‘Money market funds are primary funding source for governments and corporations: Global Financial Market Essay, UOL, UK

University University of Leicester (UoL)
Subject Global Financial Market

 Question:

‘Money market funds are primary funding source for governments and corporations and a main investment opportunity for investors. In the US, Money Market Funds have been a key factor behind the growth of the shadow banking system, which ultimately led to the global financial crisis.

It turned out that many MMF managers had been chasing yield in the low interest rate environment and invested their funds heavily in short-term asset-backed commercial paper (ABCP) and collateralised debt obligations.

’ Discuss in detail MMFs and ABCPs playing a key role in global financial crisis 2007, referring to the phrase ‘maturity transformation’.

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