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MMFs lower risky investments in low-rate environment – paper

After a 1% rate cut, money market funds decrease risky investments by 25 percentage points

Funds analysis and research

A lower risk-free rate encourages money market funds to increase their buffer of safe assets, says research published by the Federal Reserve Bank of New York.

In the ‘Do low rates encourage yield seeking by money market funds?’ blog post, Gabriele La Spada discusses his research seeking to understand how money market funds’ investment strategies evolve in a low-rate environment.

Specifically, La Spada’s aim is to find “whether competitive pressure leads these funds to reach for yield in a low

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