Money market funds also known as money market mutual funds are open-ended mutual funds. These form of market funds target short-term debt security investments. In comparison, the above market funds provide the same security as bank deposits and provide high returns. The money market funds are controlled in the United States under the Investment Company Act of 1940. They provide liquidity to financial intermediaries.
Money market funds invest in Securities such as commercial paper, short-term bonds, repurchase agreements, US Treasury bills and other money funds. The security these funds provide arise from the fact that they cap credit, market, and liquidity risks. Money market funds maintain a value of $1 per share so that the funds can pay dividends to investors. Money market funds buy the highest rated debt and mature in 13 months. Another requirement for these funds is the need to maintain a 2-month period as the weighted average maturity time. At the same time, you cannot use the funds to invest more than 5% in any other issuer rather than government securities and repurchase agreements.
The first money market was established in 1971 by Bruce R. Bent together with his colleague Henry B.R.Brown. They named it the Reserve Fund and offered it to investors who were interested in saving their cash and earn a small rate of return. It took a short period to establish other funds, and the market grew significantly. Money market funds made mutual funds popular which were not utilized before. Money market funds aim never to lose money by seeking a stable net asset value.
The money market funds is a financial product that was recognized by the American Museum of Financial History due to its importance and impact on the nation’s financial history. Bruce R. Bent introduced a formal discipline and developed rules for the money market funds. Currently, the product serves tens of millions of investors, and the industry is now worth more than $3.0 trillion.
Bruce owns a Bachelor of Science in Philosophy from Northeastern University. He is the Vice Chairman and President of Double Rock Corporation. He is also the pioneer in the cash management and retirement services businesses. He is very visionary and possesses entrepreneurial skills that have led him to invent relevant products and technologies in the financial services industry.
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