Can the manager of a money market fund usually respond to the changing credit situation of a particular issuer?
Yes. Fund managers constantly monitor the credit quality of their portfolios to ensure that fund assets pose minimal credit risks. Should an issuer’s credit quality deteriorate, in most cases fund managers have time to react, such as by choosing not to reinvest in a firm’s commercial paper as it matures. It would be unusual for the credit quality of a security to change all in one day. Rather, investors would typically reassess the credit quality of an issuer over a period of time, causing interest rates on its securities to rise over the course of weeks or months.
Related Questions
- If a fund manager has both an onshore fund and an offshore fund, can both be included in the Dow Jones Credit Suisse LEA Hedge Fund IndexSM?
- What happens to a money market fund’s per-share market value if a credit ratings agency downgrades securities held by the fund?
- Can the manager of a money market fund generally respond quickly to changing market conditions?
