Monday, September 16, 2013

Retail money markets AUM and fund flows

The chart below shows the amount of retail money markets funds outstanding. The spike at the end of last year was due to harvesting of capital gains in preparation for a higher tax regime. The current spike is retail exiting assets that are impacted by higher rates, such as munis, long-dated treasuries and other fixed income products (and to some extent equity funds as well). Both situations corresponded to net outflows from "risky" funds.

Source: FRB

Movement in money markets AUM provides a useful indicator for the behavior of retail investors. And while it doesn't say anything about the types of assets retail investors are entering or exiting, it signals the overall level of retail risk aversion - whether the risk is coming from the Eurozone, higher taxes, or the Fed taper. The chart below compares retail money markets AUM (which is available on a weekly basis) with total fund flows across fixed income and equity funds. The relationship - particularly in recent years - is hard to ignore.
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