In either a sign of economic recovery or of short-term memory loss, the Wall Street Journal
's Daisey Maxey
that money-market funds are again investing heavily in long-duration, high-risk securities.
As a response to last fall's market meltdown, many money-market funds turned toward safer, lower-yield investments. However, as Maxey's "Fund Track" notes, managers are seeing a deficiency of "high quality, short-term liquid investments." This trend, combined with low interest rates, is moving managers to again turn toward higher-yield options. Maxey cites the $705 million Accessor U.S. Government Money Fund
as an example: in September, the fund's manager told shareholders that the fund would now invest in commercial paper.
"The pendulum has never swung so quickly from greed to fear and back again," Peter Crane
, president of Crane Data LLC, told Maxey.
Maxey points to the $5 million Monetta Government Money Market Fund
as one example of the risk involved; on Tuesday the fund's manager disclosed that it would liquidate by mid-December.
High-risk investments may not be a bad idea if the Fed keeps interest rates in the 0 to 0.25 range. However, Federated Investors
's CIO Debbie Cunningham
says that her firm's money-market funds aren't "for the most part" switching back to longer-dated maturities, believing that interest rates should increase sometime next year.
Stay ahead of the news ... Sign up for our email alerts now