Conservative Economic Commentary | Topic: Money Market Funds

Subject: money market funds

A Money Market Fund (or Money Market Mutual Fund) is an open ended mutual fund that invests in short term debt securities. Regulated under the Investment Company Act of 1940, Money Market funds are important providers of liquidity to financial intermediaries. In 1971, Bruce R. Bent established the first money market fund in the U.S. The Reserve Fund was offered to investors who were interested in preserving their cash and earning a small rate of return.
Outside of the U.S., the first money market fund was set up in 1968 and was designed for small investors. The fund was called Conta Garantia and was created by John Oswin Schroy. The fund’s investments included low denominations of commercial paper. (Wikipedia Jan 2010)

Liquidity preference 2005

Investors move to money market funds

By John Schroy, on March 12th, 2006 |

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For the first year since 2001, investors moved back into money market mutual funds in 2005, with net sales of $127 billion.

The return of investors to money market funds was clearly the result of the Federal Reserve policy of increasing short-term interest rates, combined with the flattening of the yield curve due to buying pressure on longer-term fixed income securities resulting from the trade deficit.

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