According to the most recent data from the Investment Company Institute, the net assets of mutual funds increased $178.90 billion, or 2.5 percent to $7.413 trillion in December 2003.1 Noteworthy for credit unions is the activity in money market accounts. Whereas money funds offered to institutions experienced an inflow of $3.11 billion, funds offered to individuals had an outflow of $25.94 billion for the same period. What is the implication for credit unions?
The story is so familiar that it hardly needs repeating: the stock market meltdown a couple of years ago resulted in a massive inflow of deposits from investors seeking safe havens. These deposits more often than not ended up in money market share accounts, providing a source of funding for credit unions. The question is how reliable, or stable, is this source of funding. In a rising rate environment, with the stock market providing competition for investor dollars, funding the asset side of the balance sheet with this liability source requires prudent asset/liability management.