Money market funds attracted $106 billion in August, with assets under management continuing to rise

According to the Zhitong Finance and Economics APP, as investors seek to lock in high yields ahead of a possible rate cut by the Federal Reserve, money market funds saw significant inflows in August, reaching a historical high in assets under management. Based on the latest data from the Investment Company Institute, in the week ending August 21, U.S. money market funds attracted an additional $24.9 billion, with a total inflow of approximately $106 billion for the month. Currently, around $6.24 trillion in cash is held in these funds. This increase in funds is mainly attributed to active participation from retail investors, who contributed $21.4 billion. At the same time, institutional investors also added around $3.45 billion in investments, partially offsetting the outflows triggered by a series of upcoming regulations by the U.S. Securities and Exchange Commission. As a result, some funds have closed, leading investors to adjust their asset allocations. Since the Federal Reserve initiated its most aggressive tightening policy in decades in 2022, retail investors have been shifting towards money market funds. Despite market expectations of policymakers beginning to ease monetary policy next month, the current high interest rate levels continue to attract inflows into these funds. While traders anticipate a potential 1 percentage point rate cut by the end of the year, Federal Reserve officials suggest that a gradual rate cut may be a more appropriate strategy. It is worth noting that even if the Federal Reserve starts cutting rates, money market funds may still maintain their attractiveness. Institutions and corporate treasurers often choose to outsource cash management to generate returns during rate cuts, rather than managing it themselves. Detailed data shows that as of August 21, government funds primarily invested in securities such as Treasury bonds, repurchase agreements, and institutional debt increased to $5.06 trillion, up by $19.5 billion. Meanwhile, prime funds, which tend to invest in higher-risk assets like commercial paper, saw their assets rise to $1.05 trillion. Overall, the inflows and asset growth of money market funds reflect investors' high regard for liquidity and safety in the current economic environment, as well as anticipation and preparation for upcoming changes in monetary policy