Record Inflows into Money Market Funds
The total assets held within U.S. money market funds have surpassed $8 trillion, reaching an all-time high with no signs of slowing down. This figure increased by $105 billion in the week ending Monday, according to Crane Data. The continued influx into these funds occurs even as the Federal Reserve continues to lower its benchmark interest rates.
A primary driver for this trend is that the yields offered by money market funds remain significantly more attractive than those provided by traditional banks. As of December 1, the seven-day yield on the Crane 100 Money Fund Index, which tracks the 100 largest money market funds in the U.S., stood at 3.80%. This offers a substantial advantage over bank deposit rates, which have seen minimal adjustments.
This phenomenon is not limited to individual investors; large institutions and corporate treasurers are also redirecting their cash into money market funds to secure higher returns without the complexities of daily cash management.
Investors Prioritize High Yields Despite Fed Rate Adjustments
The Federal Reserve has already implemented two quarter-point rate cuts in September and October, bringing its benchmark rate into the 3.75% to 4% range. Despite these reductions, cash continues to flow into money market funds at a rapid pace.
Gennadiy Goldberg, head of U.S. interest rate strategy at TD Securities, commented on the trend, stating, "Money market funds continue to draw inflows as yields remain highly attractive amid gradual Fed rate cuts." He anticipates that while inflows may not cease entirely, they are likely to moderate if the Fed persists with rate cuts. However, even yields exceeding 2% are generally sufficient to sustain this momentum.
Financial traders are anticipating another rate cut at the Federal Reserve's December meeting. This speculation gained traction last week following remarks from John Williams, the President of the Federal Reserve Bank of New York, who indicated his support for such a move. Williams' stance is noteworthy as he is considered to be closely aligned with Fed Chair Jerome Powell. Prior to his comments, several other policymakers had expressed reservations about another rate cut occurring so soon.
A significant factor contributing to the strong performance of money market funds is their approach to declining interest rates. Banks typically pass on lower rates to their customers almost immediately. In contrast, money market funds adjust their rates more gradually, making them a more appealing option for investors during periods of falling rates. This lag allows investors to maximize the value of their cash for a longer duration.
Year-to-date in 2025, over $848 billion has been invested in the money market fund sector, according to Crane's industry-wide tracking. A separate report from the Investment Company Institute, which excludes internal firm funds, indicated total assets at $7.57 trillion for the week ending November 25.
SEC Proposes New Regulations to Facilitate Public Offerings for Small Businesses
Concurrently with the surge in money market fund assets, the Securities and Exchange Commission (SEC) is actively working on initiatives to simplify the process for smaller companies to become publicly traded.
SEC Chair Paul Atkins announced during an event at the New York Stock Exchange on Tuesday that the agency is developing regulatory changes aimed at reducing disclosure requirements and streamlining bureaucratic processes. The objective is to provide smaller firms with an extended period, at least two years, to comply fully with initial public offering (IPO) rules, an increase from the current one-year timeframe.
Atkins also indicated that the SEC is re-evaluating the definition of a small company, a classification that has not been significantly updated in two decades. He highlighted that the number of publicly traded companies has halved over the past thirty years, attributing this decline partly to compliance costs that disproportionately affect smaller entities compared to larger corporations.
"Our regulatory framework should provide companies in all stages of their growth and from all industries with the opportunity for an IPO," Atkins stated. He expressed concern that existing compliance costs may be hindering smaller firms' access to public markets.
In addition to IPO reforms, the SEC is also pursuing changes to executive compensation rules. This matter was raised earlier this year during a series of discussions with investors, pension funds, and public companies. Atkins confirmed that the agency is continuing its work on this front. Furthermore, he has tasked SEC staff with developing proposals to "de-politicize shareholder meetings," ensuring they remain focused on director elections rather than becoming venues for contentious disputes.