A money market mutual fund is a type of mutual fund that invests only in highly liquid instruments such as cash, cash equivalent securities, and highly rated, debt-based securities with a short-term maturity, which is less than 13 months. As a result, these funds offer high liquidity with a very low level of risk. A money market funds‘ primary investment objective is to earn interest and maintain a net asset value (NAV) of $1 per share. Benchmarks used for money market funds are based on reference interest rates for the money market, such as LIBOR. In addition to being low-risk, some money market funds have the added benefit of providing returns that are tax-exempt for qualified investors. Such funds often use an average of the performance of a group of tax-exempt money market funds as a benchmark.
The the top three tax-exempt money market funds ranked by 1-year total return are the Fidelity SAI Municipal Money Market (FMQXX), Vanguard Municipal Money Market Inv (VMSXX), and Invesco Treasurer’s Ser Tr Prem TxEx Ins (PEIXX). Unless otherwise specified, all figures are as of March 30, 2020.
Fidelity SAI Municipal Money Market (FMQXX)
- 1-Year Trailing Total Return: 1.43%
- 12-Month Trailing Dividend Yield: 1.35%
- Expense Ratio: 0.14%
- Assets Under Management: $156.2 million
- Inception Date: January 11, 2018
- Minimum Initial Investment: $0
FMQXX is a money market fund that seeks as high a level of interest income exempt from federal income tax consistent with liquidity and stability of the principal. The fund normally invests at least 80% of assets in municipal securities whose interest is exempt from federal income tax. FMQXX may invest up to 20% of assets in securities that are subject to state and/or federal income tax. The composition of the fund by instrument as of February 29, 2020, is: Variable Rate Demand Notes (VRDN) at 85.0%; commercial paper at 4.4%; and municipal notes at 3.5%.
Vanguard Municipal Money Market Inv (VMSXX)
- 1-Year Trailing Total Return: 1.38%
- 12-Month Trailing Dividend Yield: 1.32%
- Expense Ratio: 0.15%
- Assets Under Management: $17.6 billion
- Inception Date: June 10, 1980
- Minimum Initial Investment: $3,000
VMSXX is a money market fund that seeks to provide income that is exempt from federal personal income taxes while maintaining liquidity and preserving shareholders’ principal. The fund invests in a range of high-quality, short-term municipal securities. All of the fund’s assets are invested in tax-exempt securities as of February 29, 2020.
Invesco Treasurer’s Ser Tr Prem TxEx Ins (PEIXX)
- 1-Year Trailing Total Return: 1.36%
- 12-Month Trailing Dividend Yield: 1.28%
- Expense Ratio: 0.20%
- Assets Under Management: $100.6 million
- Inception Date: February 25, 2005
- Minimum Initial Investment: $1,000
PEIXX is a money market fund that seeks to provide tax-exempt income while maintaining liquidity and preserving capital. The fund invests in high-quality, short-term municipal obligations, including Variable Rate Demand Notes (VRDNs), tax-exempt commercial paper, revenue bonds, anticipation notes, and general obligation notes. The composition of the fund’s portfolio as of February 29, 2020, is: VRDNs at 82.9%; Other Municipal Security at 11.7%; and U.S. Government Agency Repurchase Agreement at 5.4%.
