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This paper characterizes the run behavior of sophisticated (institutional) and unsophisticated (retail) investors by studying the runs on prime money market funds (MMFs) of March 2020, at the beginning of the COVID-19 pandemic. For both U.S. and European institutional prime MMFs, the runs were more severe in funds for which the imposition of redemption gates and fees was a material possibility because of their lower liquidity positions. In contrast, although U.S. retail prime MMFs are also required to adopt the same system of gates and fees, their outflows did not depend on fund liquidity; unsophisticated (retail) investors ran more often if their funds belonged to a family offering institutional prime MMFs and suffering larger institutional redemptions. Finally, across investor types, MMFs belonging to families with a larger offering of government MMFs experienced larger outflows; this result is consistent with lower switching costs in fund families that are more specialized in government funds.

We document the reaction of money market fund (MMF) investors and portfolio managers to a new SEC regulation that came into effect in October 2016. This regulation forces all prime and municipal MMFs to adopt a system of redemption gates and fees and institutional prime and muni MMFs to also operate under a floating net asset value (NAV). First, we show that in anticipation of the new regulatory framework, investors flowed from prime and muni into government MMFs and especially toward the riskier type of government MMF, agency MMFs, consistent with their likely higher risk appetite profile. Second, the flows from prime and muni MMFs into government MMFs mostly occurred within fund families, supporting the hypothesis that the flows were due to the regulatory changes. This contrasts with past outflows from prime and muni MMFs into government MMFs, such as those seen during the 2008 crisis; in those cases, investors often left not only their prime and muni fund but also the fund family. We relate such differences in investors' behavior to their appetite for money-like assets, whose supply was impacted by the new regulation, as opposed to traditional flight-to-safety motives. Third, the outflow from prime and muni MMFs was stronger for institutional investors, consistent with the fact that these investors are more elastic to industry developments and have been subject to a stricter regulation than retail investors. Finally, as a result of the outflows from prime and muni funds, MMF credit to the private sector has been significantly reduced, whereas credit to government-sponsored enterprises (and in particular Federal Home Loan Banks) has increased substantially.