What types of investments do money market funds hold?
Federal regulations prohibit a money market fund from acquiring any investment that is not (1) short-term, (2) determined to present minimal credit risks, and (3) either highly rated or determined to be comparable in quality to highly rated securities. “Short-term” means that the money market fund can receive its full principal and interest within 397 days. Moreover, regulations prohibit the average maturity of the fund’s investments from exceeding 90 days, and almost all funds maintain a much shorter average maturity. Taxable money market fund investments include U.S. Treasury securities, federal agency notes, certificates of deposit, and commercial paper. Money market funds also may invest in repurchase agreements that are collateralized fully by U.S. Treasury and agency securities or other high quality securities. Commercial paper consists of short-term notes issued by a wide variety of corporations such as domestic and foreign firms, banks, finance companies, and issuers of commerc
