Money market fund assets were roughly flat for the 5th year in a row in 2016, but they actually fell slightly, ending four straight years of fractional gains. While official monthly numbers aren't in yet, ICI's weekly "Money Market Fund Assets" report shows money fund assets down about $31 billion, or 1.1%, in 2016 (through 12/28), compared to increases of $26 billion in 2015, $14 billion in 2014, $14 billion in 2013, and $10 billion in 2012. (Assets suffered steep declines in 2009, 2010, and 2011, falling $537 billion, $483 billion and $115 billion, respectively, after rising an average of $591 billion the prior 3 years.) In 2017, though, money fund assets declined in the first week of the New Year.
Yesterday's ICI release says, "Total money market fund assets decreased by $11.25 billion to $2.72 trillion for the week ended Wednesday, January 4, the Investment Company Institute reported.... Among taxable money market funds, government funds decreased by $12.64 billion and prime funds increased by $1.22 billion. Tax-exempt money market funds increased by $170 million." Total Government MMF assets, which include Treasury funds too and which represent 81.3% of all money funds, stand at $2.209 trillion, while Total Prime MMFs, which total 13.9%, stand at $377.6 billion. Tax Exempt MMFs total $131.1 billion, or 4.8%.
ICI explains, "Assets of retail money market funds increased by $4.47 billion to $987.68 billion. Among retail funds, government money market fund assets increased by $3.52 billion to $607.77 billion, prime money market fund assets increased by $1.11 billion to $253.50 billion, and tax-exempt fund assets decreased by $150 million to $126.41 billion." Retail assets account for just over a third of total assets, or 36.3%, and Government Retail assets total 61.5% of all Retail MMFs.
The release continues, "Assets of institutional money market funds decreased by $15.72 billion to $1.73 trillion. Among institutional funds, government money market fund assets decreased by $16.16 billion to $1.60 trillion, prime money market fund assets increased by $110 million to $124.06 billion, and tax-exempt fund assets increased by $330 million to $4.74 billion." Institutional assets account for 63.7%, with Government Inst assets making up 92.6% of all Institutional MMFs.
The update notes, "ICI reports money market fund assets to the Federal Reserve each week. Data for previous weeks reflect revisions due to data adjustments, reclassifications, and changes in the number of funds reporting. Weekly money market assets for the last 20 weeks are available on the ICI website. For more information about the implementation of new money market fund rules by the Securities and Exchange Commission (SEC), please see our ICI Viewpoints."
Prime money fund assets have been roughly flat since the October 14 transition to "floating" (4-digit) NAVs, down a mere $5.4 billion since 10/19 and up $4.8 billion since 11/2/16. But in 2016 (from 12/30/15 through 12/28/16), Prime MMF assets declined by $907.4 billion, or 70.7%, and they declined by $1.082 trillion, or 74.2%, since 10/31/15 (just prior to the start of the massive Prime to Government migration).
Govt MMFs, on the other hand, were up by $1.001 trillion in 2016 (82.0%), and they're up by $1.208 trillion (119.2%) since 10/31/15. Govt money fund assets have increased by $85.2 billion since 10/19 and by $33.8 billion since 11/2/16. Tax Exempt MMFs were down by $123.4 billion in 2016 (-48.5%) and they're down by $114.0 billion (-46.5%) since 10/31/15.
We expect overall money fund assets to rebound moderately in 2017, growing by 5-10% overall. We're also assuming a modest recovery in Prime (and Tax Exempt) assets, as higher yields and larger spreads between Prime and Govt funds begin slowly attracting investors back to Prime. The Fed's Dec. 14 rate hike, which moved rates from a range of 0.25% to 0.5%, to 0.5% to 0.75%, has pushed overall money fund yields (as measured by our Crane 100 Money Fund Index, an average of the 100 largest taxable funds) from 0.33% to 0.43% so far. But rates have stalled out over the last few days, after increasing from the hike through Christmas.
Spreads between Prime Inst and Treasury Inst MMFs, which had been 20 basis points (0.36% to 0.16%), or 17 bps comparing Prime Inst with Govt Inst MMFs (0.36% to 0.29%), are now at 24 bps (0.48% vs. 0.24%), or 20 bps comparing Prime Inst with Govt Inst MMFs (0.48% vs. 0.28%). On the Retail side, spreads are even larger (27 bps) with Prime Retail MMFs yielding 0.34% vs. 0.07% for Govt Retail and 0.07% for Treasury Retail MMFs.
While yields overall likely still have more of the Fed hike to go before they truly flatten, this is unclear. From the start of 2015 through year-end, though, they are substantially higher. Our Crane 100 started 2016 yielding 0.13% and ended it at 0.43%, while our broader Crane Money Fund Average (which includes all Taxable MMFs) rose from 0.06% to 0.25% as of 12/31/16. (Watch for Crane Data's month-end asset totals and yield averages Monday with the publication of our monthly Money Fund Intelligence and MFI XLS. Note that our asset series will be showing large increases in December due to the addition of a number of private and "internal" funds -- see our Jan. 4 News and the pending MFI for more.)
