Money Market Funds Run Risk: Will Floating Net Asset Value Fix the Problem?

2012 ◽  
Author(s):  
Jeffrey N. Gordon ◽  
Christopher M. Gandia
Keyword(s):  
Money Market ◽  
Money Market Funds ◽  
Asset Value ◽  
Net Asset Value

Indonesian Mutual Funds Classification Using Clustering Method

2015 ◽  
Vol 21 (4) ◽  
pp. 826-829
Author(s):  
Ir. Dewi Tamara ◽  
Shintia Revina
Keyword(s):  
Mutual Funds ◽  
Mutual Fund ◽  
Money Market ◽  
Fixed Income ◽  
Clustering Method ◽  
New Classification ◽  
Asset Value ◽  
Net Asset Value ◽  
Alternative Investment

Mutual funds have existed since 1990 as an alternative investment in Indonesia. The objective of this research is to examine the existing classification of mutual funds database. The data of mutual funds is taken from Bloomberg through Portal Reksadana 2013 which covered 690 mutual funds. The existing classification consists of mutual funds fixed income (reksadana pendapatan tetap), equity (reksadana saham), money market (reksadana pasar uang) and structured (reksadana campuran). The existing financial attributes consists of the net asset value, percentage annualized return the last 6 months, 1 year, 3 years, 5 years and year-to-date. This paper uses K-means clustering to propose new classification of Indonesian mutual funds. The result reveals that mutual funds in equity and fixed income belong to its group. However, mutual funds money market is belong to mutual fund fixed income and mutual funds structures are identified to mutual funds equity. Furthermore, we find that in average 43% of Indonesian mutual funds are misclassified in accordance with their attributes. Finally, it is suggested to re-group the mutual funds into smaller classification, which has lower rates of misclassified mutual funds and possibility to achieve better performances in terms of its percentage annualized return.

scholarly journals Valuation discrepancies in money market funds during market disruptions: evidence from Egypt

2020 ◽  
Vol 17 (3) ◽  
pp. 97-110
Author(s):  
Kariman Kordy ◽  
Aliaa Bassiouny ◽  
Eskandar Tooma
Keyword(s):  
Interest Rates ◽  
Global Financial Crisis ◽  
Emerging Market ◽  
Money Market ◽  
Regulatory Oversight ◽  
Accounting Regulation ◽  
Money Market Funds ◽  
Interest Rate Volatility ◽  
Asset Value ◽  
Accumulated Losses

Money market funds (MMFs) are generally considered safe investment vehicles, but the 2008 global financial crisis showed their vulnerability during market disruptions resulting in increased regulatory oversight across developed markets to protect investors. This paper examines the effect of MMF accounting regulation on investors in an emerging market context. It hypothesizes that the continued use of amortized cost methods to account for MMFs’ Net Asset Value (NAV) during market disruptions can result in unfair treatment of investors. The Egyptian money market provided a unique laboratory to test this hypothesis over a prominent economic crisis that combined high levels of interest rate volatility with a redemption-only structure for MMFs. A model that measures the discrepancies between the amortized and floating market NAVs per certificate for various money market portfolios (MMPs) simulating MMFs of different durations is tested using the Egyptian data. A sharp rise in interest rates is found to lead to significant discrepancies between the amortized NAV per certificate relative to their floating value. Serial investor redemptions of the certificates compound the discrepancies, but only certificate holders remaining in the funds bear the accumulated losses, which are augmented for portfolios with higher durations. The results suggest that emerging market regulators consider introducing the rules that switch to floating NAV calculations for MMFs during such periods to promote equality across all investors.

scholarly journals The Role of Money Market Funds (MMFs) in the Austrian Theory of Money: a Comment on Money and the Business Cycle

2018 ◽  
pp. 333-352
Author(s):  
Olav A. Dirkmaat
Keyword(s):  
Interest Rates ◽  
Great Part ◽  
Money Market ◽  
Bank Run ◽  
Money Market Funds ◽  
Negative Interest Rates ◽  
Asset Value ◽  
The Business Cycle ◽  
Interest Payments

Money market funds (MMFs) represent $3 trillion dollars in finan- cial industry assets. However, regulations regarding MMFs have increased substantially after various of them have “broken the buck” in the 2008 crisis. Moreover, negative interest rates have  destroyed a great part of the MMF industry in Europe, since it is impossible to maintain a stable net asset value (NAV) and pay div- idends (which can be considered de facto interest payments) when the underlying assets have negative yields. Yet, despite the recent exodus of MMFs, MMFs rarely get into trouble. In 1978, First Multi- fund for Daily Income (FMDI) went bankrupt, with investors even- tually taking a 6% loss. Yet the average maturity of FMDI’s assets was longer than two years, so FMDI could hardly be considered a MMF. In 1994, the Community Bankers Fund “broke the buck,” leading to a 4% loss to shareholders; curiously, no “redemption run” (equivalent of a bank run) occurred. In 2008, the Reserve Pri- mary Fund “broke the buck” due to their exposure to Lehman, but eventually paid back 99 cents on the dollar (1% loss).  

Reconsidering Returns

2021 ◽  
Author(s):  
Samuel M Hartzmark ◽  
David H Solomon
Keyword(s):  
Mutual Funds ◽  
Price Index ◽  
Market Performance ◽  
Performance Expectations ◽  
Asset Value ◽  
Net Asset Value ◽  
Perception Of Performance ◽  
Predictable Returns

Abstract Investors’ perception of performance is biased because the relevant measure, returns, is rarely displayed. Major indices ignore dividends, thereby underreporting market performance. Newspapers are more pessimistic on ex-dividend days, consistent with mistaking the index for returns. Market betas should track returns, but track prices more than dividends, creating predictable returns. Mutual funds receive inflows for “beating the S&P 500” price index based on net asset value (also not a return). Investors extrapolate market indices, not returns, when forming annual performance expectations. Displaying returns by default would ameliorate these issues, which arise despite high attention and agreement on the appropriate measure.

Sign in / Sign up

Export Citation Format

Share Document