The Role of Money Market Mutual Funds in Mutual Fund Families

Abstract

This study examines cross-sectional differences among money market mutual funds (MMMFs) in the context of sponsoring fund families. The study finds that flows to family non-MMMFs are negatively related to family MMMF flows, and family non-MMMF cash flow volatility is positively related to family MMMF cash flow volatility. This suggests that families can offset cash transactions between MMMFs and non-MMMFs and that families place non-MMMFs cash in family MMMFs. Furthermore, loads positively affect cash flow volatility of MMMFs, suggesting that fund family investors also use family MMMFs as cash centers by utilizing free asset transfers within the family. Application of these strategies can translate into significant benefits for the fund family and its investors.