Sturm und Drang in money market funds:when money market funds cease to be narrow

This paper investigates the returns and flows of German money marketfunds before and during the liquidity crisis of 2007/2008. The mainfindings of this paper are: In liquid times money market funds enhancedtheir returns by investing in less liquid papers. By doing so they outperformedother funds as long as liquidity in the market was high. Investingin less liquid assets, however, widens the narrow structure of money marketfunds and makes them vulnerable to runs. During the shortening ofliquidity caused by the subprime crisis illiquid funds experienced runs,while more liquid funds functioned as a safe haven.[...]