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Money Market Mutual Funds
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GROUP MEMBERS
Sidrat Zahra Syed F10BA148
Rabia Rana F10BA153
Mufarrah Ejaz F10BA158
Saleha Ehsan F10BA150
Zarish Zulfiar F10BA131
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INTRODUCTION
Mutual Funds
! An in"est#ent "ehi$le that is #ade u% &f a %&&l &ffunds $&lle$ted fr #any in"est&rs f&r the
%ur%&se &f in"estin' in se$urities su$h as st&$(s)
b&nds) #&ney #ar(et instru#ents and si#ilar
assets*
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TYPES OF MUTUAL FUNDS:
! Close Ended Mutual Fund:A $l&sed+end fund is a %ubli$ally
traded in"est#ent $%any that raises a fi,ed a#&unt &f $a%ital
thr&u'h an initial %ubli$ &fferin' -./* 2he fund is then stru$tured)
listed and traded li(e a st&$( &n a st&$( e,$han'e*
! Open Ended Mutual Fund:A ty%e &f #utual fund that d&es n&t
ha"e restri$ti&ns &n the a#&unt &f shares the fund ill issue* .f
de#and is hi'h en&u'h) the fund ill $&ntinue t& issue shares n&
#atter h& #any in"est&rs there are* %en+end funds als& buyba$( shares hen in"est&rs ish t& sell*
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MONEY MARKET MUTUAL FUNDS
! A money market fund-als& (n&n as money market
mutual fund is an &%en+ended #utual fundthat in"ests
in sh&rt+ter# debt se$uritiessu$h as S 2reasury bills
and $#er$ial %a%er*
http://en.wikipedia.org/wiki/Mutual_fundhttp://en.wikipedia.org/wiki/Securitieshttp://en.wikipedia.org/wiki/Securitieshttp://en.wikipedia.org/wiki/Mutual_fund -
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MONEY MARKET MUTUAL FUNDS
! M&ney #ar(et funds are i#%&rtant %r&"iders &f liuidity t& finan$ial
inter#ediaries
! .n"est&rs interested in the #&ney #ar(et $an a$$ess it #&st easily
thr&u'h #&ney #ar(et #utual funds
.ts i#%&rtant t& re#e#ber t& %&ints) th&u'h6
! M&ney #ar(et funds are n&t $ash and $an suffer l&sses) alth&u'h
they rarely ha"e*
! nli(e a ban( de%&sit) #&ney #ar(et funds are n&t insured by the
federal '&"ern#ent*
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Purpose of Money Mare! Mu!ua"Fun#s for In$es!ors
2here are three instan$es hen #&ney #ar(et #utual funds) be$ause
&f their liuidity) are %arti$ularly suitable in"est#ents*
1* M&ney #ar(et #utual funds &ffer a $&n"enient %ar(in' %la$e f&r
$ash reser"es hen an in"est&r is n&t uite ready t& #a(e an
in"est#ent &r is anti$i%atin' a near+ter# $ash &utlay f&r a n&n+
in"est#ent %ur%&se*
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R%s s%!ua!%ons %n "e!!er&of&'re#%!!ransa'!%ons
Fraud Risks The payment will be obtained for nonexistent or worthless merchandise against
presentation by the
beneficiary of forged or falsified documents.
Credit itself may be fake.
