In times of severe financial upheaval, investors have often kept their money in cash. Some may prefer the proverbial mattress but money markets have traditionally been a low-yielding yet stolidly safe investment.
The haven reputation took a pummelling when a US fund “broke the buck” last year, as the fall of Lehman Brothers, an investment bank, dislocated credit markets and reduced the value of the fund’s assets to below the level investors paid in.
Nonetheless, with equity markets in turmoil, money market funds offer an attractive level of safety for risk-averse retail investors. US money market mutual funds posted net inflows of $64bn in January, bringing the industry’s assets to a record of almost $4,000bn, according to Strategic Insight, a fund intelligence provider.
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