Fund flow of tax exempt MMFs in the U.S. 2011-2016, by asset location

In 2011, roughly 95 percent of tax-exempt money market funds (MMFs) were domiciled in North America. European MMFs accounted for less than three percent, while Australian-based securities made up less than one percent of asset allocation. From 2011 to 2016, tax-exempt MMFs experienced incremental fund outflow until an MMFs repositioning removed all asset allocation. Similarly to government MMFs assets were redirected to comparable funds of a new structure.

Tax exempt money market funds

MMFs in the United States are a type of mutual fund which are highly liquid and regulated by the Securities and Exchange Commission. MMFs that primarily invest in securities which are exempt from local income taxes are called tax-exempt funds. These tax-free securities are typically issued by local governments or municipal entities.

Money market fund reforms

Following new regulations introduced in 2014, all tax-exempt funds are further divided into two categories based on the type of investor. “Tax exempt retail” are funds that are allowed to maintain a stable net asset value per share and are limited to individual investors. All remaining funds fall under the category of “tax exempt institutional”. These funds have a floating net asset value per share which fluctuates with the market value of the fund’s assets.