U.S. money market fund inflows have topped $280 million over the past two weeks, as many investors pull their bank deposits, according to a report.
Investment banks like Goldman Sachs Group (GSG), JPMorgan Chase, and Fidelity were labeled the biggest winners by the report, as investors started to pour cash into money market funds, after the collapse of three regional U.S. banks and the bailout of Credit Suisse and First Republic in March raised concerns about the safety of bank deposits.
Inflows of cash have greatly accelerated lately, particularly from large depositors looking for safe havens.
Despite U.S. Federal regulators agreeing to backstop all investor deposits at Silicon Valley Bank (SVB) and Signature Bank, they have yet to guarantee deposits above $250,000 at other troubled institutions.
Money market funds are known among investors for holding very low-risk assets, which are easy to buy and sell, such as short-term U.S. government debt.
The boost in inflows this month, pushed overall assets in money funds to a record $5.1 trillion by March 22, according to data published by Bank of America.
Money Market Funds See Massive Boost
The yields available on these assets have risen to their highest levels in years, as they rise with the Fed’s aggressive hike in U.S. interest rates, in its attempt to curb inflationJanuary and February saw smaller net inflows, which together have led to the strongest quarterly growth for American money market funds in three years.
GSG’s money market funds have taken in nearly $52 billion since March 9, an increase of 13 percent, right before SVB was taken over by federal regulators.
“We are seeing shifts into money market funds by every segment of investor,” said Ashish Shah, chief investment officer for public investing at Goldman Sachs Asset Management.
“Given the volatility we are seeing in the market, every investor has to ask themselves: does my cash risk profile match [my overall risk profile], and am I sufficiently diversified among the choices?”
Meanwhile, JPMorgan received nearly $46 billion, while Fidelity saw inflows of almost $37 billion, according to iMoneyNet on March 24.
International money market funds, which tend to be smaller than U.S. funds, have seen less investments.
Investors Altering Investment Strategies to Safeguard Assets
The Investment Company Institute (ICI) said that money is flowing specifically into market funds that hold U.S. government debts, which are considered the safest deposits worldwide, reported the Financial Times.Data from ICI showed that most of the monetary flows have come from institutional investors, but retail clients have also started to place their assets into money funds.
The report said that prime funds, which hold bank and corporate short-term debt, have had small outflows, while the biggest inflows have gone to funds associated with blue-chip Wall Street banks and the major financial investment institutions.
“Money market funds have seen remarkable flows in recent weeks, with the largest flows into government money market funds. Part of that is because of a flight to quality after the scare with bank closures, but it’s also because yields for money markets are currently very attractive," Sara Devereux, global head of Vanguard’s fixed-income group, told the Financial Times.
She said that Vanguard saw almost $12 billion in inflows, placing it sixth place behind the top three funds and Charles Schwab and Federated Hermes.
