Discover the Benefits of United States Treasury Money Mutual Funds
A United States Treasury money mutual fund pools capital from investors to buy low-risk government securities. This particular type of mutual fund specializes mainly, or even exclusively, in U.S. government debt instruments like Treasury bills and repurchase agreements. These funds are a go-to for individuals looking to preserve capital or park cash temporarily.
Key Takeaways
- U.S. Treasury money mutual funds invest predominantly in low-risk, highly liquid instruments such as U.S. Treasury bills.
- Ideal for risk-averse investors who wish to protect their principal investment.
- These mutual funds are overseen by the Securities and Exchange Commission (SEC) which enforces rules on maturity, credit quality, and liquidity of the securities.
Understanding United States Treasury Money Mutual Funds
U.S. Treasury money mutual funds are acclaimed as one of the safest investment vehicles. These funds predominantly consist of U.S. Treasury bills and are known for being stable and liquid. They usually fall into the category of money market funds or low-risk fixed-income funds. Treasury bills benefit from the full faith and credit of the U.S. government, making these portfolios reliable due to the nation’s stable economy and political landscape.
U.S. Government Money Market Funds
A broad range of money managers offer money market mutual funds exclusively investing in U.S. Treasuries. These funds adhere to standard accounting principles to maintain a stable net asset value (NAV) of $1 per share at amortized cost rather than market value. Registered as money market funds, they follow Rule 2a-7 of the Investment Company Act of 1940.
Principal Features:
- Only the highest-rated debt is included
- Maximum average dollar-weighted maturity: 60 days
- Liquidity rules mandate 10% of assets convertible to cash within one day and 30% within five days, with no more than 5% held in securities exceeding a week for liquidity.
Regulations have been tightened post the 2008 financial crisis to enhance investor safety.
Today, major brokerage service providers often offer U.S. government money market funds as cash sweep options or no-transaction-fee funds. Notable U.S. government money market funds include:
- Vanguard Treasury Money Market Fund (VUSXX)
- Fidelity Treasury Only Money Market Fund (FDLXX)
- American Century Capital Preservation Fund (CPFXX)
U.S. Government Mutual Funds
Investment managers also offer U.S. government mutual funds providing similar benefits without the money market tag. These funds tend to offer slightly higher returns while maintaining comparable risk levels. Ranging in durations from short-term to long-term, they provide opportunities for increased returns in longer-duration options. Prominent U.S. government mutual funds include:
- Eaton Vance Short Duration Government Income Fund (EALDX)
- Commerce Short Term Government Fund (CFSTX)
- Federated Hermes Total Return Government Bond Fund (FTRGX)
- Fidelity Intermediate Treasury Bond Index Fund (FUAMX)
- Vanguard Extended Duration Treasury Index Fund (VEDTX)
- Fidelity Long-Term Treasury Bond Index Fund (FNBGX)
Related Terms: Mutual Funds, Treasury Bills, Money Market Funds, Fixed Income, Investment Risk.
References
- U.S. Government Publishing Office. "§270.2a-7 Money market funds".
- U.S. Securities and Exchange Commission. “Reserve Primary Fund Distributes Assets to Investors”.
