Roger Merritt, managing director at Fitch Ratings, said that while there have been outflows, "the feedback from fund managers is that they're continuing to maintain liquidity because they do expect it to happen, but the corporate treasurers have been very slow to react.

"How much more moves out remains an unknown, and that's why the funds continue to operate with a very high amount of liquidity," Merritt added.

The movement of prime fund assets is a "dynamic situation," said Greg Fayvilevich, a senior director at Fitch, with the spread that institutional prime funds offer over government funds a key factor.

Until recently, "the yield spread between prime and government funds has been fairly compelling," he said, but noted that in recent weeks the spread has come in. As of Aug. 2, the spread between institutional prime and government funds stood at 13 basis points, down from a peak of 17 basis points, he said.

"Because prime funds are obligated to build up so much liquidity, that's starting to impact their yield," Fayvilevich said, adding that as the spread narrows, "there will be less of an incentive for investors to stay in prime."

Lance Pan, director of investment research and strategy for Capital Advisors Group, predicted that the bulk of the move out of prime funds will be accomplished by mid-September.

"I've had conversations with people, and Labor Day kept being brought up," Pan said, adding that few corporate investors will want to wait until the end of September to make a move, given that that is quarter-end.

At this point, Pan said, organizations that have decided to stay in prime funds will be keeping an eye on the pace of outflows to see if they want to rethink that decision.

There's also a potential issue with the supply of securities that prime funds buy. Pan estimates that two-thirds of the assets of prime funds are commercial paper issued by banks. But as money funds shorten their average maturities ahead of October, they're looking for shorter securities. Pan said that could be a problem for banks, since the liquidity coverage ratio, one of the capital requirements that came out of the post-financial-crisis reforms, means it no longer makes sense for banks to sell commercial paper that matures in less than 30 days.

"Banks can try to accommodate by coming in shorter, but there's going to be a time when they bump against that 30-day [limit]," he said. Banks may decide to shift to other ways of funding themselves, like selling CDs, he said.

And prime funds, which are already buying some government securities and using repo transactions as they bolster their liquidity amid the outflows, may rely on those instruments even more heading into October. "It's possible that in the couple of weeks before and after Oct. 17, prime funds may essentially look like old government funds—very short and mostly non-corporate paper," Pan said.

Treasurers' Viewpoint

Thomas Hunt, director of treasury services at the Association for Financial Professionals, noted that for corporate treasurers, the big move out of money funds already occurred. The AFP's 2016 Liquidity Survey showed that 55% of companies' short-term cash is held in bank deposits, while 9% is in prime funds and 7% in government funds. That's little changed from 2015, when 56% of corporate cash was in bank deposits, 9% in prime funds, and 6% in government funds, but it's a sharp contrast to 2008, when 39% of companies' cash was in money funds of various types—about 2.5 times the current level—and just 25% was in bank deposits.

Corporate treasurers have been among the groups wary of the new money fund rules, citing the additional administrative and accounting complexity related to floating NAVs and the fact that fees and gates could interfere with their ability to access their funds when they needed them.

Still, the latest AFP Liquidity Survey suggests some finance executives are starting to see possibilities in money funds that float. Thirty percent of the finance executives who responded to the 2016 survey said their organizations would not invest in prime funds after the rule changes, no matter what spread prime funds offered over government funds; that figure is down from 49% in the 2015 survey. A quarter of the 2016 respondents said they would invest in prime funds if they traded 25 basis points over government funds, and another 25% said they would do so if the spread hit 50 basis points.

"We're definitely seeing a warming trend toward being more comfortable with floating NAV," said Hunt, pictured at left.

When AFP asked finance professionals what alternative short-term investments they were considering in response to the changes to money funds, separately managed accounts still generated the most interest, but the level of interest was lower than last year's.

While 44% in this year's survey said they were considering separately managed accounts as an alternative investment, that's down from 52% in the 2015 survey. Hunt said the change may reflect companies' greater understanding of the expenses related to separately managed accounts.

"Probably those that considered it looked into the costs and benefits and figured it wasn't a viable option given that their cash investment levels weren't enough to cost-justify that," Hunt said. "There are definitely expenses—the custodian's fee, the investment manager's fee, the data fees." Separately managed accounts make sense for those with enough assets, but they are less appealing for companies dealing with fewer assets, he said.

Other alternatives include short-term funds that still offer a stable net asset value, which were cited by 21% of the survey's respondents; extending maturities (18%); direct repo transactions (13%); and ultrashort funds (also 13%).