Could money market funds break the buck again?
Posted on January 19th, 2012
Money market funds are nicknamed sleep-at-night funds because they’re largely safe and stable.
They invest in short-term, highly rated debt issued by banks, governments and corporations worldwide. Currently, $2.6 trillion are stashed away in money market funds, waiting to be reinvested.
Yet, in September 2008, the $65 billion Reserve Primary Fund in New York broke the buck — selling for less than the $1 net asset value of a fund share — after it was caught holding bankrupt Lehman Brothers debt.
A panicked wave of money market fund redemptions followed, causing the government to step in. “A lot of funds were in danger of going under,” says Mike Krasner, the managing editor of iMoneyNet in Westborough, Mass. “Commercial paper was freezing up worldwide.”
Could money funds break the buck again?
Money market mutual funds, or MMFs, try to keep their net asset value constant at $1 per share.
Tags: Funds, Market Funds, Money Market, Money Market Funds
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