A money market vehicle (MMV) is a structure or arrangement (e.g., a fund) that provides exposure to money market movements. This exposure is reflected in the steady, though low, interest income associated with low liquidity risk. The main types of money market vehicles are:
- Money market funds (MMFs): a type of mutual fund or similar structure that invests the money market, i.e., in high-quality, short-term debt securities and cash equivalents. Money market funds are investments in short-term fixed-income securities or cash-like securities. These funds are designed to provide high liquidity combined with lower risk (credit risk) as compared to other cash products. This entails stability of capital (invested amount) and typically better yields.
- Money market accounts (MMAs): interest-bearing accounts at a bank or a similar financial institution that pays a certain interest (comparably competitive yield) associated with other certain benefits to the accountholder such as debit cards and check-writing. By nature, this represents a type of deposit account that earns interest, at rates often higher than ordinary savings accounts. Money market accounts typically limit accountholder’s withdrawals (up to a certain number of times per a given period) and have a higher minimum balance requirement (maintenance level) than savings accounts.
