Money Market Fund

RECENT NEWS
New York Times  Jul 24  Comment 
The S.E.C. adopts new rules for money market funds. | The Obama administration is pressing its case for retroactive laws on so-called inversions. | To the con man, nothing can top the "sucker list." | The White House is starting a $10 billion farm...
New York Times  Jul 24  Comment 
Nearly six years since the panic after the collapse of Lehman Brothers, the S.E.C.’s new rules are intended to prevent investors from dumping their shares in funds during times of stress.
Mondo Visione  Jul 23  Comment 
The Securities and Exchange Commission today adopted amendments to the rules that govern money market mutual funds.  The amendments make structural and operational reforms to address risks of investor runs in money market funds, while preserving...
Jutia Group  Jul 23  Comment 
[at noodls] - NEW YORK--(BUSINESS WIRE)--Jul. 23, 2014-- "BlackRock supports the SEC's efforts to improve the resiliency of U.S. money market funds during times of stress and appreciates the thoughtful, deliberate ... Read more on this. ...
Mondo Visione  Jul 23  Comment 
Today, the Securities and Exchange Commission (SEC) voted to require certain money market funds (MMFs) to price shares in a manner that more accurately reflects the market value of the funds’ underlying portfolios.  These particular MMFs will...
New York Times  Jul 15  Comment 
The Financial Stability Oversight Council must soon decide whether to accept proposed S.E.C. rules on money market funds or to press for tougher measures.
Gold Stocks Today  Jul 15  Comment 
Steve Hochberg on the state of retail money market funds vs. stock market capitalization, filmed at the 2014 Las Vegas Money Show Editor's note: The article below is adapted from the transcript of the live presentation above, originally recorded...
Financial Times  Jul 13  Comment 
Chinese regulators and banking authorities have begun looking at the online money fund industry
USAToday.com  Jul 11  Comment 
You really don't want the kind of excitement you get when a money fund goes bad.
Financial Times  Jun 19  Comment 
Central bank to quadruple trading with government money market funds in the repurchase market as it engages more directly with shadow banks




 
TOP CONTRIBUTORS

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.

Statistics

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]

References

  1. Investment Company Institute, "Money Market Mutual Funds", Dec 11th, 2008.
Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki