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Shadow Insurance? Money Market Fund Investors and Bank Sponsorship.
- Source :
- Working Papers Series (Federal Reserve Bank of Kansas City); Aug2021, Issue 21-7, p1-54, 54p
- Publication Year :
- 2021
-
Abstract
- We argue that bank holding companies (BHCs) extend shadow insurance to the prime institutional money market funds (PI-MMFs) they sponsor and that PI-MMFs price this shadow insurance by charging investors significantly higher expense ratios and paying lower net yields. We provide evidence that after September 2008, expense ratios at BHC-sponsored PI-MMFs increased more than at non-BHC-sponsored PI-MMFs. Despite higher expense ratios, BHC-sponsored PI-MMFs did not experience larger redemptions than non-BHC-sponsored PI-MMFs. In addition, we show that expense ratios increased with BHCs' financial strength and the likelihood of their support; however, this expense ratio differential disappeared after the 2016 MMF reform. [ABSTRACT FROM AUTHOR]
Details
- Language :
- English
- ISSN :
- 19365330
- Issue :
- 21-7
- Database :
- Complementary Index
- Journal :
- Working Papers Series (Federal Reserve Bank of Kansas City)
- Publication Type :
- Report
- Accession number :
- 152589653
- Full Text :
- https://doi.org/10.18651/RWP2021-07