Who Invented Money Market Funds?
Bruce R. Bent is considered to be the inventor of the money market fund. He established the Reserve Fund in 1971 with the purpose of providing investors who were seeking stability with a small rate of return on their money. Today, there are many types of money market funds ranging from institutional money funds which are purchased by big institutions to retail money funds which are purchased by ordinary individuals.
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The Reserve Fund
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The first money market account was known as the Reserve Fund. It operated by purchasing short-term debt instruments such as commercial paper.
Features
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Money market accounts, also called principle stability funds, are similar to savings accounts but offer a higher yield, restrictions on transactions, and higher minimum balance.
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Regulation
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The Securities and Exchange Commission oversees money market funds in the U.S.
Trouble for the Reserve Fund in 2008
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During the financial crises of late 2008, Bent's Reserve Fund broke the buck which is a very rare event in which a money market fund actually loses value. The Reserve Fund had operated since its inception without this occurring.
Fun Fact
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During the early 1980s, money market funds soared in popularity increasing from $20 billion to $150 billion in total investments in just a few short years. Investors were attracted by safety, liquidity and high yields.
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