Investors are flooding into US money market funds as concerns about the safety of bank deposits increase amid the collapse of two regional US banks and the rescue deal for Credit Suisse.
According to data provider EPFR, more than $286 billion has poured into money market funds in March, making it the biggest month of inflows since the depths of the Covid-19 crisis.
Goldman Sachs, JPMorgan Chase, and Fidelity are among the biggest winners from investors pouring cash into US money market funds over the past two weeks.
Goldman Sachs’ US money funds have taken in nearly $52 billion, a 13% increase, since March 9th, while JPMorgan’s funds received nearly $46 billion, and Fidelity recorded inflows of almost $37 billion, according to iMoneyNet data.
Money market funds typically hold very low-risk assets that are easy to buy and sell, including short-dated US government debt. The yields available on these vehicles are now the best in years as they rise with interest rates, which have been lifted to 15-year highs by the US Federal Reserve in its quest to curb inflation.
Money market funds draw huge influx of cash
The surge in flows this month has helped push overall assets in money funds to a record $5.1 trillion on Wednesday, according to research from Bank of America.
The pace of inflows has accelerated in the past fortnight, particularly from large depositors looking for safe havens. While US officials have agreed to backstop all of the deposits at Silicon Valley Bank and Signature Bank, which failed the same weekend, they have not guaranteed those above $250,000 at other institutions.
“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. He added that:
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?
Investors seeking safe havens amid banking crisis
Data from the Investment Company Institute shows the money is flowing specifically into funds that hold US government debt, which are considered the safest destinations. So-called prime funds, which hold bank debt and corporate paper, have had small outflows.
On the other hand, money market funds commonly offer high liquidity and low risk, making them a popular option for investors during uncertain times.
The surge in money market funds inflows this month was due to large depositors looking for safe havens. The yields available on these vehicles are now the best in years as they rise with interest rates, which have been lifted to 15-year highs by the US Federal Reserve in its quest to curb inflation.
The banking crisis has led many investors to rotate their portfolio investments in the past two weeks, sending over $286 billion into United States money market funds so far in March. This surge in flows helped push overall assets in money funds to a record $5.1 trillion on Wednesday, according to research from Bank of America.
