“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.”

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