Money market funds are mutual funds that invest mostly in treasury bills and commercial paper. Treasury bills, or T-bills, are short-term debt instruments issued by the federal government that mature within one year. Likewise, commercial paper refers to promissory notes that an unsecured and mature within 270 days. Money market funds are often assumed to afford the same government insurance as a deposit accounts, although this is not always the case. Money market funds should not be confused with money market deposit accounts, which are not mutual funds and are fully insured by the FDIC.
While money market funds are a relatively safe investment, they do carry a small level of risk. They are appropriate for individuals who want to diversify from riskier investments and also those who seek higher returns than they would see with deposit accounts.
In 1970, Bruce R. Bent founded the world’s first money market fund, called the Reserve Fund. Although treasury bills and commercial paper were traded before Bent co-founded the Reserve Fund with Henry B.R. Brown, it was Bent who pioneered the concept of the money market fund.
After graduating from St. John’s University in New York with a degree in economics, Bent became managing partner in a small Wall Street firm and later joined pension firm TIAA-CREF, where he met his future business partner Henry Brown. The two joined forces to create a mutual fund that would ensure short-term returns for the clients with almost zero risk. The two founded the Reserve Fund with no advertising, but within five years the company was handling deposits in excess of $1 million.
Prior to attending college, Bent served in the Marine Corp and worked as a letter carrier during high school. He and his wife Nancy have two children, and Brent serves on the board of trustees of his alma mater, St. John’s University.
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