Growth in money market mutual funds leveled off last year despite stock market volatility, which in the past has sent investors running for the safety of these cash instruments.

Money market assets grew 18% in 1997, according to figures from the Investment Company Institute, Washington. That is down slightly from a 20% jump in 1996 and a 23% increase in 1995.

The slowdown in asset accumulation came despite a 554-point downtick in the Dow Jones industrial average in October that was followed closely by fallout from overseas markets.

But investors' comfort level with the stock market is understandable when you look at stock market returns for 1997 overall, said G. David Orr, chief capital markets economist at First Union Corp., Charlotte, N.C. The Standard & Poor's 500 index rose 30%, while the Dow Jones industrial average gained 22% last year.

Investors are more sophisticated nowadays, said Patricia A. Larkin, head of taxable portfolios and money market trading at Dreyfus Investment Services Corp., a subsidiary of Pittsburgh-based Mellon Bank Corp. And despite volatility in Asia, "people just are not concerned," she said.

Another factor that may have depressed money-fund asset accumulation in 1997 was stagnant short-term interest rates, said Mr. Orr. The Federal Reserve only raised rates once, tacking on 25 basis points to the federal funds rate in March. By contrast, from February 1994 to February 1995, the Fed doubled that short-term rate, from 3% to 6%, Mr. Orr said.

"The predictions were that the Fed would continue to increase interest rates," he said, explaining the 23% jump in money market assets in 1995.

Still, 18% growth in money market assets is not "shabby," said Thomas H. Nevin, president of PNC Institutional Management Corp., a division of PNC Bank Corp., Pittsburgh. Money market assets administered by PNC grew 25%, or from $31 billion to $40 billion, last year, he said.

That growth was fueled partly by a 50% uptick in assets in PNC's TempFund, which finished the year with $9.6 billion under management. Mr. Nevin attributed the substantial growth in assets to the extension of the fund's daily trading close from 3 p.m. to 5:30 p.m., which he said attracted clients from the West Coast's Silicon Valley. The PNC funds are primarily institutional, he said.

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