Money market funds swell as investors shelter from Covid crisis

Coronavirus map of Europe

Money market funds were the only type of fund to post an increase in net assets as well as inflows of cash in the first quarter of 2020, as coronavirus-related panic wiped 10.8 per cent off assets for open-ended funds worldwide, down at EUR47.1 trillion.

Money market funds, which invest in high-quality, short-term debt instruments and cash equivalents, saw assets rise by 13.7 per cent to EUR7 trillion. Sales also spiked to EUR829 billion, over three times net sales in the previous quarter.

“Savers in the US and China, which are two countries where MMFs play a big role as vehicle to park cash, have increased their savings in MMFs, most likely as a precautionary move against the backdrop of the Covid-19 crisis,” says Bernard Delbecque, senior director, Economics & Research at EFAMA.

Equity fund assets decreased by 19.7 per cent to EUR17.8 trillion, followed by bond funds, which lost 6.7 per cent, at EUR10.2 trillion at the end of the first quarter. Balanced/mixed fund assets decreased by 12.7 per cent to EUR7.9 trillion. 

Worldwide net cash flow to all funds amounted to EUR617 billion, compared to EUR 808 billion in the fourth quarter of 2019, as all fund types other than money market funds saw outflows.

The largest outflows hit long-term funds, which recorded EUR213 billion in outflows, compared to net inflows of EUR548 billion in the previous quarter. Bond funds also suffered net outflows of EUR207 billion, compared to inflows of EUR233 billion in the previous quarter. 

In comparison, equity funds managed to stem the flow at EUR15 billion net outflows for the quarter, compared to net inflows of EUR134 billion in Q4 2019. Balanced/mixed funds worldwide recorded net outflows of EUR39 billion, against EUR120 billion in the previous quarter. 

In terms of the worldwide distribution of investment fund net assets at end Q1 2020, the United States and Europe held the largest shares in the world market, with 47.9 per cent and 32.3 per cent, respectively. These blocs also saw the largest net sales of regulated open-ended funds, with outflows of EUR423 billion in the United States and EUR122 billion in Europe.

China (4.1 per cent), Japan (3.7 per cent), Australia (3.5 per cent), Brazil (3.1 per cent), Canada (3 per cent), Republic of Korea (1 per cent), India (0.5 per cent) and South Africa (0.3 per cent) followed in the ranking of fund net assets.

Statistics were compiled by EFAMA and the Investment Company Institute (ICI) on behalf of the International Investment Funds Association (IIFA), an organisation of national investment fund associations, and included statistics from 46 countries.