The AAA rated Goldman Sachs US Dollar Liquid Reserves Fund has become the largest fund in Europe with assets over US$22bn (€17bn). Out of a universe of approximately 24,082 funds, it is larger than any equity, bond or other money market fund. The growth of this money market fund reflects a number of factors. First, companies are increasingly using money market funds, with the industry as a whole growing 25 per cent in 2004. Secondly, size is an important factor with money market funds; inflows and outflows can be very large and sudden, as companies need liquidity. The larger a money market fund, the better that fund is able to cope with such activity without tending to harm its performance and the yield it can offer. Since stable net asset value funds arrived in Europe from the US in the late 1990s their use has mainly been confined to large multinational companies and financial institutions. These quickly recognised the benefits of the ease of liquidity and the diversified range of instruments a money market fund could offer. Recently the alternative investment community (private equity and hedge funds in particular have large liquidity needs) has also started to use money market funds as a means of managing pools of cash.
A report by broking group Marsh examines the repercussions from the administration of the South Korean company, which filed for bankruptcy protection at the end of August.
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