What must a Basic Money Market Fund consist of at least 50%?

A Basic Money Market Fund is designed to provide a safe and stable investment option, typically investing in short-term, high-quality, and low-risk instruments. The requirement stipulating that at least 50% of the fund must consist of bank deposits aligns with the fundamental characteristics of money market funds. These funds aim to preserve capital while offering liquidity and are primarily composed of cash-equivalents like time deposits, certificates of deposit (CDs), and other similar instruments issued by banks. This structure helps ensure that the fund can meet redemption requests while still providing some return on investment, albeit modest.

The focus on bank deposits reduces the risk profile of the fund, ensuring that a significant portion is placed in secure, easily accessible investments. This is essential because investors in money market funds generally prioritize safety and liquidity over high returns. Therefore, the necessity for at least 50% in bank deposits reflects the need for stability and risk management within a Basic Money Market Fund.