More than $286 billion has flooded into US money market funds so far in March, making it the biggest month of inflows since the depths of the Covid-19 crisis, according to data provider EPFR.

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 the rescue deal for Credit Suisse raised concerns about the safety of bank deposits, according to the Financial Times.

Goldman’s US money funds have taken in nearly $52 billion, a 13 per cent increase, since March 9, the day before Silicon Valley Bank was taken over by US authorities. JPMorgan’s funds received nearly $46 billion and Fidelity recorded inflows of almost $37 billion, according to iMoneyNet data.

Money market funds typically hold very low-risk assets that are easy to buy and sell, including short-dated US government debt. The yields available on these vehicles are now the best in years as they rise with interest rates, which have been lifted to 15-year highs by the US Federal Reserve in its quest to curb inflation. There were smaller net inflows in January and February, setting the stage for the strongest quarter for US money funds since the outbreak of the coronavirus pandemic three years ago.

The pace of inflows has accelerated in the past fortnight, particularly from large depositors looking for safe havens. While US officials agreed to backstop all of the deposits at SVB and Signature Bank, which failed the same weekend, they have not guaranteed those above $250,000 at other institutions.

“We are seeing shifts into money market funds by every segment of investor,” chief investment officer for public investing at Goldman Sachs Asset Management Ashish Shah said.

“Given the volatility we are seeing in the market, every investor has to ask themselves: does my cash risk profile match my overall risk profile, and am I sufficiently diversified among the choices?” he added.

The surge in flows this month helped push overall assets in money funds to a record $5.1 trillion on Wednesday, according to research from Bank of America.

Data from the Investment Company Institute shows the money is flowing specifically into funds that hold US government debt, which are considered the safest destinations. So-called prime funds, which hold bank debt and corporate paper, have had small outflows.

Sara Devereux, global head of Vanguard’s fixed-income group, said: “Money market funds have seen remarkable flows in recent weeks, with the largest flows into government money market funds. Part of that is because of a flight to quality after the scare with bank closures, but it’s also because yields for money markets are currently very attractive.” Her group had almost $12 billion of inflows, placing it sixth behind the top three and Charles Schwab and Federated Hermes.

Federal Reserve data released on Friday showed bank deposits declined in the week through March 15, from $17.6 trillion to $17.5 trillion, and deposits at small banks declined from $5.6 trillion to $5.4 trillion.

Neel Kashkari, president of the Minneapolis Fed, on Sunday said the stresses in the banking sector brought the US closer to a recession.

“What’s unclear for us is how much of these banking stresses are leading to a widespread credit crunch,” Kashkari said. (QNA)

Source: Qatar News Agency