Sovereign and Regulatory Risks
! /erf&r#an$e &f the 7&$u#entary redit #ay be %re"ented by '&"ern#ent a$ti&n &utside
the $&ntr&l &f the %arties*
Purpose of Money Mare! Mu!ua"Fun#s for In$es!ors
9* An in"est&r h&ldin' a bas(et &f #utual funds fr a sin'le fund
$%any #ay &$$asi&nally ant t& transfer assets fr &ne fund t&
an&ther* .f) h&e"er) the in"est&r ants t& sell a fund bef&re de$idin'&n an&ther fund t& %ur$hase) a #&ney #ar(et #utual fund &ffered by
the sa#e fund $%any #ay be a '&&d %la$e t& %ar( the %r&$eeds &f
sale*
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3* 2& benefit their $lients) br&(era'e fir#s re'ularly use #&ney
#ar(et #utual funds t& %r&"ide $ash #ana'e#ent ser"i$es*/uttin' a $lients d&r#ant $ash int& #&ney #ar(et #utual funds ill
earn the $lient an e,tra %er$enta'e %&int -&r t& in annual returns
ab&"e th&se earned by &ther %&ssible in"est#ents*
Purpose of Money Mare! Mu!ua"Fun#s for In$es!ors
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R%s s%!ua!%ons %n "e!!er&of&'re#%!!ransa'!%ons
Fraud Risks The payment will be obtained for nonexistent or worthless merchandise against
presentation by the
beneficiary of forged or falsified documents.
Credit itself may be fake.
Sovereign and Regulatory Risks
! /erf&r#an$e &f the 7&$u#entary redit #ay be %re"ented by '&"ern#ent a$ti&n &utside
the $&ntr&l &f the %arties*
Opera!%ona" De!a%"s of MoneyMare! Mu!ua"
Fun#sMoney market mutual funds are designed tooffer features that are particularly suited to the
needs of small investors
:&u $an %ur$hase #&ney #ar(et #utual funds dire$tly fr
br&(era'e $%anies &r #utual fund fir#s) just as y&u &uld
%ur$hase a st&$( &r euity #utual*
M&ney #ar(et #utual funds als& &ffer se si#%lified
ithdraal features that are #&re ty%i$ally ass&$iated ith ban( &r
trust a$$&unts*
f
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R%s s%!ua!%ons %n "e!!er&of&'re#%!!ransa'!%ons
Fraud Risks The payment will be obtained for nonexistent or worthless merchandise against
presentation by the
beneficiary of forged or falsified documents.
Credit itself may be fake.
Sovereign and Regulatory Risks
! /erf&r#an$e &f the 7&$u#entary redit #ay be %re"ented by '&"ern#ent a$ti&n &utside
the $&ntr&l &f the %arties*
Ca!e(or%es of Money Mare!Mu!ua"
Fun#sMoney market mutual funds may contain a specific type of moneymarket security or a combination of securities across a wide spectrum:
ne %arti$ular ty%e &f fund li#its its asset %ur$hases t& *S* 2reasury
se$urities*
An&ther $lass &f #&ney #ar(et funds %ur$hases b&th *S* '&"ern#ent
se$urities and in"est#ents in "ari&us '&"ern#ent+s%&ns&red enter%rises
-;SEs*
2he third and lar'est $lass &f #&ney #ar(et #utual funds in"ests in a
"ariety &f #&ney #ar(et se$urities that &ffer the hi'hest de'ree &f se$urity*
" f #
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R%s s%!ua!%ons %n "e!!er&of&'re#%!!ransa'!%ons
Fraud Risks The payment will be obtained for nonexistent or worthless merchandise against
presentation by the
beneficiary of forged or falsified documents.
Credit itself may be fake.
Sovereign and Regulatory Risks
! /erf&r#an$e &f the 7&$u#entary redit #ay be %re"ented by '&"ern#ent a$ti&n &utside
the $&ntr&l &f the %arties*
2a,able funds in"est in se$urities su$h as 2reasury bills and $#er$ial
%a%er) h&se interest in$e is subje$t t& federal ta,ati&n*
2a,+e,e#%t funds in"est e,$lusi"ely in se$urities that are issued by stateand l&$al '&"ern#ents and are e,e#%t fr federal ta,ati&n* 2a,+e,e#%t
funds 'enerally a%%eal t& in"est&rs in hi'her federal ta, bra$(ets h& are
see(in' ta, sa"in's &n the &"erall interest in$e 'enerated by their
%&rtf&li&s*
Ca!e(or%es of Money Mare!Mu!ua"
Fun#s
% % % % " f #%
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R%s s%!ua!%ons %n "e!!er&of&'re#%!!ransa'!%ons
Fraud Risks The payment will be obtained for nonexistent or worthless merchandise against
presentation by the
beneficiary of forged or falsified documents.
