Is a Money Market Mutual Fund (MMMF) considered a money market instrument?

A Money Market Mutual Fund (MMMF) is not classified as a money market instrument, although it invests in money market instruments. Money market instruments typically refer to debt securities that are short-term, highly liquid, and considered low risk, such as Treasury bills, commercial paper, and certificates of deposit. These instruments are issued by governments, financial institutions, and corporations with short maturities.

On the other hand, an MMMF is an investment fund that pools money from multiple investors to purchase a diversified portfolio of money market securities. While it primarily invests in these securities, the fund itself is structured as a mutual fund, which makes it distinct from the individual money market instruments it holds in its portfolio. The key distinction lies in the manner of operation and ownership; the MMMF offers shares to investors, who own portions of the fund rather than owning the underlying securities directly. This structural difference is why the statement indicating that an MMMF is a money market instrument is incorrect.