To meet the daily cash managemen t needs of the institutional investors the institutional money market funds are used. The institutional money market funds aim at providing maximum income together with liquidity and capital preservation . This is done by investing high quality, short term, US dollar denominated money market instruments .
There are basically two types of institutional money market funds that can be discussed under the following heads:
Select Money Market Fund : This type of institutional money market fund generates maximum income along with liquidity and capital preservation. With the objective of income maximization, the institutional money market fund stress on credit quality, liquidity and appropriate diversification. Investments are done in portfolio comprising of dollar denominated money market instruments, which are known as “ First Tier Securities ” in the common parlance. The expiry date of the portfolio is a function of the prevailing interest rate forecasts. Competitive money market yields are achieved at by the study of the yield spread changes. The positive aspects of the portfolio are that it offers competitive yield, low expenses, late day investment or the redemption line. There is electronic execution of trades. The portfolio also offers access to accounts for direct purchasing. The minimum amount of investment required to open this account is $1,000,000.
Select Treasury funds: This is another type of the institutional money market fund that aims at achieving maximum income accompanied by liquidity and preservation of capital. The approach of investment is very interesting in this type of institutional money market fund. At least 80% of the net assets are invested in the securities that are issued by the US. The income earned from this fund may receive the advantages of local and state taxation. The income that is anyway related to the repurchase agreements may not enjoy such tax advantages. The fund can take advantage of the short-term rates by investing in the repurchase agreements. There are many advantages of the portfolio yield.
Firstly, they are competitive.
Secondly, the expenses are low.
Thirdly, there are late day investment or redemption deadlines.
The minimum amount of money that is required to make investments in this type of institutional money market funds is $ 1,000,000.
The largest institutional money market fund is the JP Morgan Prime Money Market Fund . The types of the JP Morgan Prime Money Market Fund include:
- 100% US Treasury Securities money market funds
- California municipal money market fund
- Federal Money Market Fund
- Liquid Assets money market fund
- Michigan Municipal money market fund
- Municipal money market fund
- New York Municipal money market fund
- Ohio Municipal money market fund
- Prime money market fund
- Tax Free money market fund
- US government money market fund
- US Treasury money market fund
For more details on the institutional money market funds sites to be viewed are aafunds.com, institutionalmoneymarket.pdf, immfa.org etc.