Basic definition
Money Market Mutual Funds, referred to as MMMFS) is a collection of numerous small investors, and is operated by special managers. An financial form of a financial organization that is distributed according to certain periods and holding share after earning income. For a common fund mainly operated in the currency market, the Monetary Fund is called the monetary market. Monetary Market Common Fund is a special type of common fund, which is a new type of investment wealth management tool that has emerged since the 1970s. The purchaser purchases a fixed price (usually $ 1) to purchase several fund shares, and the monetary market for monetary market uses these funds to invest in the profitable short-term monetary market tools (such as Treasury coupons and business notes, etc.). In addition, the purchaser can also issue a check of funds held in the form of shares in the fund.
Advantages
Monetary market funds have other advantages in addition to stable income, strong liquidity, low purchase limit, high capital security, such as the fund account to be issued Check, pay the consumer bill; where you are usually stored in cash as a new investment, these cash can get higher than the revenue of the deposit, and can withdraw from investment at any time. Some investors have subscribed to the monetary market fund and then gradually redemption for investment stocks, bonds or other types of funds. Many investors will also hold in the form of a monetary market fund in the form of an emergency. Some monetary market funds even allow investors to draw funds directly through the ATM.
Features
1. The most important difference between the money market fund and other investment in stocks is that the net value of the fund unit is fixed, usually 1 yuan per fund unit. After investing in the fund, investors can use revenue and investment, and investment income will continue to accumulate, increase investors' fund share. For example, an investor invests in a monetary market fund with 100 yuan, can have 100 fund units, after the year, if the investment compensation is 8%, then the investor has 8 fund units, a total of 108 fund units, value 108 yuan.
2, measuring the standard of good or bad in money market funds is the yield, which is different from other funds with net asset value value.
3. Good fluidity, high capital security. These features are mainly stem from the money market is a low risk and high liquidity market. At the same time, investors may not be restricted by the period, and can transfer the fund units at any time.
4. Low risk. The expiration date of monetary market tools is usually very short. The average period of monetary market fund portfolio is generally 4 to 6 months, so the risk is low, and its price is usually only affected by market interest rates.
5. The investment cost is low. The money market fund usually does not charge a redemption fee, and its management cost is also low, the annual management fee of the monetary market fund is approximately 0.25% to 1% of the net asset value, 1% from the traditional fund year management fee ~ 2.5% low.
6. The monetary market funds are open funds. Money market funds are often considered a risk or low-risk investment tool. Suitable for capital short-term investment in response to future needs, especially in terms of interest rates, high inflation rate, the securities fluidity, can be reduced, This gold is from losses.
Operating range
As the name suggests, the monetary market fund is a fund with money market tools as investment objects. The investment scope of the monetary market fund mainly includes:
cash
The residual period within 397 days (including 397 days) Bonds
The remaining period is within 397 days (Including 397 days), asset support securities (including bank rejection) Business drafts
Bank acceptance bills
bank deposits within a year (including 1 year) , Large amounts of deposits
large amounts of transfer deposits
period within 1 year (including 1 year) Central Bank Ticket
Terminal within one year ( In contraction of 1 year) bond repurchase and other monetary market tools
In fact, the scope of these monetary market funds is a variety of high security factors and stable income, so there are many hopes to avoid securities market risks. Enterprises and individuals, the monetary market fund is a natural safe, in general, can achieve the benefits of the bank deposit interest, but also guarantee the security of the principal.
Main Features
Money Market Monetary Fund is first in the fund, and it is also a fund specially investing money market tool, which is compared with the general fund. In addition to the characteristics of the monetary market, the monetary funds of the general funds have also had some investment characteristics:
1. Monetary Market Common funds invest in high quality securities in the currency market.
2. Monetary Market Common Fund provides a restricted deposit account.
3. The regulations received by the Monetary Fund are relatively limited
Development history
US First Money Market Common Fund as an alternative to bank deposits was founded in 1972, it is One of the best examples of financial innovation in the market changing environment. In the early 1970s, the United States provided most of the deposit interest rates provided by commercial banks and savings banks, and the monetary market instruments were floating interest rates, but many small and medium investors were unable to enter the monetary market (because there is The minimum transaction amount is regulated), the monetary market share the use of this fact, collecting many investors' small funds, some experts, which also show that entrepreneurs in the pursuit of profits can discover the vulnerabilities of government regulations that are not strict design. However, since the market interest rate is in the upper limit of the interest rate limit of deposit agencies, the monetary market is difficult to develop because of its income is not higher than the bank deposit rate, and the total shares are very limited in several years.
