As we've been writing, late last month, Crane Data hosted its big Money Fund Symposium conference in Jersey City. (See our July 2 News, "JP Morgan AM's Tufts Says Embrace Innovation in MF Symposium Keynote," and our July 6 News, "Cunningham, Gutierrez, Sabatino Discuss Major Issues at MF Symposium.") Today, we highlight another discussion and quote from the "Senior Portfolio Manager Perspectives" session, which was moderated by Moody's Robert Callagy and which featured State Street Investment Management's Todd Bean, J.P. Morgan Asset Management's Doris Grillo and Vanguard's Nafis Smith. Asked to comment on the "Stablecoins Reserves and Tokenized Money Funds" session, Bean comments, "So when you came to the Symposium last year, you saw our CEO give the keynote address, and she was the very bullish about the technology and the opportunity set that was coming out of that. And we remain so. I think listening to a couple of the panels yesterday, and for this idea of kind of launch it and leave it, build it and they will come, we've partnered with Galaxy Digital on a couple of different products in the space and dealing with people that are living in the crypto financial world and return prospects in the space." (See our July 28, 2025 News, "July MFI Profile: State Street I.M.'s Yie-Hsin Hung on the Future of Cash.") (Note: Conference materials are available in our "Money Fund Symposium 2026 Download Center." See our latest Money Fund Intelligence for more highlights, and mark your calendars for next year's show, which will be June 23-25, 2027 in Philadelphia!)
He continues, "So, I think we are coming into it a little more optimistic than what I've heard from others so far. The space as a whole, I struggle to get my head around that it will be as kind of 'kumbaya' as Adam [Ackermann] just made it sound between stablecoins and tokenized funds. If you're an investor that's going to [buy] the U.S. dollar on-chain, you have a choice to buy a stablecoin or a token. To me, that decision comes down to two things. It's utility and return. So, on the utility side, how am I going to use it? Who's willing to accept it?"
Bean states, "But on the other side, what am I going to earn for the capital that it's taking me to mint the coin or token? That's what really reminds me, and you touched on it at the very end of the last session, [of] the comparison to banks and money market funds going back to the late '70s and early '80s. This idea that Regulation Q at the time capped interest rates on banks and what they were able to pay on top of it created the opportunity for money funds to exist and for our industry to grow the way it has over the years."
He adds, "So, return does matter. That's kind of the way I view stablecoins and tokenized funds at the moment. Tokenized funds are providing a fair market return to on-chain investors, whereas, as Pete highlighted, the stablecoins are still regulated against paying that interest. So, I do think it will be competitive, and I think there's probably better near-term prospects than we've heard so far."
Asked about money market supply, Grillo tells us, "In terms of what we see in supply, so far this year it's been non-financial commercial paper that has been the main driver of growth, and that's typically more on the largely [tier 2] issuers, with some participation from tier one. [W]e saw supply also increase on the onset of the Middle East conflict, which is not unusual. Typically, you see banks and corporates often test liquidity and try to pre-fund when we have any geopolitical development or any credit headlines that could drive volatility.... Fast forward, we have seen what we're seeing currently is typically supply runs dry a little on quarter ends."
She then says, "We're now approaching year end, where banks are going to start to try to ramp up their funding needs over year end to January. We're starting to see that, and typically we'll see some spreads start to widen two to five basis points, but, again, it's a little bit of a mix. Right now, we've seen a backup because of the recent FOMC dots, the Mideast crisis as well. So, it will be interesting to see what happens."
Smith replies, "So, in terms of what we're buying and not buying, clearly I have the focus on repo, [and we] continue to like ... agencies. Pretty much all tenors, I think, make sense in an environment where SOFR [is] relatively elevated compared to, say, like overnight reverse repo at the Fed or something like that. So, agency floggers and repo."
Discussing asset growth and expectations, Bean replies, "Well, you're probably asking the wrong person because it's [the] one call I've had wrong since the pandemic. It's like every year I come [to Money Fund Symposium], and every year Pete's super bullish about the new high we're going to meet, and every year I'm like, there's no way we're going to do that. And then every year I'm wrong, and he's right."
He comments, "But honestly, when we were looking at it earlier this year, we started asking the question, like, why are we getting that wrong? What are we missing there? And I think a really interesting thing we looked at was just the percentage of cash versus the rest of the financial system or the way cash is a percentage of the economy as a whole. So, if you take cash assets and you look at it versus the S&P 500 or you look at it versus GDP, cash assets currently aren't that different than historical norms. So, like, cash and us as a money fund industry have grown as the rest of the financial system, as the rest of the economy has grown. So, I think that's really ... what I was missing over the last few years in getting that call wrong when clients would ask me."
Bean adds, "So, again, I do still think there is room [to grow] given a lot of the volatility. We've seen the uncertainty.... Near-term flows have obviously been skewed by a ton of things. Corporate bond issuance has been massively in the tech zone and is playing a big part in these giant IPOs. We've kind of heard that through a few of the panels as well. It's hard to know how long ... some of that money will stick around, but it is real. We're feeling it and seeing it in the markets. But that's kind of the trickiest part of our job is forecasting what those flows are going to look like over the next week or the next couple of months or the rest of the year."
Grillo replies, "So, in terms of generally in AUM, I think 2026 is unlikely going to be a year of money market fund outflows. Historically, money market fund balances broke as the economy rose, and significant outflows typically occur during extraordinary times where the dotcom caused the global financial crisis, and the pandemic was the time that we saw the most outflows. That's when the Fed came in, slashed interest rates to zero, and real rates were negative. That's when some clients sought other alternatives. But the economy is pretty hot. You know, interest rates are high. Real rates are high -- I think that's a tailwind for money market funds."
Smith summarizes, "Retail flows have been relatively flat year to date. We see that in the industry; we see that at Vanguard. I think year to date we're down honestly in terms of our retail, AUM. Where we are seeing some inflows is in the short duration space. It's our ultra short product that's garnered some cash this year. I think you see that kind of in the history more broadly. We've also seen some growth in our Cash Plus [bank deposit] offer, which Pete asked me to mention the bank deposit program.... This is just a high-yield savings account offer that's meant to complement the money market fund, so we've seen some growth there."
Finally, Smith adds, "Maybe just a quick comment on ETFs. I think I mentioned this last year. For certain investors, I think there's probably an argument for ETFs, but can you compare money market ETF to, say, an ultra-short ETF? I think the value proposition is much less compelling. So, it'll be interesting to see how things evolve. I think that the [consensus here] has been fairly lackluster for money-mark ETFs, and I think the conversation around tokenization is really interesting.... So, I think I'm just somewhat skeptical on the ETF conversation, but very open to the tokenization conversation."
