ETF Safe Havens: Stickier Than Money Markets

As cash funds shed billions ahead of tax time, ETFs hang on to assets.

sumit
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Senior ETF Analyst
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Reviewed by: Lisa Barr
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Edited by: Daria Solovieva

A whopping $69 billion came out of money market funds during the week ending April 19, according to the latest data from the Investment Company Institute. It was the biggest one-week drop in money market assets since July 2020. 

But that decline isn’t what it seems. The deadline for filing tax returns was April 18, so the drop in money market assets reflects people taking cash out of the funds to pay the IRS rather than a bigger fundamental shift in where people are putting their money to work.  

Last year, money market funds shed $61 billion during the week of the tax filing deadline, while they lost $87 billion the year before.  

Still, the outflows from money market funds contrast with the steady state of the assets in ultra-short-term bond ETFs.  

These funds, which are the closest thing to money market funds in an ETF wrapper, saw outflows of only $73 million during the week ending April 20.  

Granted, ultra-short-term bond ETFs haven’t seen nearly the inflows of money market funds in 2023 as a whole (around $12 billion versus $474 billion), and they have only a fraction of the assets ($161 billion versus $5.2 trillion). 

But maybe this is an indication that the assets in the ETFs might be a little bit stickier than the assets in the money market funds? 

Both of these investment vehicles have been in demand, with interest rates at 16-year highs, and they’re offering very similar returns for savers.  

The iShares 0-3 Month Treasury Bond ETF (SGOV) has a 30-year SEC yield of 4.69%, while the Vanguard Cash Reserves Federal Money Market Fund Admiral Shares (VMRXX) has a seven-day SEC yield of 4.78%. 

Both are great options for investors seeking to take advantage of today’s high yields.  

Sumit Roy is the senior ETF analyst for etf.com, where he has worked for 13 years. He creates a variety of content for the platform, including news articles, analysis pieces, videos and podcasts.

Before joining etf.com, Sumit was the managing editor and commodities analyst for Hard Assets Investor. In those roles, he was responsible for most of the operations of HAI, a website dedicated to education about commodities investing.

Though he still closely follows the commodities beat, Sumit covers a much broader assortment of topics for etf.com, with a particular focus on stock and bond exchange-traded funds.

He is the host of etf.com’s Talk ETFs, a popular video series that features weekly interviews with thought leaders in the ETF industry. Sumit is also co-host of Exchange Traded Fridays, etf.com’s weekly podcast series.

He lives in the San Francisco Bay Area, where he enjoys climbing the city’s steep hills, playing chess and snowboarding in Lake Tahoe.