Another Milestone! U.S. Money Market Funds Surpass $8 Trillion for the First Time

In recent years, U.S. money market funds have become hugely popular among American investors thanks to their attractive high yields. The latest industry data now shows that total assets under management in U.S. money market funds have broken through the $8 trillion mark — yet another historic milestone.

 

According to data from money market and mutual fund information provider Crane Data, in the week ending this past Monday, total assets in U.S. money market funds rose by approximately $105 billion, hitting a new all-time high.

 

 

Even though the Federal Reserve has cut rates five times since September last year, investors continue to pour money into money market funds, primarily because their yields remain relatively high compared to other investment vehicles.

 

As of December 1, Crane Data’s Crane 100 Money Fund Index — which tracks the 100 largest money market funds — still offered a 7-day annualized yield of 3.80%.

 

This year, Fed policymakers have eased more slowly than many expected at the beginning of the year: the Fed has only cut the benchmark rate twice so far (September and October), each by 25 bps, bringing the federal funds target range to 3.75%–4.00%.

 

Gennadiy Goldberg, Head of U.S. Rates Strategy at TD Securities, said:  

“With the Fed only cutting gradually, money market fund yields remain highly attractive and continue to draw inflows. We expect inflows to slow as rates move lower, but historical experience shows that annualized yields above 2% should still attract capital.”

 

Cailian Press previously reported that in November last year, U.S. money market fund assets first surpassed $7 trillion, while the 7-day annualized yield of the top 100 funds was around 4.51%.

 

Crane Data, which tracks the entire money market fund industry, shows that more than $848 billion has flowed into money market funds this year alone. Another widely watched industry dataset from the Investment Company Institute (ICI) — which excludes internally held corporate cash funds — reported total money market fund assets at $7.57 trillion in the week ending November 25.

Scale Still Expected to Keep Climbing

Money market funds typically pass on rate cuts to investors more slowly than banks, which helps them attract even more inflows.

 

During rate-cutting cycles, institutions and corporate treasurers also tend to outsource cash management to earn yield rather than manage it in-house.

 

Although many in the industry previously believed the Fed’s easing cycle would trigger trillions of dollars flowing out of money market funds into equities and other assets, retail investors are still choosing what they see as safer, higher-yielding money market funds.

 

JPMorgan’s U.S. Short-Term Rates Strategy Head Teresa Ho noted that retail investors currently allocate 15%–20% of their portfolios to money markets — close to historical averages (the figure once reached 40% in 2009).

 

She said:  

“Retail allocation to money markets is not excessive or out of line, so there’s no need for active rebalancing. Therefore, I believe that after breaking the $8 trillion mark, the sector will continue to grow next year.”