From the January 2010 issue of Boomer Market Advisor • Subscribe!

Everything ventured, nothing gained in money funds

Here we go again. We seemed to have learned little about risk during the worst economic crisis the world has ever seen.
"Faced with a dearth of high-quality, short-term liquid investments in which to invest and low yields, some money-market funds are moving into longer-duration instruments, boosting their risk." So writes the Wall Street Journal. The paper reports it's a notable reversal as many money funds had shifted to shorter-term investments in the grip of last year's panic.
"The pendulum has never swung so quickly from greed to fear and back again," Peter Crane, president of Crane Data LLC, told the paper.

Average maturities for money funds came down last fall, although perhaps not as sharply as some would have expected, after the industry was shaken by a fund that failed to keep its dollar par value. The average weighted maturity of the 100 largest money-market funds was 47 days in August 2008, and then dipped to 43 days for two months, according to Crane. By February it was back up to pre-crisis levels and, currently, the weighted average maturity of the 100 largest money-market funds is 52 days.

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