Money fund assets were flat in the latest week, declining by a mere $360 million to $3.320 trillion as of Wednesday, December 9, according to the Investment Company Institute's statistics. Over the past five weeks, money fund assets have decreased by a mere $18 billion, or 0.5%, averaging declines of a mere $4 billion a week. This follows a 34-week slide when funds dropped by $568 billion, or 14.5%, and averaged weekly declines of $16.7 billion.
ICI's latest weekly report says, "Taxable government funds decreased by $1.46 billion, taxable non-government funds increased by $3.15 billion, and tax-exempt funds decreased by $2.05 billion. Assets of retail money market funds decreased by $5.91 billion to $1.073 trillion.... Assets of institutional money market funds increased by $5.55 billion to $2.247 trillion."
Year-to-date, money fund assets have declined by $510 billion, or 13.3%. Retail assets have declined by $282 billion, or 20.8%, while Institutional assets have declined by $238 billion, or 9.6% YTD. Over the past 52 weeks, total money fund assets have fallen by $457 billion, or 12.8%, retail assets have fallen by $278 billion, or 21.4%, and institutional assets have fallen by $187 billion, or 8.2%.
It of course remains unclear whether this recent pause signals that the large outflows from money funds are finished. Since asset levels remains over $1 trillion higher than they were just over 3 years ago (they were at $2.311 trillion on Nov. 22, 2006), there still may be plenty of "hot money" to exit. But we believe institutional money will only leave in volume when sharp rate hikes begin, and even then one could argue that these investors have few other super-safe and liquid options. We also believe that the majority of rate-sensitive, brokerage-related or market-timing retail money is already gone, so that these outflows should slow substantially going forward. (See the December MFI for more discussion on our asset projections for 2010.)
