Goldman Sachs, JPMorgan Chase and Fidelity have been the biggest beneficiaries of investors pouring money into US money market funds over the past two weeks, as the collapse of two US regional banks and the Credit Suisse bailout raised concerns about the safety of bank deposits.
According to data provider EPFR, more than $286 billion has flooded into money market funds so far in March, making it the biggest month of inflows since the Covid-19 crisis took hold. sharp.
Goldman’s U.S. funds raised nearly $52 billion, up 13%, since March 9, a day earlier. Silicon Valley Bank was taken over by the US government. According to iMoneyNet data on Friday morning, JPMorgan funds received nearly $46 billion and Fidelity recorded inflows of nearly $37 billion.
Money market funds typically hold very low-risk assets that are easy to buy and sell, including short-term U.S. government debt. Yields on these vehicles are now at their best in years as they rise alongside interest rates, which were raised to 15-year highs by the US Federal Reserve in an attempt to contain inflation. There was smaller net inflows in January and February, setting the stage for the strongest quarter for US money funds since the coronavirus pandemic broke out three years ago.
The pace of inflows has accelerated over the past two weeks, especially from large depositors looking for safe havens. While US officials agreed to stop all deposits at SVB and signature bankfailed on the same weekend, they failed to secure those over $250,000 at other institutions.
“We are seeing a shift to money market funds by all segments of investors,” said Ashish Shah, chief investment officer for public investments at Goldman Sachs Asset Management. “Given the volatility we are seeing in the market, every investor must ask himself: is my cash risk profile consistent with this? [my overall risk profile]and do I have enough variety between the options?”
This month’s surge in flows helped push total assets in money funds to a record $5.1 trillion on Wednesday, according to research from Bank of America.
Data from Investment Company Institute Shows money is flowing especially into US government debt holdings, which are considered the safest destinations. The so-called primary fund, which holds bank debt and corporate papers, has had small outflows. The largest inflows of capital went to funds linked to Wall Street’s blue-chip banks and the largest investment firms.
Federal Reserve data released on Friday showed that bank deposits fell in the week to March 15, from $17.6 trillion to $17.5 trillion, and money deposits at small banks fell from $5.6 trillion to $5.4 trillion.
Neel Kashkari, president of the Minneapolis Fed, on Sunday said tensions in the banking sector have brought the United States closer to a recession.
“It definitely brings us closer together,” Kashkari said on CBS’s Face the Nation. “What is not clear to us is how much stress this banking industry is leading to a widespread credit crunch.”
Sara Devereux, global head of fixed income at Vanguard, said: “Money market funds have seen notable inflows in recent weeks, with the largest inflows into funds. government money market funds. Part of that is due to the trend towards quality following bank closure fears, but also because money market yields are currently very attractive.”
Her team has nearly $12 billion in inflows, ranking sixth behind the top three and Charles Schwab and Federated Hermes.
ICI data shows that most of the cash flow is coming from institutional investors but individual clients are also turning to money funds.
Andrzej Skiba, head of fixed income for BlueBay US at RBC Global Asset Management, said: “When you have shocks in the market with high levels of uncertainty about key parts of the economy. economy and around the world, not just in the US, the first thing that drives us towards safety.”
“With the yields on offer, money market funds not only offer good yields but are also very safe for investors,” Skiba added.
Most of the cash flow, he said, is being invested in a record issuance from the Federal Home Loan Bank, which is responding to a large liquidity demand from member banks trying to reassure people. deposit money on their stability.
“Overall, we see strong demand for money markets, partly due to the high yields on offer, while partly reflecting the substantial amount of liquidity that funds provide both investors and investors. institutional and retail, even during (or especially in the wake of) volatile markets,” Skiba said.
International money market funds, initially smaller, are seeing a less pronounced trend. But BlackRock’s international funds have received $16 billion in international inflows since March 9, and GSAM has received $6 billion, according to iMoneyNet.
Additional reporting by Felicia Schwartz in Washington
This article has been revised after publication to update the total amount of money in money market funds so far in March.
