64.What do you know about money market funds?

Money market funds are very popular in the West, where the size of the assets they hold second place after the stock funds.

As the name implies, considered mutual funds invest in money market, so for the sake of completeness we consider the main characteristics of the money market.

So, in the world stock markets are divided into money markets and capital markets. In the money markets traded short-term securities on the capital market deals with long-term securities, such as stocks and bonds.

Money market instruments are government securities, short-term securities companies (commercial paper) and banks, repurchase agreements (REPO), bank deposits. Money market instruments with original maturities of less than one year.

Main indicators of the money market - a dollar, the ruble, the euro and the rate of inflation. In addition, the money market is largely dependent on the volume of available funds from banks and, consequently, on factors such as:

- refinancing rate (determines the value of money in the financial markets: the lower the refinancing rate, the less money the more money banks and other participants of the stock market may invest in financial instruments);

- commercial banks' balances on correspondent accounts in the Central Bank (determines the amount of free money from the banks, they could potentially invest in financial instruments);

- required reserves (also determines the amount of available funds from banks);

- lending rates on the interbank market, etc.

Thus, investments in money market funds and short-term investments are related to investments with the lowest level of risk. In terms of risk and return such investments tend to be the type of conservative policies and the main purpose of preservation have available capital against inflation and getting a small but relatively constant profits. As part of the investment portfolio, these investments help to smooth out fluctuations in riskier assets.

The composition of the assets of money market mutual funds may include:

- funds, including foreign currency accounts and deposits with credit institutions;

- government securities, municipal securities;

- bonds of companies, state registration of which was accompanied by the registration of the prospectus or in respect of which the prospectus is registered;

- securities of foreign governments and international financial institutions;

- bonds of foreign commercial organizations.

As can be seen from the list of investments in equities are not allowed. Most management companies money market funds invest primarily in the shareholders' deposits and bonds.

Very often, investments in short-term securities and money market mutual funds to be regarded as highly liquid temporary investment funds, which can be easy to sell if there is something better. In the West, many clients of brokerage firms hold cash balances with such funds. Investments in highly liquid money market and tend to have a higher annual percentage compared to bank deposits.

The yield on money market funds with a yield comparable to bank deposits (11.9% per annum), but has a number of advantages. If the deposit in the bank (without losing interest) can be closed by a fixed time, the shareholder of the mutual fund money market may redeem or exchange your Shares on any given day.