The Investment Company Institute's latest weekly "Money Market Fund Assets" report shows money fund assets skyrocketing in the latest week, their second biggest increase of the year and biggest jump since the week ended March 2. Over the past 52 weeks, money fund assets are up by $77 billion, or 1.7%, with Retail MMFs rising by $152 billion (10.6%) and Inst MMFs falling by $75 billion (-2.4%). ICI shows assets down by $73 billion, or -1.6%, year-to-date, with Institutional MMFs down $192 billion, or -5.9% and Retail MMFs up $118 billion, or 8.1%. (Note: Register soon for our "basic training" event, Money Fund University, which will take place Dec. 15-16 in Boston, Mass!)
The weekly release says, "Total money market fund assets increased by $47.50 billion to $4.63 trillion for the week ended Wednesday, November 2, the Investment Company Institute reported.... Among taxable money market funds, government funds increased by $36.10 billion and prime funds increased by $7.70 billion. Tax-exempt money market funds increased by $3.70 billion." ICI's stats show Institutional MMFs jumping $36.4 billion and Retail MMFs increasing $11.2 billion in the latest week. Total Government MMF assets, including Treasury funds, were $3.945 trillion (85.2% of all money funds), while Total Prime MMFs were $573.2 billion (12.4%). Tax Exempt MMFs totaled $113.5 billion (2.4%).
ICI explains, "Assets of retail money market funds increased by $11.15 billion to $1.59 trillion. Among retail funds, government money market fund assets increased by $3.48 billion to $1.14 trillion, prime money market fund assets increased by $5.70 billion to $342.49 billion, and tax-exempt fund assets increased by $1.97 billion to $100.13 billion." Retail assets account for over a third of total assets, or 34.3%, and Government Retail assets make up 72.1% of all Retail MMFs.
They add, "Assets of institutional money market funds increased by $36.35 billion to $3.04 trillion. Among institutional funds, government money market fund assets increased by $32.62 billion to $2.80 trillion, prime money market fund assets increased by $2.00 billion to $230.71 billion, and tax-exempt fund assets increased by $1.73 billion to $13.34 billion." Institutional assets accounted for 65.7% of all MMF assets, with Government Institutional assets making up 92.0% of all Institutional MMF totals. (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.)
For the month of October through 10/31, MMF assets increased by $18.9 billion to $5.054 trillion according to Crane's MFI XLS, which tracks a broader universe of funds than ICI. Crane Data's Prime asset totals increased $26.8 billion in October to $995.4 billion. For the first two days of November, we show MMFs increasing by $26.2 billion to $5.080 trillion. Prime MMFs broke the $1.0 trillion level, rising $6.3 billion to $1.002 trillion. Given that November and December are the two strongest months of the year seasonally, we expect the big inflows to continue in coming weeks.
In other news, Fitch Ratings posted the release, "U.S. ESG Money Market Funds Held Steady in 3Q22," and published "U.S. ESG Money Market Funds: 3Q22." They tell us, "On Sept. 16, 2022, State Street announced the liquidation of the State Street ESG Liquid Reserves Fund at the end of October 2022. From the announcement until liquidation, the fund will primarily be invested in cash and/or cash equivalents. Going forward, Fitch will no longer track this fund and the non-ESG (environmental, social and governance) comparison fund, State Street Institutional Liquid Reserves Fund, in this report."
They write, "Money market funds (MMFs) shortened maturities in response to the Federal Reserve's rate hikes. Both ESG and non-ESG MMFs had average weighted average maturities of 14 days for the third quarter. Gross yields of ESG MMFs averaged 2.27% in 3Q22, the same as non-ESG MMFs. ESG MMFs' net yields averaged 2.12% during the quarter, which was 9 basis points(bps) higher than for comparable non-ESG MMFs due to the lower expense ratios of ESG funds and the lifting of fee waivers for non-ESG funds."
The update states, "The Fed increased rates by 75bps twice in 3Q22, on July 27 and Sept. 21. ESG MMFs' gross and net yields were up 155bps and 156bps, respectively, between June 30, 2022 and Sept. 30, 2022, while non-ESG MMFs' gross and net yields rose 155bps and 154bps over the same period, respectively. Following each rate hike, yield spreads decreased but quickly stabilized.... Yields will continue to increase as the Fed's benchmark federal-funds rate is expected to reach at least 425bps by the end of this year."
It adds, "Allocations in ESG MMFs remained relatively stable this quarter, but with slightly increased allocations to Bank of New York Mellon, Barclays and Bank of America during this period, totaling 5.6%, while allocations in non-ESG MMFs were increased 1.3% in total. Allocations to Federal Reserve Bank of New York and Mitsubishi UFJ increased quarter over quarter in non-ESG MMFs, while staying stable in ESG MMFs. Non-ESG MMF exposure to the Federal Reserve Bank of New York was 15.3% during this period to take advantage of the Fed's Reverse Repurchase Program (RRP) and higher rates. ESG MMFs continue to be ineligible for the Fed’s RRP due to their smaller size."
Fitch also published "U.S. Money Market Funds: October 2022," which summarizes, "Total taxable money market fund (MMF) assets increased by $7.8 billion from Aug. 31, 2022 to Sept. 30, 2022, according to Crane Data. Government MMFs lost $17.9 billion in assets during this period, and prime MMFs gained $25.7 billion. Total assets have decreased by $22.4 billion since Dec. 31, 2021."
Finally, they tell us, "Taxable MMFs decreased exposure to U.S. Treasuries from August to September. Treasury holdings decreased by $85 billion, while repo holdings increased by $75 billion, from Aug. 31, 2022 to Sept. 30, 2022, according to Crane Data. Repo remained the largest portfolio segment, for the 13th consecutive month. As of Sept. 30, 2022, institutional government and prime MMF net yields were 2.59% and 2.80%, respectively, per Crane Data. Yields are up significantly."
