Federated posted a brief entitled, "3 Questions: Federated prime money market funds and also released its Third Quarter Earnings Thursday. Federated asks, "Q: Could you speak to how prime money market funds fit into a broad strategy of cash management?" MM CIO Deborah Cunningham writes, "​Investors have many choices for managing cash, decisions that change as their needs change. Liquidity and stability of principal are paramount criteria, but yield matters. The liquidity portfolio of institutions and individuals often include government money market funds due to their relatively safe investments and the convenience of their constant net asset value (​NAV) of $​1 per share without the potential of gates or fees. But while U.​S. government bills, notes or bonds are generally considered risk free, they offer low yield, especially with the Federal Reserve holding rates at historic lows. Here is where prime money funds come in. They traditionally have offered higher yield compared to government money funds, with comparable stability." They also ask, "Q: How do prime funds compare to bank deposits?" Federated writes, "While both offer liquidity and seek to preserve principal, prime money market fund portfolios typically contain variable-​rate and short-​term instruments. These allow portfolio managers to quickly reinvest assets to capture the growing yields stemming from a rising-​rate environment, as we are in now.... In contrast, banks offer an administered rate, which is slow to respond to changes, generally rising only around half as much (​i.​e., if market rates increase 100 basis points, bank rates rise on average 50 basis points). Unlike money market funds, bank deposits are FDIC insured and offer fixed rates of return.... In times of uncertainty, and these days of anxiousness about the length of the record-​breaking run of the risk markets, prime money funds may be a good choice." Also, see Federated'​s Q3 Earnings Release. The earnings call will be held Friday, Oct. 27 at 9 a.​m. (​Dial 877-​407-​0782 to listen.)

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