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- The public sector, if only because it is a minor player in money market mutual fund investments, likely did not contribute to the volatility that funds experienced.
MMF sectors faced significant outflows and increasingly illiquid markets for the funds’ assets. As a result, prime and tax-exempt MMFs experienced, and began to contribute to, general stress in short-term funding markets in March 2020. For example, as pressures on prime and tax-
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Did the public sector contribute to the volatility of mutual funds?
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What is the money market mutual fund liquidity facility (MMLF)?
Jun 20, 2023 · The public sector, if only because it is a minor player in money market mutual fund investments, likely did not contribute to the volatility that funds experienced. Now to segments of the data that are less accurate:
- Introduction
- Data and Basic Fund Characteristics
- Business Functions and Investor Base
- Flow Volatility and Portfolio Risk
- Turmoil in March 2020
- Conclusion
- References
Prime money market funds (MMFs) represent a key vulnerability in the financial system. During the last 15 years, they have experienced two severe investor runs, in September 2008 and March 2020, both of which contributed to full-scale financial crises. The vulnerability of prime MMFs to runs and potential reforms to address the problem have attract...
Both public and nonpublic MMFs are regulated by the Securities and Exchange Commission (SEC) and governed by the same set of rules. To identify nonpublic MMFs, we start from the list of MMFs that file SEC Form N-MFP, which is a mandatory reporting form for all MMFs. From this list of MMFs, we filter out public funds that are covered by the iMoneyNe...
Public institutional prime funds generally offer their shares to all investors that can meet their minimum investment requirements. They tend to have a broad base of institutional investors, including corporates, pension funds, and state and local governments. Nonpublic funds, on the other hand, tend to state in their prospectuses that they are onl...
Since nonpublic prime funds only accept investments from a selected group of investors, it is reasonable to assume that their investor base on average is more concentrated than that of public prime funds. However, we do not have detailed data on their investor bases to confirm our assumption. With this caveat in mind, we compare public and nonpubli...
It has been well documented that institutional prime funds experienced severe investor runs at the onset of the COVID crisis (see, for example, President's Working Group on Financial Markets (2020) and Li, Li, Macchiavelli, and Zhou (2021)). In less than three weeks in March 2020, 16% of AUM was redeemed from institutional prime funds. This aggrega...
In this note, we compare the investment behavior and investor flows of public and nonpublic institutional prime MMFs. We find that nonpublic funds typically have more volatile aggregate net flows than public funds. Nonpublic funds also tend to have safer and more liquid portfolios and experienced significantly less outflows in March 2020. To be sur...
Federal Reserve Bank of Boston, Money Market Mutual Fund Liquidity Facility (MMLF). Lei Li, Yi Li, Marco Macchiavelli, Xing (Alex) Zhou, 2021, "Liquidity Restrictions, Runs, and Central Bank Interventions: Evidence from Money Market Funds," The Review of Financial Studies, Volume 34, 5402–5437. President's Working Group on Financial Markets, 2020, ...
Jul 1, 2019 · Specifically, mutual funds with more active strategies, high expense ratios or high turnover ratios have markedly higher dispersion of performance compared to mutual funds with low expense ratios or low turnover ratios or relatively passive strategies.
- Miles Livingston, Ping Yao, Lei Zhou
- 2019
The big story in the U.S. public equity markets is the shift from active to indexed, or rules-based, funds. Exhibit 2 shows that since 2008, investors have directed $2.0 trillion into index mutual funds and ETFs and more than $1.8 trillion out of active funds.9 Investors have shifted their equity allocations from actively-managed equity
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Inflation, market volatility and geopolitical conflicts have given new urgency to the challenges facing mutual funds. For mutual fund managers to be future-fit, they’ll need to address several issues.
lowly correlated with stocks and mutual funds. In other words, the benefit of diversifying one’s portfolio is greatest in times of high volatility (like most of 2020). Some may even desire a significant share of their retirement funds to