There are only 4 funds in 1973, with only $ 100 million in assets. But by the end of the 1970s, due to the increase in market interest rates, the yield of currency market tools such as Treasury coupons and commercial bills exceeded 10%, far higher than banking and savings institutions for savings deposits and regular deposits. The 5.5% interest rate limit is paid. As the savings institutions have continuously extracted funds from savings deposits and regular deposits, the total assets of the Monetary Market Common Fund have expanded rapidly, from 1977, less than 4 billion US dollars, emerged from 1982. There have been more than 200 funds hold $ 240 billion in assets and have more than stocks and bonds in total assets. Therefore, the rapid development of the Monetary Market Common Fund is a product of market interest rates that exceed bank and other deposits controlling interest rates. At the same time, the co-funded funds can develop rapidly and maintain vitality is that there is less control, and the monetary market is not a legal limit, and there is no fine for advance withdrawals.
Money market is rapidly developed, causing a strong response to commercial banks and savings institutions, and they ask Congress to attach reserves and other restrictions on monetary market, and the Congress finally did not approve deposit institutions. However, the commercial bank and savings institutions have issued a new type of financial instrument, which is the monetary market deposit account (MMDAS), which is similar to the common funds of the monetary market, and also provides limited check issuance and no reserve requirements, and the yield is almost common with the monetary market. The fund is as high as the fund.
Under the counterattack of banks and other depositors, the total assets of the MMDan Fund in the end of 1983 and early 1983 were declined at the end of 1982 and in early 1983. These innovative financial instruments of commercial banks and deposits temporarily prevent funds from moving from banks to the monetary market. However, commercial banks cannot withstand the cost of providing high-yield, so that the interest rate of MMDAS will be reduced. The result is that the Monetary Fund has developed rapidly. At the end of the 1980s, great benefits have been created in the late 1980s. In 1987, the US stock market collapsed, leading to a large amount of funding into the monetary market, the total assets exceeded $ 300 billion. 1989 and 1990 Savings and Loan Association Crisis caused commercial banks to suddenly increase their deposit insurance, and protect their deposits while regulating the authorities more concerned about the high interest rates of deposits have emerged. All of these changes are beneficial to the rapid development of the Money Market Common Fund, and its assets reached $ 500 billion in 1991. About 650 tax payments in 1996, 250 duty-free funds, total assets of approximately $ 750 billion, 80% of the tax-based assets. Its shares account for about 4% of all financial intermediary assets, and accounted for more than 25% of total assets of all common funds (stock funds, bond funds, monetary market). In 1997, it reached $ 1 trillion.
Current Situation
In the current financial crisis, liquidity has become a big problem. Even if financial instruments, such as credit-based banks released (generally fully flowing), it has become difficult to trader - in fact, this market is sometimes even suspended. In the United States, the Federal Reserve Commission has announced that the 2A-7 (Treasury Bond) Money Market Fund provides liquidity to achieve cash flow, especially if these cash amounts are very large. The British Bank is also committed to providing similar facilities and the European central banks may do the same thing. Further plans to support funding is to create a similar retail investor, bank deposit deposit insurance plan.
as a defensive move, in late September 2008, most funds increase their overnight liquidity (in the Sterling Fund, the scope of its scope is 20 billion to 30 billion pounds) There is or between 30 billion to $ 45 billion), which is more dismsive, and the gap between the bank's peers and borrowing markets, exacerbating the overnight interest rate and the London banking. However, this approach is based on fund performance, especially for bonds and commercial bills with high proportion of flow securities, such as floating interest rates, there will be, they will think that in the occurrence When you break the rate overnight crash, the fund they manage has to have a larger scale in overnight investment.
Sterling Money Market Fund and the Euro Money Market Fund seems to have experienced the test of the storm, but the performance gap in different funds in the later period is much larger than the common gap, because various funds have their own benchmarks. This is a domain worth exploring because it can tell you how many information about how to manage funds and what problems have emerged. Learn how the fund will be very interesting to the global interest rate downturn. Normally, in the case of interest rate drop, the fund is the most competitive state.
It is clear that whether it is the US or Europe's regulatory agencies will be reviewed, and how to manage the monetary market funds should be specifically managed. But in this regard, it is expected to manage and operate the fund more carefully.