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Survey Predicts Institutional Money Fund Exodus

A new survey of money market fund managers and institutional investors conducted by Citigroup indicates that respondents foresee heavy outflows ahead for institutional prime money funds. The survey reflects responses from 247 respondents, 65 percent of which managed assets of more than $20 billion. When asked to predict how much of the $930 billion in assets under management would leave institutional prime money funds, 82 percent responded that the figure would be in excess of $200 billion, and 32 percent believed that the figure would exceed $400 billion. Looking to the $510 billion retail prime fund side, 83 percent of respondents predicted outflows of less than $200 billion, and 49 percent predicted outflows of less than $100 billion.

The survey also asked for respondent’s views on the future of the spread between prime and government funds (which it noted historically averaged 10 to 15 basis points). By October 2016 (when the money market rules take full effect), 96 percent of respondents predicted that the spread would exceed 15 basis points, and 54 percent predicted that the spread would exceed 25 basis points.