Credit itself may be fake.
Sovereign and Regulatory Risks
! /erf&r#an$e &f the 7&$u#entary redit #ay be %re"ented by '&"ern#ent a$ti&n &utside
the $&ntr&l &f the %arties*
Types of Money Mare!Mu!ua"
Fun#sTypes of Mutual FundsEach mutual fund has specific investment objectives that mould the funds assets, investment
options and strategy. At the most basic level, there are three types of mutual funds:
(i) Equity funds, ii) i!ed income funds, and iii) "oney "ar#et funds
Growth FundA mutual fund $hose focal aim is to achieve capital appreciation primarily by investing in
gro$th stoc#s..
Asset Allocation Fund%his type of mutual fund invests in a variety of securities in multiple asset classes $ith the
objective of carrying out asset allocation typically by itself.
% % % % " f #%
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R%s s%!ua!%ons %n "e!!er&of&'re#%!!ransa'!%ons
Fraud Risks The payment will be obtained for nonexistent or worthless merchandise against
presentation by the
beneficiary of forged or falsified documents.
Credit itself may be fake.
Sovereign and Regulatory Risks
! /erf&r#an$e &f the 7&$u#entary redit #ay be %re"ented by '&"ern#ent a$ti&n &utside
the $&ntr&l &f the %arties*
Money Market Funds
A mutual fund $hich invests in lo$ ris# securities, for the most part in government
securities, &o's, commercial paper of companies and other highly liquid and lo$ ris#
securities
Tracker Fund%his type of fund, as its name suggests, follo$s the performance of a particular inde!.
%heoretically, these types of funds are as volatile as the mar#et $ith a correlation of unity.
Fund of FundsA type of mutual fund $hich invests in other mutual funds, also #no$n as multimanagement funds. %hese types of funds enable investors to achieve a broad
diversification and an appropriate asset allocation $ith investments in a variety of fund
categories that all are $rapped up into one fund
Types of Money Mare!Mu!ua"
Fun#s
% % % % " f #%
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R%s s%!ua!%ons %n "e!!er&of&'re#%!!ransa'!%ons
Fraud Risks The payment will be obtained for nonexistent or worthless merchandise against
presentation by the
beneficiary of forged or falsified documents.
Credit itself may be fake.
Sovereign and Regulatory Risks
! /erf&r#an$e &f the 7&$u#entary redit #ay be %re"ented by '&"ern#ent a$ti&n &utside
the $&ntr&l &f the %arties*
ncome FundA ty%e &f #utual fund that e#%hasizes $urrent in$e) either &n a #&nthly &r
uarterly basis) as di"er'ent fr tar'etin' $a%ital a%%re$iati&n*
!alanced FundMutual funds that $bine in"est#ents in shares) sh&rt ter# and l&n' ter# b&nds
in %ursuit &f in$e 'ains and $a%ital a%%re$iati&n hile a"&idin' e,$essi"e ris(*
E"uity FundA #utual fund that in"ests %rin$i%ally in st&$(s is $alled euity fund* .t is als& (n&n
as a
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R%s s%!ua!%ons %n "e!!er&of&'re#%!!ransa'!%ons
Fraud Risks The payment will be obtained for nonexistent or worthless merchandise against
presentation by the
beneficiary of forged or falsified documents.
Credit itself may be fake.
