Institutional funds drive money market assets to $8.02 trillion as retail adds little

Money market fund assets rose $114.46 billion to $8.02 trillion in the week ended November 4, and institutional funds took $102.25 billion of that, the Investment Company Institute (ICI) said. Retail funds added $12.21 billion.

Institutional funds took $102.25 billion of the $114.46 billion

The ICI reported the total for the week ended Wednesday, November 4, and said that the change in money market fund assets is primarily driven by flows and can be used as a proxy for net new cash flows. Assets were $7.90 trillion the week before and $7.94 trillion two weeks earlier, according to the table in the release. The two-week gain was $71.17 billion (computed from $8,015.74 billion less $7,944.57 billion, the ICI's figures), so the latest week more than reversed a decline in the week before.

Institutional funds, which the ICI classifies by the language in their prospectus and which are sold mainly to institutions, hold $4.90 trillion, or 61.1% of the total (computed). Retail funds, sold mainly to the general public and including funds sold to employer-sponsored retirement plans, hold $3.12 trillion, or 38.9%.

Over the two weeks from October 21 to November 4, institutional assets rose $68.59 billion and retail assets rose $2.58 billion (computed from the ICI table). The data do not show who the institutional buyers were or why they added.

Government funds took almost all of it, prime funds lost a little

Among taxable funds, government funds increased by $117.80 billion to $6.62 trillion and prime funds decreased by $4.03 billion to $1.23 trillion, the ICI said. Government funds invest in cash, securities issued by the US Treasury, including repurchase agreements collateralized fully by Treasuries, and securities issued or guaranteed by the government or its agencies, according to the ICI's definition. They hold 82.6% of all money market fund assets and prime funds hold 15.4% (computed).

Institutional prime fund assets fell $5.18 billion to $245.84 billion, while institutional government fund assets rose $107.87 billion to $4.64 trillion. Retail government funds added $9.93 billion to $1.99 trillion, and retail prime funds added $1.15 billion to $985.76 billion.

What cash pays while the money arrives

The Treasury's daily yield curve data show the 3-month Treasury bill yield at 4.30% on November 10, up from 3.65% on January 2, according to the US Treasury. The 10-year note yielded 4.98% on the same day, 0.68 percentage point more than the 3-month bill (computed).

The ICI release does not tie the week's inflow to yields, and it does not say whether the money came from bank deposits, from sales of other funds or from other sources. Weekly changes are also revised later, as the ICI notes that data for previous weeks reflect revisions due to data adjustments, reclassifications and changes in the number of funds reporting.

We would read the pile of cash as a measure of caution, not a verdict

FinanceInTime's view is that a money market fund balance above $8 trillion is evidence of how much investors value being paid 4.30% for holding Treasury bills, not evidence about where stocks or bonds are headed. Flows into cash are a measure of sentiment, and our investing line is that sentiment is not value. The threat is that long-run returns suffer if cash is held beyond the point where it is paying less than inflation; the opportunity is that cash now pays more than it did in January.

We expect institutional balances to keep driving the weekly totals if the pattern of the last two weeks holds, with retail funds moving more slowly. We would change that view if retail inflows overtake institutional ones for several weeks in a row. This is a forecast, with those conditions, and it is uncertain.

The view in this final section is FinanceInTime's editorial opinion, for information only. It is not investment, tax, legal or other advice, and it does not take your circumstances into account. Forecasts are uncertain and past results do not guarantee future ones.