Penn Mutual Asset Management posted an insight titled, "Cash is Still King: Money Market Funds Hold Firm Near All-​Time Highs." It states, "U.​S. money market funds have experienced substantial growth in assets under management over recent decades, driven by shifting interest rate environments, economic disruptions, regulatory reforms and sustained investor demand for safe, liquid cash alternatives. Total balances remain exceptionally elevated—​recently reaching approximately $​7.​8 trillion -- despite the Federal Reserve'​s (​Fed) most recent easing cycle in late 2025." The blog continues, "Since its peak above 5%, the Fed has reduced the target federal funds rate to a range of 3.​50%-​3.​75%, a move that directly lowers yields on money market funds. At first glance, this persistence of elevated cash balances may seem counterintuitive, as declining rates have historically encouraged investors to rotate out of cash and into higher-​returning assets such as equities or longer-​duration fixed income. However, current conditions help explain why money market funds continue to attract significant capital." Penn Mutual states, "Even with rates trending downward, money market funds continue to offer attractive yields relative to traditional bank deposits, often outpacing insured savings accounts by a meaningful margin. On a historical basis, yields remain appealing, and both institutional and retail investors maintain money market allocations to meet liquidity needs, satisfy short-​term operating requirements or utilize as a temporary parking place for capital. Because these funds invest primarily in short-​dated instruments such as Treasury bills, agency discount notes and high-​quality commercial paper, their yields reset gradually, providing a smoother descent compared to more volatile market instruments." They continue, "As a result, the combination of still-​competitive yields in money markets, principal stability, daily liquidity and limited confidence in the broader economic outlook has kept balances near record highs rather than prompting a meaningful rotation into risk assets. An elevated money market fund balance may reflect continued investor caution amid slowing growth, uncertain inflation dynamics and relatively full valuations across other asset classes.... Until ... alternative asset classes offer meaningfully better risk-​adjusted returns, or the economic outlook becomes clearer, money market funds are likely to remain a central destination for investor capital."

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