News Bites | A few facts about money market funds

As the debate about money market regulation rages, we thought we’d recap some of the statistics that have been bandied about in recent weeks.

Money market funds play an important role in cash management. They have almost double the assets of checking accounts. (Click on the graphics to see them full screen.)

Money market funds are a particularly important investment for businesses. According to the Investment Company Institute, nonfinancial businesses had 25% of their short-term assets in money funds at the end of 2010. A survey conducted by SunGard in 2011 found that close to half of corporations used money funds for cash management and that they expected use to increase in future.

Money market funds are major investors in businesses. At the end of 2010, they owned more than one-third of the commercial paper outstanding.

The safety and liquidity of money market funds are their most important features, according to a Fidelity survey of both retail and institutional investors.

The proposed regulatory changes could lead to lower use of money market funds. Both retail and investors expected to reduce use of money market funds – or stop using them altogether – if they no longer had a stable $1 value per share. Retail investors’ reaction to redemption restrictions was almost as negative.

Links to industry surveys mentioned in this post:

The Investor’s Perspective: How individual and institutional investors view money market mutual funds and current regulatory proposals designed to change money funds,” Fidelity Investments

2011 Investment Company Fact Book, Investment Company Institute

Corporate Cash Investment Report,” SunGard

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