Investors have poured money into US money market funds over the past two weeks as concerns about the security of bank deposits were raised by the failure of two regional US banks and the rescue plan for Credit Suisse. Goldman Sachs, JPMorgan Chase, and Fidelity are the biggest beneficiaries in this situation. Almost $286 billion has been transferred into US money market funds so far in March as a result of investors rotating their portfolio investments due to the banking crisis in the last two weeks.
Short termed government debt is one of the very low-risk assets that money market funds frequently hold and trade easily. The yields on offer for these investments are at their highest point in recent memory as a result of the US Federal Reserve’s decision to raise interest rates to 15-year highs in an effort to fight inflation.
During the past two weeks, the rate of inflows has quickened, especially from major depositors searching for safe havens. Although US regulators promised to guarantee all accounts at SVB and Signature Bank, which failed the same weekend, they have not done so for those deposits worth more than $250,000.
On March 9, the day before Silicon Valley Bank was taken over by US authorities, Goldman’s US money funds had received close to $52 billion, a 13% rise. As of Friday morning, JPMorgan’s funds received close to $46 billion while Fidelity saw inflows of close to $37 billion.
Ashish Shah, the chief investment officer for public investing at Goldman Sachs Asset Management said that they “are seeing shifts into money market funds by every segment of investor.” He also reflected on the questions an investor should ask themselves such as whether their risk profile matches with their target or whether they have sufficiently diversified among choices.
Money market fund inflows are prompted by worries on the stability of the financial system as U.S. and European banks struggle with liquidity shortages as a result of tighter monetary policy. The US money fund industry saw its greatest quarter since the start of the coronavirus epidemic three years ago, despite lower net inflows in January and February.