Total assets in money-market funds declined modestly over the past week but remain near all-time highs, underscoring the persistent investor preference for liquidity and capital preservation amid heightened market uncertainty.
According to the latest data from the Investment Company Institute (ICI), money-market fund balances fell by $25 billion to $7.01 trillion for the week ended April 9. That dip follows a week in which total assets had reached a record $7.03 trillion.
The pullback likely reflects a seasonal trend, as investors begin tapping liquid assets to meet federal and state tax obligations ahead of the April filing deadline.
“We’re entering a cyclical period where money-market funds tend to lose some assets because of tax season,” noted Robert Sabatino, head of Global Liquidity Portfolio Management at UBS Asset Management. “This is a predictable pattern that doesn’t signal any fundamental weakness in investor sentiment toward cash equivalents.”
Despite the minor weekly outflow, money-market fund assets are up roughly $156 billion since the start of the year, highlighting the continued demand for yield and safety. Market turbulence—driven in large part by concerns over President Donald Trump’s expansive tariff agenda—has pushed many investors to reduce equity exposure.
Year-to-date, the S&P 500 is down more than 10%, while the tech-heavy Nasdaq Composite has fallen by over 15%, fueling a flight to safety that has benefited cash allocations.
Money-market funds, often seen as a refuge during periods of volatility, are currently offering yields that are difficult to ignore. The Crane 100 Money Fund Index reports an average annualized seven-day yield of 4.14%. Certain institutional-grade funds, including the Vanguard Treasury Money Market Fund, offer even higher yields—4.23% as of the latest reporting period—with relatively low entry thresholds for investors, in this case, a $3,000 minimum investment.
“It’s not surprising that assets have come up,” Sabatino said. “Most money-market funds are now yielding north of 4%, which is a compelling return for assets offering liquidity, principal stability, and—in some cases—tax advantages.”
For advisors evaluating short-duration options for client portfolios, the case for cash has rarely been more straightforward. Unlike high-yield savings accounts, which often carry promotional rates subject to revision at any time, many money-market funds offer more consistent yield profiles. Furthermore, some tax-exempt money-market funds may provide state or local income tax advantages, depending on the investor’s residency and the fund’s composition—an attractive feature for high-net-worth clients in high-tax jurisdictions.
At the same time, money-market funds lack the federal insurance protection offered by FDIC-backed accounts. While this distinction is important, many advisors view it in context. Most money-market funds hold short-term U.S. Treasury bills, repurchase agreements, or other high-grade instruments. These underlying holdings provide a strong liquidity profile and historically low credit risk, making them a cornerstone of short-term asset allocation strategies for conservative investors.
The broader macro environment also continues to favor cash alternatives. With equity markets under pressure and fixed income challenged by rate volatility, the relative appeal of stable-value instruments has grown. The current yield advantage offered by money-market funds, when coupled with downside protection, positions them as a critical tool in managing both risk and return expectations for clients wary of volatility.
For RIAs and portfolio managers, the conversation around cash is no longer just about capital preservation—it’s increasingly about total return in a volatile environment. The Fed’s monetary stance remains a wild card, but if rates remain elevated or edge higher, yields on money-market funds could inch upward as well, particularly as older, lower-yielding instruments mature and roll over into higher-rate holdings.
From a strategic allocation standpoint, advisors are recalibrating cash targets upward. While traditional portfolio models often limited cash exposure to 2% or 3%, many RIAs are now recommending allocations of 5% to 10% or more for certain client segments. These cash reserves serve not only as a buffer but also as dry powder should equity valuations become more attractive later in the year.
For clients in or near retirement, the appeal of these funds is magnified. The ability to earn over 4% on idle cash while maintaining daily liquidity is particularly relevant for clients drawing regular distributions or facing near-term spending needs. For younger investors or those with longer time horizons, tactical reallocations into cash can provide temporary shelter while broader market conditions stabilize.
Looking ahead, money-market fund flows may fluctuate as tax season progresses and investor behavior shifts in response to macroeconomic headlines. Still, the structural backdrop remains supportive. The combination of competitive yields, principal stability, and high liquidity ensures that these vehicles will continue to play a central role in portfolio construction, particularly as market volatility persists.
In fact, money-market funds may become an even more critical part of client conversations as the year unfolds. The reacceleration of inflation pressures, geopolitical risk, and continued tariff-related market disruptions could further undermine risk asset performance. Advisors who can clearly articulate the role of cash as both a strategic reserve and a yield-generating asset will be well-positioned to guide clients through a murky investment landscape.
With yields where they are, the opportunity cost of holding cash is significantly reduced—if not altogether eliminated. For much of the past decade, the phrase “cash is trash” resonated among growth-oriented investors. That narrative is shifting. In today’s environment, cash can be a source of real return, offering both psychological comfort and tactical flexibility.
Wealth managers would also do well to evaluate money-market offerings across custodians and fund families. Expense ratios, yield differentials, tax treatment, and underlying portfolio composition can vary significantly. In a market where small yield differences matter, especially on large cash balances, due diligence on fund selection is essential.
In summary, while the slight week-over-week decline in money-market fund assets reflects a predictable seasonal tax effect, the bigger picture remains unchanged. Investors continue to rotate into cash amid broader market unease. For RIAs, this trend offers both a tactical lever and an educational opportunity—one that reinforces the importance of liquidity, yield discipline, and downside management in client portfolios. As long as equity markets remain volatile and interest rates stay elevated, cash isn’t just a placeholder—it’s a performance contributor.
