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Explore the SEC money market fund categories

There are 3 categories of money market funds. Individual investors can invest in 2 of them—retail and government funds.

Money market fund categories

Retail funds

  • Are limited to individual investors and certain accounts, such as custodial accounts, whose beneficiaries are individuals.
  • Seek to maintain a stable $1 net asset value (NAV).
  • Are permitted to impose fees and gates.

Government funds

  • Are open to all investors (individuals and investors ineligible for retail funds, such as corporations and foundations).
  • Seek to maintain a stable $1 NAV.
  • Must hold 99.5% of assets in cash, U.S. government securities, and/or repurchase agreements that are collateralized solely by U.S. government securities or cash.
  • Are exempt from the fees and gates rules, but can adopt them voluntarily if previously disclosed to investors.

Institutional funds

  • Are open to all investors (individuals, and investors ineligible for retail funds, such as corporations and foundations*).
  • Have a floating NAV based on market values, much like other non-money market mutual funds.
  • Are permitted to impose fees and gates.

Understanding liquidity fees & gates

What's behind the SEC rules

Vanguard money market fund designations


Pricing

RETAIL

Seeks to maintain a stable $1 NAV

GOVERNMENT

Seeks to maintain a stable $1 NAV


Eligibility

RETAIL

Most individuals**

GOVERNMENT

All investors


Potential fees and gates

RETAIL

Yes

GOVERNMENT

No


Vanguard money market funds

RETAIL

Prime Money Market Fund†

Tax-Exempt Money Market Fund†

State tax-exempt money market funds† (CA, NJ, NY, and PA)

GOVERNMENT

Federal Money Market Fund††

Treasury Money Market Fund††

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REFERENCE CONTENT

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Gates

A money market fund's ability to temporarily suspend withdrawals during periods of financial instability for up to 10 business days in a 90-day period if weekly liquid assets drop below 30%.

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Understanding liquidity fees & gates

Liquidity fees and gates are tools to help money market fund managers keep the funds stable during times of extreme market duress. Under the rules:

  • A fund may impose a fee of up to 2% on redemptions if a fund's weekly liquid assets fall below 30% of its total assets.
  • A fund must impose a 1% fee on redemptions (with the option of imposing a fee of up to 2%) if a fund's weekly liquid assets fall below 10% of its total assets—unless the fund's board determines a fee would not be in the fund's best interest.
  • A fund may impose a gate—that is, suspend redemptions—for up to 10 business days in a 90-day period.

The fees and gates rules only apply to retail and institutional funds, although government funds may voluntarily adopt them if the fees and gates are previously disclosed to investors.

The boards of directors of Vanguard's government funds have decided to impose neither fees nor gates.

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What's behind the SEC rules

The move for money market fund reform grew out of the 2007–2008 financial crisis.

The Reserve Primary Fund, which invested in Lehman Brothers debt, "broke the buck," meaning its NAV dropped below $1 per share.

This event prompted significant redemptions by institutional money market fund investors, putting the funds under severe stress.

Although retail (individual) activity was less volatile, with purchases and redemptions largely offsetting each other, the SEC felt it had to address concerns that money market funds may contribute to financial instability.

The final amendments to money market rules that were made in 2014 aim to protect shareholders from the impacts that a flood of redemptions could have on money market funds. The amendments are also intended to give fund managers time to respond to requests in a more thoughtful, prudent manner.