Americans continue to flock to money market funds, attracted by yields the assets haven’t seen in years. So far this year, nearly $1 trillion has flown into the funds, which are “on course for record inflows” in 2023, according to a recent note from Bank of America. The largest funds have yields topping 5%. “Money market fund yields have kept pace with the rapid rise in short-term interest rates and are at their highest levels in over 15 years—making them incredibly attractive to investors,” said Shelly Antoniewicz, deputy chief economist at the Investment Company Institute. Assets in these funds were $5.64 trillion for the week ending Sept. 20, the ICI found. While that was a decrease from the week prior, it was simply because of seasonal outflows related to the third-quarter estimated corporate tax deadline Sept. 15, Antoniewicz explained. However, inflows from retail investors continued to move higher. In fact, retail investors in money market funds have grown 40% over the past year, said Peter Crane, founder of Crane Data, a firm that tracks money markets. They also account for almost 40% of the whole money fund pie, up from 33% a year ago, he said. “They will keep hitting records, there is no doubt of that,” Crane said of money market fund inflows. He believes the 5% yield is the “magic number” for attracting investors. The average yield on his Crane 100 list of the 100 largest taxable money funds is 5.17%. In comparison, bank savings accounts have an average annual percentage yield of 0.58%, according to Bankrate.com . “Money funds are paying 10 times what most other cash options are, with the exception … of a few internet banks,” Crane said. Here are the top yielding government money market funds, per Crane Data, as of July 31, the latest data available. Government funds comprise about 80% of the market, while prime funds — which include corporate credit — account for about 20%, he said. Crane suggests considering mutual funds at brokerage firms that already house your other accounts. “Safety and liquidity are givens or assumed, but convenience is king,” he said. “What rate you are getting is important, especially the bigger the balance and the longer the time invested. But you are in cash because you might leave tomorrow.” By streamlining your accounts, cash can transfer immediately instead of waiting a day or two, he explained.
