Monday, October 5th, 2015

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Greek Debt a Growing Concern for Money-Market Funds

Wall Street is growing nervous about money-market funds.The derivatives and mortgage markets drew the most attention in the aftermath of the financial crisis, but money-market funds followed close behind. Now concerns are rising again that these ubiquitous investments could be in danger, according to The Wall Street Journal.

The ongoing Greek debt concerns have implications for a variety of markets, but a recent report from Fitch Ratings found that money-market funds hold a surprising amount of exposure to the situations. Debt from European banks accounts for more than half of the all U.S. prime money-market fund assets.

The major concern with these funds is that they are seen as so low risk that many companies and individuals invest money they simply cannot afford to lose. During the financial crisis, only a single fund fell below $1 per share, but this was enough to cause a crisis of confidence in the market and a strong reaction from the U.S. government.

The current crisis is not expected to have the same level of consequences, but The Los Angeles Times reports that roughly $18 billion was still withdrawn from money-market funds in the week prior to Tuesday, June 28. That figure is roughly equal 0.7 percent of all assets.

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