Money market funds coughed up more cash last week as investors continued to embrace risk amid signs of a stabilized economy.
Tax-free money market funds shed $2.93 billion during the week ended Dec. 22, according to iMoneyNet.
The latest purge of cash brings the industry's outflows for the year to $89.5 billion, meaning tax-free money funds have lost more than 18% of their assets this year.
Over the last four weeks, tax-free money funds have bled an average of $1.48 billion a week, representing an acceleration from two weeks ago.
The current pace is far below the rate at the apex of outflows in October, when funds were losing $4.76 billion a week based on the four-week average.
Tax-free money funds now manage just $401.5 billion, which according to Lipper FMI is the puniest total since June 2007.
It is no great mystery why people are spiriting their cash out of money funds.
The average tax-free money market fund yields 0.04%, according to iMoneyNet, just a basis point better than the all-time low.
Money market funds invest in super-short-term, super-safe paper to offer clients the equivalent of cash.
For much of 2007 and 2008, investors stampeded to money market funds to cocoon their cash from the toxicity plaguing financial markets.
The 513-fund tax-free money fund industry's assets swelled to nearly $520 billion in mid-2008 from $372 billion at the beginning of 2007, according to Lipper.
Now that the panic is over, or has at least palpably subsided, cash has lost its allure.
The Standard & Poor's 500 Index is up 24% for the year and municipal bonds have retuned more than 12% in 2009, based on an S&P index.
Investors are having more difficulty watching all this from the sidelines.
The Federal Reserve's campaign to stimulate the economy by keeping its target for interest rates near zero, as well as a scarcity of paper eligible to be purchased by money funds, has brought yields on cash down to essentially nothing.
EPFR Global in a report this week said many fund groups this year have posted "good to excellent" results and many are on pace for a record year for attracting fresh money.
Outflows for all money market funds, including tax-free funds, now exceed $500 billion this year, EPFR said.
Meanwhile, municipal bond mutual funds have taken in $78 billion in new money from investors this year, Lipper said.