Sovereign and Regulatory Risks
! /erf&r#an$e &f the 7&$u#entary redit #ay be %re"ented by '&"ern#ent a$ti&n &utside
the $&ntr&l &f the %arties*
Types of Money Mare!Mu!ua"
Fun#s*Sector FundA mutual fund that invests entirely or predominantly in a specified (single) sector is a sector
specific fund. %hese funds usually e!ist in energy, gold, and other precious metals sectors.
%he ris# associated $ith these funds depends on the specified sector. %hese types of funds areless diversified. %he volatility and correlation $ith mar#et also depends on the specified
sector.
*IslamicFundsA type of fund $hich entirely invests in +hariah compliant instruments. slamic funds e!ist in
almost all the forms discussed earlier. Each fund invests in its respective areas of interest
#eeping in vie$ the rules of shariah compliance. %he volatility of each #ind of slamic funddepends on its category and also the relationship $ith the mar#et in $hich it operates.
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Re(u"a!%ons for )u!ua" fun#s
2he in"est#ent $%any a$t &f 1>406 ocus on
disclosures and information about investment objectives,
investment company structure and operations.
2he se$urities a$t &f 1>336 f investors receiving certain
significant information about securities being offered forsale in public mar#ets.
2he se$urities a$t &f 1>346 %his act created +E& and
empo$ers it $ith securities of mutual funds.
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Ru"es (o$ern )u!ua" fun#s %nPa%s!an#
.n"est#ent %anies and in"est#ent
Ad"is&r?s Rules) 1>@1* - '&"ern $l&se+end #utual
funds
Asset #ana'e#ent $%anies rules 1>>5
-'&"erns &%en+end #utual funds*
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Re(u"a!%ons pro$%#e# safe!y !o!*e %n$es!ors %n !er)s of :
%ransparency: %he holdings of mutual funds are publically available.
-iquidity: +hares of mutual funds are redeemed by the fund company $hich
insures its daily liquidity.
Audited trac# ecords: "utual funds must #eep their performance trac#
records and have to follo$ auditing.
+afety: n case of liquidity shareholders can receive portion equal to their
shares. $ithout any loss.
%
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In$es!ors 'an earn )oney %n!*ree +ays
7i"idend %ay#ents
a%ital 'ain distributi&n
.n$reased A
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Mu!ua" fun#s %n Pa%s!an are:
! Arif Cabib .n"est#ent D /a(istan St&$( Mar(et Fund -AR.F/SM
! As(ari Asset All&$ati&n Fund -ASAAFB
! Faysal .n$e ;r&th Fund -FA:.;R
! CBG .sla#i$ M&ney Mar(et Fund -CBG.MM! ASB .n$e %%&rtunity Fund -ASG.H
! Meezan Balan$ed Fund -MBF
! /a( #an .sla#i$ Asset All&$ati&n Fund -/AA.S
! /.. ;r&th Fund -/;F! BG Sa"in's .n$e Fund -BGSA.
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R%ss
Its not true that money market mutual funds are100% safe. -Federal Reserve Chairman Ben Bernanke, March
2, 2012 Congressional testimony.
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R%ss,Con!- .
! Se #&ney #ar(et funds in"est &nly in sh&rt+ter#
2reasury se$urities) hile &thers in$lude $#er$ial
%a%er D hi$h is the sh&rt+ter# debt issued by
$&r%&rati&ns* 2he sh&rt+ter# nature &f the in"est#ents
euates t& l&er ris() f&r the si#%le reas&n that there isless ti#e f&r the issuer t& e,%erien$e finan$ial diffi$ulty
that &uld $ause the# t& default &n their debt* Ihile the
$han$e that sh&rt+ter# debt &n?t be re%aid is s#all) it
e,ists n&netheless*
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R%ss,Con!- .
