The Federal Reserve Bank of Boston published a supervisory research note analysing investor behaviour in prime money market funds and finding that retail investors became more likely to redeem during the 2020 COVID-19 stress episode than during the 2008 Global Financial Crisis, indicating increased “run” sensitivity among everyday investors. Using iMoneyNet data on daily net flows from 1 January 2007 to 31 December 2023 and regression analysis, the authors find institutional investors behaved similarly across both crises, with cumulative net outflows from institutional prime funds close to 30% in each event. Retail prime funds saw much smaller redemptions, but cumulative outflows rose from about 4% of assets in 2008 to 9% in 2020. The note links the results to changes in the information environment, including more frequent reporting of fund holdings following U.S. Securities and Exchange Commission reforms, and highlights that evolving retail behaviour may matter for financial-stability vulnerability assessments.
Federal Reserve Bank of Boston 2025-04-10
Federal Reserve Bank of Boston research finds retail investors in prime money market funds became more sensitive to stress in 2020 than in 2008
The Federal Reserve Bank of Boston's research note reveals increased redemption sensitivity among retail investors in prime money market funds during the 2020 COVID-19 crisis compared to the 2008 Global Financial Crisis. Institutional investors showed consistent behavior across both crises, with similar net outflows. The study attributes changes in retail behavior to enhanced information availability post-U.S. Securities and Exchange Commission reforms, impacting financial-stability assessments.