AARP's Money Market Fund
September 06, 2007
The American Association of Retired Persons (AARP) is in the money management business with a mutual fund division called AARP Funds. AARP Funds has a mutual fund money market called the AARP Money Market Fund with one of the highest yields in the country
One interesting tidbit from the AARP Funds site follows:
"The fund's 7 day yield is based on a 30 basis point contractual expense cap that is currently in effect through November 1, 2009. Without the expense cap, the 7 day yield would be 4.61% which reflects a gross expense ratio of 0.82%."
This is good news for investors in this fund as the expense cap lasts for over two years which will provide an ongoing boost to the yield.
Recent news headlines have put a bit of a scare in money fund investors by planting the seed that the magic $1 net asset value could be breached with further market turmoil. A price of below $1 on a money fund represents a loss of principal invested. One important item for investors to remember is the ability of the mutual fund company to maintain a net asset value of $1 on their money fund if in fact financial disaster hits. AARP Funds, a well-respected and well-capitalized firm, would certainly be considered likely to make-good investors if in fact the net asset value fell below $1. The AARP Money Fund appears to be conservatively run and according to the prospectus follows the investment guidelines below:
Normally, the Underlying Money Market Fund
intends to invest more than 25% of its total assets in
bank obligations. The Underlying Money Market
Fund may invest in the following types of investments:
�� Instruments of U.S. and foreign banks, including
certificates of deposit (CDs), bankers’
acceptances, and time deposits (TDs). In addition
to CDs and TDs issued by U.S. banks in
the U.S., the Underlying Money Market Fund
may invest in other sorts of U.S. dollar denominated
CDs and TDs, such as Eurodollar CDs
(CDs issued by banks outside of the U.S.),
Eurodollar TDs (deposits in foreign branches
of U.S. and foreign banks) and Yankee CDs
(CDs issued by U.S. branches of foreign banks).
�� U.S. Treasury bills, notes and bonds.
�� Other obligations issued or guaranteed
by the U.S. government, its agencies,
or instrumentalities.
�� Commercial paper of U.S. and foreign companies.
�� Asset-backed securities.
�� Corporate obligations of U.S. and
foreign companies.
�� Variable and floating rate notes.
�� Repurchase agreements.
For information on the AARP Money Market Fund or to open an account click here.
More information regarding money funds here.
