Goldman Sachs, JPMorgan Chase and Fidelity are the biggest winners from investors pouring cash into US money market funds over the past two weeks, as the collapse of two regional US banks and Credit Suisse’s rescue deal raised concerns about the safety of bank deposits .
According to data provider EPFR, more than $273 billion has flooded into money market funds so far in March, the biggest inflow since the depth of the Covid-19 crisis.
Goldman’s US money funds have raised nearly $52bn, a 13 per cent increase since March 9, the day before the Silicon Valley bank was taken over by US authorities. JPMorgan’s funds received nearly $46bn and Fidelity recorded inflows of nearly $37bn, according to data from iMoneyNet as of Friday morning.
Money market funds typically hold very low-risk assets that are easy to buy and sell, including short-term U.S. government debt. The yields available on these vehicles are now the best they have been in years as they move in tandem with interest rates, which have been raised to 15-year highs by the US Federal Reserve in an effort to curb inflation. There were smaller net inflows in January and February, setting the stage for the strongest quarter for US currency funds since the outbreak of the coronavirus pandemic three years ago.
The pace of inflows has picked up in the last fortnight, especially from large depositors looking for a safe haven. While US authorities agreed to backstop all deposits at SVB and Signature Bank, which failed later that same week, they have not guaranteed deposits above $250,000 at other institutions.
“We are seeing a shift to money market funds by every class of investor,” said Ashish Shah, chief investment officer of public investments at Goldman Sachs Asset Management. “Given the volatility we are seeing in the market, every investor needs to ask themselves: Does my cash risk profile match [my overall risk profile]And do I have enough diversity in options?”
This month’s surge in inflows helped push overall assets in money funds to a record $5.1 trillion on Wednesday, according to Bank of America research.
Data from the Investment Company Institute shows that money is especially flowing into funds that hold US government debt, which is considered the safest destination. So-called prime funds, which hold bank loans and corporate papers, have seen very little outflow. The biggest inflows have gone to blue-chip Wall Street banks and funds linked to the biggest investment houses.
Sarah Devereux, Global Head of Fixed-Income Group at Vanguard, said: “Money market funds have seen significant inflows in recent weeks, with government money market funds among the largest inflows. Part of the reason for this is the quality scare following bank closures. But it is also because the returns for currency markets are currently very attractive.
His group had inflows of nearly $12bn, ranking sixth in the top three and behind Charles Schwab and Federated Hermes.
ICI data shows that the bulk of inflows are coming from institutional investors, but retail clients are also pouring into money funds.
Data released on Friday from the Federal Reserve showed bank deposits fell from $17.6tn to $17.5tn in the week to March 15, and deposits at smaller banks fell from $5.6tn to $5.4tn.
Andrzej Skiba, Head of Bluebay US Fixed Income at RBC Global Asset Management, said: “When you feel tremors in markets with key parts of the economy and high levels of uncertainty around the world, not just in the US, the first impulse is to look for safety. Have to go
Skiba said: “Looking at the yields on offer, money market funds not only provide good yields, but also a lot of protection for investors.”
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He said most of the flows are being invested in the record issuance from Federal Home Loan Bank — it is responding to huge demand for liquidity from its member banks that are trying to reassure depositors about their stability.
“We generally see strong demand for money market funds, partly due to the strong yields on offer, while partly reflecting the substantial amount of liquidity the funds provide to both institutional and retail investors alike,” Skiba said. do, even (or especially) in volatile markets.” Said.
International money market funds, which are smaller to begin with, are showing less clear trends. But according to iMoneyNet, BlackRock’s international funds have received $16bn in international inflows since March 9, and GSAM has received $6bn.
Source: www.ft.com
