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Prime Money Market Funds (MMFs) on the Rebound

Prime Money Market Funds (MMFs) on the Rebound 

Prime money-market fund assets remain dramatically reduced from their pre-financial crisis levels, but they’re strengthening considerably, as recent data from iMoneyNet revealed.

Over the period beginning with the second quarter of 2018 through June 4 of this year – nearly a full year – prime retail and prime institutional funds have outperformed other categories of money-market funds. During that period, for example – as a table in iMoneyNet’s June issue of Money Market Insight showed – all taxable retail fund assets grew by 22.2 percent, but Prime Retail funds grew by 45.4 percent.

Similarly, among institutional funds, all Taxable Institutional fund assets grew at 8.2 percent, while Prime Institutional fund assets increased 34.0 percent.

Why such growth in prime funds compared to other categories? “Prime products are attractive alternatives for investors in this current financial environment who want to exit volatile equity and longer-term fixed income markets,” Deborah Cunningham, Chief Investment Officer – Global Liquidity Markets, and Senior Portfolio Manager at Federated Investors, explained to iMoneyNet’s editor, Paul Adams.

Further, she said, the yields on bank deposits – with which money-funds have competed since the financial crisis – “have lagged the rising-rate environment in recent years, and investors are paying attention by switching their cash positions to money funds.”

The full story is available in this month’s issue of iMoneyNet’s Money Market Insight.

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