The so-called money market funds refer to fund management companies selling fund units and investing the raised funds specifically in mutual funds with the money market as the investment portfolio field and object. Investment methods. Money market instruments invested by money market funds include short-term bonds (including central bank bills), bank certificates of deposit, repurchase agreements, large negotiable certificates of deposit, bank acceptance bills or other short-term debt financial instruments with good liquidity, with a maturity of one Year or less than one year, the government, commercial banks or other financial institutions, enterprises with high credit ratings, etc. are the issuers of these money market instruments. Therefore, money market instruments are characterized by high liquidity and low risk. However, the money market has the characteristics of a wholesale market. The amount of a single transaction is huge, often in the millions, making it difficult for individual investors to participate in investment. By raising small amounts of individual funds to organize mutual funds, money market funds are established so that individual investors can participate in money market investment activities and enjoy certain investment returns while maintaining the liquidity of personal investments.
Compared with other forms of investment, money market funds have the following basic characteristics:
( 1) Money market funds are open-end investment funds that specialize in money market instruments as investment portfolio objects, with relatively stable returns and relatively small risks. Money market funds have the general organizational form and basic characteristics of mutual investment funds. However, money market funds are a type of investment fund that specifically invests in money market instruments. They have the characteristics of short term and high liquidity. Investors can increase their investment amount at any time. , you can also withdraw from the fund at any time by issuing a check, which is more flexible than ordinary mutual investment funds. Money market funds are not as volatile as stock market funds and ordinary bond funds. Therefore, the capital gains generated by the money market fund asset portfolio are not large and the income is relatively stable. Because money market funds concentrate a large number of small funds and invest them uniformly in money market instruments with lower original risks, through scale combination, various money market instruments complement each other in terms of liquidity, thereby reducing the risk of investing in money market funds. down to a trivial level.
(2) The face value of fund units is fixed. In order to provide investors with liquidity and convenience similar to quasi-currency, money market funds generally adopt the practice of maintaining a fixed transaction price of each fund unit, such as always maintaining 1 yuan, in accordance with internationally accepted short-term capital market investment fund practices. /Fund units, and establish corresponding asset pricing and accounting models. The fund calculates fund income daily, and regularly transfers the profits and losses confirmed by fund investment to the account of the fund holder in the form of shares.The increase or decrease in shares reflects the changes in the income of fund holders. Holders can obtain cash income by redeeming fund shares, issuing checks, etc.
(3) The net book value of the fund deviates from the actual value. The actual value of the fund is determined by the market price of the money market instruments in which it invests, that is, the market interest rate. Fluctuations in interest rates will lead to changes in the actual value of the fund. If the market value of the fund is used as the net book value, it is not conducive to investors' cash management. In order to reduce the fluctuation of the net book value of money market funds, fund managers generally use the amortized cost method (Amortized Cost Method). When the fund initially invests, the actual cost of purchasing money market bonds is used as its net book value, and the investment premium or discount is used as the remaining balance of the bond. Amortization is carried out during the period, which increases or decreases the net book value of the fund. Using this method, from the perspective of investors, is similar to investing a stable principal and receiving guaranteed interest income in each period.
However, the disadvantage of this treatment method is that the net book value of the fund, which is constantly adjusted through amortization costs, deviates from the actual value. When this deviation reaches a certain level, The purchase or redemption of fund shares will cause investment losses to fund investors and fund companies. In order to solve this problem, according to the requirements of the U.S. Investment Company Act of 1940, money market funds must establish a shadow pricing mechanism (Shadow Pricing) to reflect the net value of fund units based on market prices. When the shadow price deviates from the fund's book price to a certain extent, usually set at 0.5%, the fund manager will adjust the investment based on the shadow price and adjust the fund's net book value to the market value to ensure that this deviation will not affect the fund's holdings. Substantial damage was caused to someone and the fund management company.
