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Evening Brief – 03.27.23

Following the collapse of Silicon Valley Bank (SVB) and ensuing banking crisis, the popularity of US money market funds has skyrocketed. According to Emerging Portfolio Fund Research (EPFR) data, more than $286 billion has been invested in these funds so far in March. The inflows are the highest seen in a month since the emergence of Covid.

The top beneficiaries of this dash to cash have been Goldman Sachs, JPMorgan Chase and Fidelity. Goldman’s money funds have grown by 13%, receiving $52 billion. JPMorgan’s funds have seen inflows of nearly $46 billion, while Fidelity has enjoyed nearly $37 billion.

No one has come out ahead following SVB’s fall, and that includes the Wall Street bank titans whose money market funds are rapidly expanding. The fragile financial sector has shelved a potential IPO revival. Meanwhile, similarly sized regional banks have teetered on the brink of insolvency, and big banks would rather introduce various financial arrangements to keep these banks afloat than relive the 2008 global financial crisis and buy them.

Investors rushing into money market funds are specifically targeting ones that hold US government debt. These funds are offering their best yields in years, as the Federal Reserve continues to raise interest rates in a bid to curb inflation. In the seven days leading up to March 22, total money market fund assets increased by $117.42 billion to $5.13 trillion, according to Investment Company Institute (ICI) data.

Money market funds typically hold very low-risk assets that are easy to buy and sell, including short-dated US government debt. The current crisis in the banking sector has only served to amplify these qualities and we are likely to see this trend continue in the months ahead.

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Inside The Story

About Joe Palmisano

Joe Palmisano is Editorial Director for Connect Money, where he brings nearly three decades experience of market insights as a financial journalist, analyst and senior portfolio manager for leading financial publications, advisory firms, and hedge funds. In his role as Editorial Director, Joe is responsible for the selection of content and creation of daily business news covering the financial markets, including Alternative Assets, Direct Investment and Financial Advisory services. Before joining Connect Money, Joe was a financial journalist for the Wall Street Journal, regularly publishing feature stories and trend pieces on the foreign exchange, global fixed income and equity markets. Joe parlayed his experience as a financial journalist into roles as a Senior Research Analyst and Portfolio Manager, writing daily and weekly market analysis and managing a FX and US equity portfolio. Joe was also a contributing writer for industry magazines and publications, including SFO Magazine and the CMT Association. Joe earned a B.S.B.A. in Finance from The American University. He holds the Chartered Market Technician (CMT) designation and is a member of the CFA Institute.