Money market fund inflows to stabilize following strong 2023

March 26, 2024 (MLN): Money market fund (MMF) flows are set to stabilize in 2024 after significant inflows in 2023, Fitch Ratings says in a new report.

Global MMF assets under management (AUM) were $9.9 trillion at end-2023, up 17% from the previous year with most of the increase coming in 2H23.

US MMF AUM rose 21% to $6.3tr in 2023 driven by investors taking advantage of high interest rates and deposit outflows after the US regional bank failures.

Fitch estimates that European MMFs’ AUM increased by 11% to EUR1.8tr with short-term MMFs the main contributor. Chinese MMF assets rose 8% to CNY11.3tr after a strong performance in the first six months of the year.

Fitch expects central banks’ interest rates cuts in 2H24, and regulatory reform in the US and China money fund sector to have a limited impact on overall flows, although faster-than-expected rate cuts may accelerate MMF outflows.

Nevertheless, we expect balanced industry flows given the presence of the duration effect, allowing MMFs to delay the impact from policy rate cuts to funds yields.

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