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Money Market Funds Continue Growth Spurt

IMN Blog 

The story around the above table is a positive one for money-market funds (MMFs). In the first full month of this year’s second half, U.S. MMFs continued a growth spurt that began almost exactly a year ago (last year’s second half). Total assets, all Taxable assets, and assets in six key MMF categories all increased in July, and the end-of-month totals for all funds and for all Taxable funds reached decade highs, as the story notes.

In addition, July asset growth contributed to YTD asset growth of 8.3 percent for all funds and 9.1 percent for Taxable funds. As they have in the recent past, prime funds reported particularly strong asset growth: YTD, Prime Retail funds are up 20.4 percent and Prime Institutional funds are up 27.0 percent.

Assets flow to MMFs, ironically, in good economic conditions (driven by a greater need for operating cash, equipment purchases, payroll, and so on) and in uncertain times (driven by the safety and liquidity of the instruments in MMF portfolios). In addition, relatively high yields compared to many other short-term investments (not documented in the table) combined with the growth in MMF assets this year may reflect both sets of conditions: a strong U.S. economy AND some storm clouds on the horizon, including a slowdown in GDP, the Federal Reserve’s decision to lower its principal interest rate, tariff spats between the U.S. and China, and other geopolitical circumstances.

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