Federal Reserve Board research links bank dominated institutional prime money market funds to more volatile flows and more conservative portfolios

The Federal Reserve Board has published a FEDS Note using newly available Securities and Exchange Commission Form N-MFP investor-type data for institutional prime money market funds. Across 32 share classes from 8 publicly offered institutional prime funds over June 2024 to August 2025, the note finds that share classes dominated by bank investors tend to experience more volatile daily flows and a higher likelihood of large outflows, while also holding more liquid and lower-risk portfolios. The analysis does not attempt to establish causality. The study groups reported investors into dealers, banks, nonfinancial firms and other investors. Dealers and banks each accounted for roughly 30% of investments on average, while banks were the principal investor in 26% of share class-month observations. Relative to peers, bank-dominated funds held higher weekly liquid assets, shorter weighted average maturities, lower gross yields and fewer risky assets. Flow analysis used next-month daily flow volatility and the share of days with net outflows of at least 5 percent, and bank-led share classes showed higher readings on both measures. The note adds that the sample covers a 15-month period without material stress in money market funds, so the predictive role of investor composition during stressed conditions remains uncertain. It nevertheless suggests investor composition may be a useful indicator for assessing money market fund flow dynamics and potential run risk during stress episodes.