Skip to main content

Newsroom

September 16, 2013

Money market funds: hidden risks

Soon after Lehman Brothers’ once unthinkable bankruptcy in September of 2008, a money market fund did something similarly shocking. Five years ago this month, the Reserve Primary fund “broke the buck”. Fear spread, freezing up the short-term funding markets that rely on money market funds such as Reserve Primary, until the government stepped in.

Investors have treated money market funds like bank deposits, expecting zero principal risk despite the lack of systematic government insurance. The funds aim for a stable share price of $1, and by investing in short-term, highly rated securities, they have largely achieved it. The fact that they do not mark their positions to market, unless market value deviates from $1 by more than 0.5 per cent (or $0.005), reinforces the impression of security. Hence their $2.6tn in assets.”

***

Read full Financial Times article here

 
In the News
Share

MEDIA REQUESTS

For media inquiries, please contact us at
press@bettermarkets.org or 202-618-6433.

Contact Us

For media inquiries, please contact press@bettermarkets.org or 202-618-6433.

To sign up for our email newsletter, please visit this page.

Name(Required)
This field is for validation purposes and should be left unchanged.

Sign Up — Stay Informed With Our Monthly Newsletter

This field is for validation purposes and should be left unchanged.

For media inquiries,

please contact press@bettermarkets.org or 202-618-6433.

Donate

Help us fight for the public interest in our financial markets, protecting Main Street from Wall Street and avoiding another costly financial collapse and economic crisis, by making a donation today.

Donate Today