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Major Money Market Fund groups navigating negative interest rates
EPFR-tracked Money Market Funds posted their third straight outflow, and 10th in the past 15 weeks, going into the final days of August as ultra-low and negative rates of return prod investors to look for alternatives. These cash management vehicles absorbed over $1 trillion in March and April amidst the global sell-off triggered by the COVID-19 pandemic.
While Japanese and European Money Market Funds have been coping with negative interest rates at the short end of their yield curves for several years, managers of US MM Funds have generally been able to deliver a positive return for clients. But the compression of yields during the latest crisis has pushed real returns – investment gains minus fees – into negative territory. According to Paul Adams, Senior Editor at EPFR sister company iMoneyNet, “Right now 83.6% of the US fund providers who report to us are waiving or reducing fees to prevent clients experiencing de facto negative returns.”