Watching weekly money market fund flows at ICI, the mutual fund industry group, can be confusing. Too many variables go in to flows to actually divine something meaningful. But the past few weeks (and years) have started to bear out divergent issues.
Investors continue to dump prime and tax-exempt funds, on all levels, and move in to government funds. The why is all over the map: most funds are saddled with high expenses, a consequence of rapidly moving money. Historically low yields hit these ultrashort, highly regulated funds the most. Operational costs for the funds are being widely supported by the investment managers, to the point that BNY Mellon now has enough gumption to charge fees on non-money fund corporate cash.
To wit, ETFs have been floated as alternatives to money market funds. Get rid of mandating $1 per share NAV and externalize the accounting and you remove a lot of the costs. (In the June Investing in Funds report, WSJ looked at the money fund debate.
So far, only three ETFs have come up as viable money-fund alternatives. One - PIMCO’s MINT appeals to the yield-chasers. Two others contain ultra short term Treasurys, for the ultimate cash bear. The industry is starting to take notice. Federated Investors is looking to launch a MINT-like fund and could just be starting the next wave of ETFs.
