A money market is a fund that seeks to generate income for participants through investments in short-term securities such as certificates of deposit, treasury bills and commercial paper. The fund’s net asset value is usually $1 a share and its interest rate can vary. In addition, most money market funds offer check-writing privileges.
No true money market ETF existed until the recent launch of Claymore’s Premium Money Market ETF in Canada (TSX: CMR). CMR invests primarily in high-quality, short-term (generally 90 days or less) debt securities, including treasury bills and promissory notes issued or guaranteed by Canadian governments or their agencies, bankers acceptances and commercial paper (excluding asset-backed commercial paper) issued by Canadian Chartered banks, loan companies, trust companies and corporations.
Especially attractive is CMR’s low expense ratio of 0.25%. For more information, see Claymore’s Canadian website.
At the beginning of the year, WisdomTree filed to bring to market a U.S. cash fund and a U.S. government cash fund. No current information is available on the status of the WisdomTree offerings.
In the mean time, check out iShares Lehman Short Treasury Bond Fund (NYSEArca: SHV) which tracks an index of U.S. Treasury bonds with an effective duration of around 0.3 years. Although the distribution yield is 2.29%, the flight to quality due to the recent credit crisis has pushed the 30 day SEC yield down to 1.58% and the average yield-to-maturity down to 1.36%. For more information, see the iShares website.
Alternatively, take a look at the recently launched PowerShares Active Low Duration Fund (NYSEArca: PLK) which we covered in an earlier posting.