Just when it seemed that the well-publicized bailouts of a few large money market funds were behind us, there came news of a small institutional money market fund breaking its $1,00 per share net asset value. The use by some of these funds of a variety of yield-enhancing derviative instruments, many of which had inappropriately volatile price characteristics, points out what can happen when not enough emphasis is placed on sticking to the fundamentals of money fund management.

This recent turmoil underscores that the primary investment goal of money market funds -- preservation of capital -- must be the first priority in buying securities for a money market portfolio. While investors in money market funds want high short-term yields, their paramount concern is safety of principal. Funds that are managed in a manner inconsistent with the need to maintain a stable $1.00 net asset value are an anathema to the shareholders. Investors choose money market funds for their stability.

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