Money market funds are open-end management investment companies that invest in high-quality, short-term debt instruments, including commercial paper, Treasury bills and repurchase agreements. They are registered under the Investment Company Act of 1940, but unlike other open-end registered funds, which are required to compute their net asset value (NAV) at the end of every trading day, money market funds maintain a stable NAV, generally of $1 a share. Money market funds had $2.9 trillion of assets under management on Sept. 30, 2012.1
There are four main types of money market funds: Treasury money market funds that invest primarily in U.S. Treasury obligations, including collateralized repos; government funds that invest primarily in U.S. Treasury and agency obligations; prime money market funds that invest in private debt instruments; and tax-exempt funds. Because of the greater risks in their portfolios, prime money market funds generally pay higher yields than Treasury or government money market funds.2
