Money Market Fund

Reuters  Mar 26  Comment 
U.S. securities regulators are inching closer to completing new rules for money market funds, though no final decision on how to proceed has been made just yet, according to a person familiar with the matter.
Reuters  Mar 26  Comment 
U.S. securities regulators are preparing to exempt a majority of money market mutual funds from a central plank of rules intended to curb risks in the $2.6 trillion market, the Wall Street Journal reported, citing people familiar with the matter.
Mondo Visione  Mar 24  Comment 
The staff of the Securities and Exchange Commission today made available certain analyses of data and academic literature related to money market fund reform.   The analyses, which were conducted by the staff of the SEC’s Division of...
Mondo Visione  Mar 19  Comment 
Encouraging Economic Discourse Thank you for inviting me here today to deliver the keynote address at this important conference.  I am particularly pleased to be sharing this honor with Norm Champ, the Director of the Division of Investment...
Financial Times  Feb 19  Comment 
In the final quarter of 2013, US MMFs’ exposure to Europe’s financial institutions fell by nearly a tenth quarter on quarter to $168bn
DailyFinance  Feb 8  Comment 
VANCOUVER, BRITISH COLUMBIA -- (Marketwired) -- 02/07/14 -- OceanRock Investments Inc. today announced its intention to make specific changes to the Meritas Money Market Fund pending unitholder approval. Proposed Changes to the Meritas...
Financial Times  Feb 4  Comment 
The funds, which control about €1tn in assets, saw net outflows nearly double last year to €69.2bn, the highest figure since €158.7bn was pulled out by investors in 2010
SeekingAlpha  Feb 4  Comment 
By Stockopedia: Private investors are often warned about the risks of running highly focused portfolios for the sake of investing heavily in just a handful of shares. For the average stock picker, getting the balance wrong between adequate...


A money market fund is a type of mutual fund that is required to invest in low-risk securities. These funds have relatively low risks compared to other mutual funds and pay dividends that generally reflect short-term interest rates.

Money market funds typically invest in government securities, certificates of deposit, commercial paper of companies, or other highly liquid and low-risk securities.

Importance to the Repo market

Money market funds play a critical role in the repo market. Repurchase agreements, or repos, are short-term agreements in which a borrower "sells" a security, but agrees to purchase it back at a specified price and date (usually the next morning), in return for a small interest payment. Securities firms such as Investment Banks and brokerages are required to have a certain amount of cash overnight - by "selling" securities to money market funds just for the night, banks can meet their liquidity obligations.

In effect, Repos are secured loans since the lender (in this case the money market fund) gets the security as collateral for the cash being lent out.

Net Asset Value and Breaking the Buck

Money market funds attempt to keep their net asset value (NAV) at a constant $1.00 per share (the price the investor paid) – only the yield (interest) goes up and down. But a money market’s per share NAV may fall below $1.00 if the investments perform poorly - a situation known as "breaking the buck". This has only occured twice - most recently, on September 16 2008, the Reserve Primary Fund "broke the buck" after writing off a large amount of Lehman Brothers (LEH) commercial paper.

Unlike a money market deposit account at a bank, money market funds have traditionally not been federally insured. On September 19, 2008, as a result of the lehman bankruptcy and the Reserve Primary Fund breaking the buck, the U.S. Treasury Department established a temporary guarantee program for the U.S. money market mutual fund industry.


As of December 11, 2008, retail money market funds had $1.282 trillion in Assets Under Management (AUM), of which 77% was in tax-exempt funds. There is an additional $2.5 trillion in institutional money market funds, of which the overwhelming majority - 93% - is tax-exempt.[1]


  1. Investment Company Institute, "Money Market Mutual Funds", Dec 11th, 2008.
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