The response of money market fund investors and managers to government shutdowns

We examine whether impending government shutdowns affect money market fund (MMF) investors and managers. Research suggests that market participants place increased risk on US Treasury Bills around government shutdown periods. There are three sets of decision makers in our sample: retail MMF investors, institutional MMF investors, and MMF investment managers. We ask the question; as the country moves toward a federal government shutdown do investors exit MMFs and do MMF managers shorten their maturities? In general, we find that fund managers did little to respond to government shutdowns. Institutional investors withdrew funds from MMFs (both Government and Prime). Retail investors moved funds into MMFs and moved into both Prime and Government funds.