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January 2017

US Money Market Reform by the Numbers


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In 2014, the SEC announced new regulatory requirements for Money Market Funds, which went into effect in late 2016. As asset managers and investors adjusted their allocations, dislocations resulted in the short end of the yield curve. With reform in full effect, we now evaluate the shifts that were observed—in flows, yields and spreads.

Money Markets Before and After Regulatory Reform

1Source: iMoneyNet, as of December 2016. 2Source: Bloomberg, as of December 31, 2016. Bps is basis points, 1/100th of a percentage point. GSAM’s and iMoneyNet’s products are not related, and iMoneyNet has not endorsed either GSAM or its products. Prime funds are money market funds that invest primarily in corporate debt securities. Government funds invest primarily in government securities. Tax-exempt funds invest primarily in tax-exempt municipal securities. Goldman Sachs does not provide accounting, tax or legal advice. Please see additional disclosures at the end of this document.

$1.1 Trillion Flowed into Government and Out of Prime Funds

From 2014 to 2016, Institutional Prime fund AUM dropped from $1T to $125B, while Government Fund AUM rose from $924 billion to $2.2 trillion.1

More than 50% of total outflows in prime funds occurred between June and September of 2016, with a full third occurring in September alone.

From 2014 to 2016, the number of Prime funds in operation dropped from 533 to 2391.

Prime Outflows Accelerated beginning in June 2016

Source: Bloomberg and iMoneyNet, as of December 31, 2016. Based on iMoneynet Prime and Government Money Market Fund Universe. For Illustrative Purposes Only.

Yields Are High, But Investors Still Hesitant

The difference between Prime and Government 7-day yields have widened, but we believe not enough to entice investors to return to Prime Funds yet.

From 2014 the difference was 10 basis points vs. 34 basis points (bps) differential today.

In October, 1 to 7 day tax-free debt experienced volatility in yields, but has since stabilized. This is expected to continue into 20171.

Spreads Should Continue to Widen

Source: iMoneyNet, as of December 31, 2016. Based on iMoneynet Prime and Government Money Market Fund Universe. Yields are an average of iMoneynet categories. Yields do not represent any yields for any Goldman Sachs product. For illustrative purposes only. Past performance does not guarantee future results, which may vary.

We believe in 2017, investors will further diversify their liquidity investments. 

For tools to help you compare the risk and reward potential of various vehicles, contact your Goldman Sachs Liquidity Solutions representative.


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