! nflation: $he %nseen Risk/erha%s the lar'est ris( ith #&ney #ar(et funds is n&t
the safety &f y&ur %rin$i%al) but the funds? inability t&
(ee% u% ith the rate &f inflati&n* .f a #&ney #ar(et fundis %ayin' y&u 0*95J hen inflati&n is at 3J) f&r e,a#%le)
y&u?re a$tually l&sin' #&ney in the sense that y&ur
%ur$hasin' %&er is de$linin'* As a result) in"est&rs
need t& ta(e $are that they d&n?t ha"e #&re $ash
all&$ated t& #&ney #ar(et funds than is a%%r&%riate f&rtheir situati&n*
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A#$an!a(es
! A Great Place to Park MoneyIhen the st&$( #ar(et is e,tre#ely "&latile and
in"est&rs arent sure here t& in"est their #&ney) the
#&ney #ar(et $an be a terrifi$ san$tuary* M&ney #ar(eta$$&unts and funds are &ften $&nsidered t& ha"e less
ris( than their st&$( and b&nd $&unter%arts* .n additi&n)
the #&ney #ar(et &ften 'enerates a l& sin'le+di'it
return f&r in"est&rs) hi$h in a d&n #ar(et $an still be
uite attra$ti"e*
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A#$an!a(es,Con!-.
! L!udty Isn"t #sually an Issue
M&ney #ar(et funds d&nt 'enerally in"est in se$urities
that trade #inus$ule "&lu#es &r that tend t& ha"e little
f&ll&in'* Rather) they 'enerally trade in entities andK&r
se$urities that are in fairly hi'h de#and -su$h as 2+bills*
2his #eans that they tend t& be #&re liuid) and that
in"est&rs $an buy int& the# and sell the# ith
$%arati"e ease*
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A#$an!a(es,Con!-.
! &ield:M&ney #ar(et funds %ay a yield based &n theh&ldin's &f the underlyin' fund* 2he yield is 'enerally
autati$ally rein"ested int& the fund "ia %ur$hase &fadditi&nal shares in the fund* 2his yield #a(es #&ney
#ar(et funds an attra$ti"e alternati"e t& the #attress*
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D%sa#$an!a(es
! $I& Insurance
M&ney funds %ur$hased at a ban( are ty%i$ally insured
by the Federal 7e%&sit .nsuran$e &r%&rati&n -F7.
C&e"er) #&ney #ar(et #utual funds are n&t usually
'&"ern#ent insured* 2his #eans that alth&u'h #&ney#ar(et #utual funds #ay still be $&nsidered a
$%arati"ely safe %la$e t& in"est #&ney) there is still an
ele#ent &f ris( that all in"est&rs sh&uld be aare &f*
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D%sa#$an!a(es,Con!-.
! 'eturns May (ary Re#e#ber) the return a fund has %&sted in a %re"i&us
year is n&t ne$essarily an indi$ati&n &f hat it #ay
'enerate in a future year* F&r e,a#%le) ha"in' di"idends&r %r&$eeds fr a st&$( sale sent dire$tly t& y&u -the
in"est&r #ay n&t all& y&u t& $a%ture the sa#e rate &f
return* .n additi&n) rein"estin' di"idends in euities #ay
&nly a''re'ate return %r&ble#s in a d&n #ar(et*
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D%sa#$an!a(es,Con!-.
! )**ortunty Lost"er ti#e) $#&n st&$(s ha"e returned ab&ut 8+10J
&n a"era'e + $&untin' re$essi&nary %eri&ds* By in"estin'
in a #&ney #ar(et #utual fund) hi$h #ay &ften yieldjust 9J &r 3J) the in"est&r #ay be #issin' &ut &n an
&%%&rtunity f&r a better rate &f return* 2his $an ha"e a
tre#end&us i#%a$t &n an indi"iduals ability t& build
ealth*
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D%sa#$an!a(es,Con!-.
! Maturity of 'oldings:M&ney #ar(et funds$ann&t h&ld in"est#ents ith a #aturity &f 'reater than
3>@ days* 2he ei'hted a"era'e #aturity &f the %&rtf&li&
$ann&t e,$eed >0 days*
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