Reserch Of China’s Money Market Fund Liquidity Risk

Money market funds (referred MMF), is an investment in the money market short-term (less than one year, with an average duration of 120 days) securities of an investment fund. The advantage of this fund include:stable earnings, liquidity, low purchase limit. In recent years, some MMF also combined with famous network platform (eg Yuebao, a money-market fund promoted by Alipay), to achieve T+0 online subscription and redemption. This not only brings great convenience for investors, but also make money market funds has been amazing and rapid development in the past years. Currently, the size of China’s money market funds have been accounted for a quarter of the public fund shares. However, the risk of money market funds is also growing along with its size, even in 2013 some MMF can not be redeem promptly, and this may lead to massive liquidity risk. At that time the currency market have tended to tighten liquidity, but a lot of MMF funds are derived from money market lending. So MMF can not meet some of the urgent redemption needs.Therefore, under the "money shortage" background, once considered as low-risk money funds also appear great liquidity risk, the risk may even evolve into a systemic risk in the financial system. We must take this into attention. This article is an in-depth analysis of the money market fund operation mechanism, based on the quantitative analysis of the money fund yields, size and relevance of liquidity risk. Through data fitting and testing, we come to a conclusion that the MMF liquidity risk will affect their yields and cause further redemption conclusions. Also by the Compare developed countries MMF with ours,we found that Chinese MMF is quite similar with the United States MMF in level of liquidity.However, there is a large gap in the supervision of liquidity risk. So, China’s MMF need to further strengthen supervision.Finally, the paper draws on the experience of fund management in some developed countries, to identify the three most viable liquidity risk control program,that measure liquidity risk by Var value method, and through the analysis of large data to predict liquidity risk in advance.