The Stability of Prime Money Market Mutual Funds: Sponsor Support from 2007 to 2011

15 Pages Posted: 10 Aug 2017 Last revised: 23 Sep 2018

See all articles by Steffanie Brady

Steffanie Brady

Federal Reserve Banks - Federal Reserve Bank of Boston

Kenechukwu Anadu

Federal Reserve Banks - Federal Reserve Bank of Boston

Nathaniel Cooper

Independent

Date Written: August 13, 2012

Abstract

It is commonly noted that in the history of the Money Market Mutual Fund (MMMF) industry only two MMMFs have “broken the buck,” or had the net asset value per share (NAV) at which they transact fall below $1. While this statement is true, it is useful to consider the role that non-contractual support has played in the maintenance of this strong track record. Such support, which has served to obscure the credit risk taken by these funds, has been a common occurrence over the history of MMMFs. This paper presents a detailed view of the non-contractual support provided to MMMFs by their sponsors1 during the recent financial crisis based on an in depth review of public MMMF annual SEC financial statement filings (form N-CSR) with fiscal year-end dates falling between 2007 and 2011. According to our conservative interpretation of this data, we find that at least 21 prime MMMFs would have broken the buck absent a single identified support instance during the most recent financial crisis.2 Further, we identify repeat instances of support (or significant outflows) for some MMMFs during this period such that a total of at least 31 prime MMMFs would have broken the buck when considering the entirety of support activity over the full period.

Keywords: money market funds, reserve primary fund, fund support, asset-backed commercial paper, AMLF

Suggested Citation

Brady, Steffanie and Anadu, Kenechukwu and Cooper, Nathaniel, The Stability of Prime Money Market Mutual Funds: Sponsor Support from 2007 to 2011 (August 13, 2012). Available at SSRN: https://ssrn.com/abstract=3015986 or http://dx.doi.org/10.2139/ssrn.3015986

Steffanie Brady (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Boston ( email )

600 Atlantic Avenue
Boston, MA 02210
United States

Kenechukwu Anadu

Federal Reserve Banks - Federal Reserve Bank of Boston ( email )

600 Atlantic Avenue
Boston, MA 02210
United States

Nathaniel Cooper

Independent ( email )

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
144
Abstract Views
904
Rank
367,205
PlumX Metrics