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Portfolio > Alternative Investments > Hedge Funds

FitchRatings: Inflows of money market funds hit $2.7 trillion in fourth quarter

By Warren S. Hersch

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U.S. money market funds experienced substantial net inflows during the fourth quarter, rising $89.1 billion to $2.7 trillion, new research discloses.

FitchRatings, New York, reported this finding today in a special report, “U.S. MMFs: Fourth-Quarter Review and Outlook.” The report details the performance of U.S. money market funds.

The report reveals that, based on data from the Investment Company Institute, government money market funds increased by $26.9 billion (accounting for net inflows), an increase of 3.4 percent., Tax-exempt funds rose by $16.3 billion, a  5.7 percent gain. And prime funds (both institutional and retail) increased by $46 billion, up 3.2 percent.

Canada remains a desirable investment destination for U.S. MMFs. At the end of November 2012, these funds provided about $55 billion to Canadian entities split among six banks and one sovereign-related entity. The banks include the Bank of Novia Scotia, which accounts for an individual issuer exposure of 25 percent of total Canadian investments. The other banks include Royal Bank of Canada (25 percent), Bank of Montreal (22 percent), Toronto Dominion (14 percent), CIBC (8 percent), and the National Bank of Canada (3 percent).

Worldwide, the U.S. experienced the largest outflow of Fitch-rated prime MMFs in November, posting a 1.7 outflow increase. This compares to outflow gains of 0.9 percent, 0.5 percent and 0.5 percent, respectively, for Japan, Australia and European countries outside the Eurozone.

The Eurozone recorded the largest inflow increase (3.7 percent) of Fitch-rated prime MMFs. This compares with 0.1 percent, 0.1 percent and 0.4 percent, respectively, for supranational entities, Canada and noncore markets.

The report adds that certificates of deposit in November remained the mostly widely held asset type of Fitch-rated prime money market funds, accounting for 30 percent of fund assets. 

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