Institutional assets in money-market funds have increased for the first time in more than a month, a sign that investors are regaining some confidence in the safety of these temporary parking spots for cash.
Overall, assets in institutional money-market funds rose by $39.6 billion for the week ended Oct. 8 to a total of $2.2 trillion, according to data from the Investment Company Institute. The jump was the largest one-week increase in institutional money-market assets since the week of July 9, when assets jumped by $42 billion.
The last time institutional assets in these funds actually increased was the week ended Sept. 3, when they grew by $12.6 billion.
In between, institutional money-market assets took a significant dive, losing more than $188 billion over a four-week span. The vast majority of these losses occurred in a single week plummeting by $173.3 billion the week ended Sept. 18 after one of the largest funds in the industry exposed investors to losses.
The Reserve Primary Fund, which had about $62 billion in assets at the time, held commercial paper issued by Lehman Brothers Holdings Inc. that became worthless after the broker-dealer filed for bankruptcy protection. The value of shares in the Primary Fund dipped below the $1 mark, the first time in more than a decade that a money-market fund broke the buck.
That event triggered a massive wave of redemptions from funds throughout the industry.
Now, with the Treasury Department insuring some money-market funds, the possibility of another fund breaking the buck is about nil, said Peter Crane, founder of money fund research firm Crane Data. He also noted that redemption pressure on money fund managers has eased quite a bit in the last two weeks.
Further, with the government now buying commercial paper money funds are the largest investors in commercial paper the market is functioning a bit more normally, Mr. Crane added. Although nothing is totally normal in this environment, he continued, it appears that some confidence has been restored in money-market funds.
Mark Bruno is a reporter at Financial Week, a sister publication of Pensions & Investments.