reasons or insurance consolidations or pension outsourcing consolidations, or just wealth creation. Some of these dynamics have nothing to do with rates, they just have to do with secular changes that are happening, and we're trying to be in front of that money when it comes. Our fixed income platform, you are seeing people shorter on the duration side. But you are starting to see folks look at higher yielding strategies as well in fixed income. We're starting to hear more demand for that. Quantitative strategies, people are starting to deploy beyond just passive to using factor-based strategies. That's a trend that we're seeing."
In other news, last week's "JPM Mid-Week US Short Duration Update" was titled, "September MMF holdings update: keeping it short and sweet." J.P. Morgan Securities tells us, "September marked a clear inflection in portfolio positioning for MMFs, as they decreased their T-bill exposure by $276bn, the largest monthly decline in 5 years ... as government MMFs rotated into both Treasury and Agency FRNs while prime MMFs rotated into repo; this shift in positioning showed up in WAMs, with government and prime fund WAMs declining by 1 day and 5 days, respectively."
They comment, "Quarter-end technicals were also clear: FICC-cleared repo increased by $107bn as dealer repo declined by $97bn; MMFs continued to allocate a sizable share of portfolios to financing markets, which stood at 35% at September month-end. As bill supply continues to rise, we expect incremental MMF demand for bills to come at the margin from repo allocation, which should translate into slightly firmer repo conditions; we look for SOFR to drift to flat to IORB on average, particularly as we move past the GSE period."
The update says, "September marked a clear inflection in portfolio positioning. Money funds had to navigate a tough mix all at once: shifting policy expectations, the usual seasonal T-bill paydowns, AUM declines, and another month of broadly soft funding conditions. The net result was straightforward -- money funds reduced bill exposure meaningfully, but they didn't simply replace it with repo. Aggregate MMF T-bill holdings fell $276bn MoM in September -- the largest monthly decline since June 2025.... In our view, this was less about a shift in preferences and more about mechanics: $130bn of total T-bill paydowns, combined with roughly $187bn of monthly outflows across government and prime funds, likely drove the decline."
It adds, "What's notable is what didn't happen. Even after shedding that much in bills, money funds didn't rotate meaningfully into repo. Part of the reason may be that repo demand has eased over the past few months -- potentially reflecting lower hedge fund leverage -- as reflected in SOFR volumes consistently running below $3tn since July. Beneath the surface, government MMFs cut repo by $34bn and instead leaned into Treasury and agency FRNs, increasing holdings by $70bn.... That move was supported by higher FRN supply in September -- agency FRNs up $44bn and Treasury FRNs up $27bn -- and also possibly reinforced by policy uncertainty, with markets pricing as much as 52bp of hikes by year-end during the month. Prime funds, by contrast, leaned more into financing markets, with repo up $47bn.... Net-net, MMF repo allocations rose only $9bn (ex ON RRP)."
