August 11, 2017

Investors Turn to Money Market Funds

by Patrick Keon

Money market funds took in over $30.9 billion of net new money for Thomson Reuters Lipper’s fund-flows week ended Wednesday, August 9. This was the largest weekly net inflow of the year for the group and the largest since the $43.8 billion of positive net flows for the week ended October 23, 2013. Investors appeared to be reacting to the uncertainty surrounding the U.S. government and were putting money on the sidelines until the turmoil settles. Money had started to flow into money market funds the prior two weeks (+$18.6 billion and $10.0 billion net, respectively) as the White House dealt with the failure to push a revised healthcare bill through Congress, in addition to what seemed like a merry-go-round of personnel changes in high-level administration positions. But the positive flows spiked this past week in reaction to the exchanges between President Donald Trump and the North Korean regime about the potential for a nuclear conflict as well as the news that Special Counsel Robert Mueller had impaneled a grand jury in the Russia election-meddling investigation.

Several of the money market fund peer groups accounted for the lion’s share of the week’s net inflows. The largest positive flows belonged to Lipper’s Institutional U.S. Government Money Market Funds (+$13.4 billion), Institutional Money Market Funds (+$7.9 billion), and Institutional U.S. Treasury Money Market Funds (+$7.6 billion) classifications. Drilling down to the individual fund level we saw the net inflows were also heavily concentrated; the ten largest positive net flows accounted for over 90% of the weekly total for the group. The funds that took in the most net new money were Federated Institutional Prime Obligations Fund (POIXX, +$4.8 billion), Goldman Sachs Financial Square Government Fund (FGTXX, +$4.8 billion), and BlackRock Liquidity Funds: FedFund (TFDXX, +$3.9 billion).

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