Top 10 Money Funds’ Holdings Shrank in March
The top 10 U.S. money market fund managers reduced their overall taxable holdings by 4.6 percent in March, with sizable withdrawals from the euro zone as the region struggles with its sovereign debt crisis.
The top tier group’s holdings of taxable assets fell at a faster pace than the overall money market fund industry, which shrank 4.4 percent to $2.3 trillion. The top 10 fund families control $1.675 trillion of that universe.
Managers withdrew significant funds from Europe, including Germany and France, according to a Reuters analysis of money market fund data provided by iMoneyNet.
The fund family with the biggest net outflow from taxable money market funds was No. 8 ranked Goldman Sachs & Co, at 10.2 percent. Legg Mason, ranked No. 9, was the only member of this group to add funds, increasing its take by 5.9 percent.
Assets under management for the top 10 funds had been growing after a drop for most of 2011. In the first two months of 2012, investors added to their positions.
“So far the outflows from money funds have not been large enough to warrant any kind of alarm,” said Lance Pan, director of investment research and strategist at Capital Advisors Group in Newton, Massachusetts, which manages $6 billion in assets.
Pan said France’s presidential election is a top concern in the market. In the first round of voting on April 22, Socialist candidate Francois Hollande beat incumbent Nicolas Sarkozy by 28.6 percent to 27.1 percent.
A two candidates will go head-to-head in a second round vote on May 6.
“Hollande might take France in a different direction,” said Pan.
Reuters’ analyzed data from iMoneyNet, a Massachusetts-based money market fund tracker that gathers data from funds, their custodial banks and the Securities and Exchange Commission. Reuters considered only taxable money market funds in its analysis and excluded variable-rate demand notes, debt often guaranteed by foreign banks but originating outside the United States.
Generally, money market funds are viewed as safe alternatives to bank accounts. They provide corporations and investors with an easily accessible storehouse for their cash.
The retreat in French and German money market fund holdings came amid a broader exodus from euro zone and European Union member states in March.
According to the data, the top 10 fund families cut holdings of German assets by 27.3 percent versus a 13.1 percent reduction in French assets. In the broader European Union, holdings of Danish money market funds were cut by 19.4 percent.
The top 10 funds cut their U.S. money market fund asset holdings by 2.9 percent to $839.1 billion. Still, U.S. money market holdings are by far the largest component of their portfolios, accounting for about half of their taxable assets under management.
In the month ended March 31, the group’s biggest discernable increase on a percentage basis was in Switzerland, which grew by 30.3 percent to $96 billion. That marked a reversal from the outflows in the prior month.
Spain also managed to regain some ground, with portfolios adding $106 million for an increase of 14.6 percent, versus outflows in February.
Taxable euro zone holdings among the top 10 managers shrank about 12 percent, nearly wiping out all of February’s gains.
The European Union overall lost about 14 percent of holdings during March, ending at the lowest level so far this year.
Charles Schwab was the only fund family among the top 10 to increase holdings in both France and Germany in March.
By Daniel Bases and Cezary Podkul