MONEY MARKET MUTUAL FUNDS
Retail Money Market Mutual Funds:
One of the types of Money Market Mutual Funds is the retail money market fund. This fund is usually sold to the individual investors. This fund received a cash inflow of $96 billion in the year 2006, which was followed by a very modest net flow of $2 billion in the year before. The yields of the money funds follow a pattern of shorter interest rates. There was a difference of close to 4 percent in the yields of the market funds and the bank deposits in the year 2006. This pattern of short term rates of interest and the preference given to the money market mutual fund over the bank deposits has been seen from the past twenty years.
Institutional Money Market Funds:
The institutional money market funds had total cash inflows of $151 billion in the year 2006. These funds are used mainly by the pension funds, businesses, local and state governments, and many other large investors. The inflow of cash in the year 2005 in the institutional money market funds was $61 billion. This showed the diminishing interest of the businesses on holding onto the bank deposits. The banks are not allowed to pay interest on the demand deposits of the customers, which is not the case in the money market fund industry. During the period of the years 2005 and 2006, the non financial business houses diverted a total close to $70 billion from their bank checking deposits to the money market funds. This showed the increased demand of the funds among the people. |
