Prior to 1971, reserve funds were unheard of as many investors were only beginning to realize the pain of not having cash on hand. The problem was that many investors wanted to secure a place where they could stash cash in the short term. Treasury bills and certificate of deposits were available but there wasn’t a viable connection between these instruments of savings and the investors. In other words investors were having a hard time getting to their cash and making it grow for them.
The solution appeared to take the form of a money market or reserve fund that would allow investors access to their money and help them grow their wealth. The very nature of money market funds is the fact that these are primarily short term funds designed to decrease risk by investing in short term securities such as Treasury bonds and CDs.
The liquidity of this type of fund provides investors with a safe haven for cash reserves in the short term. The main factor in establishing money market funds was the fact that investors could have access and gain a small rate of return on their investment. In the beginning many of the money market funds focused primarily on bank accounts that could only pay a 5.25% interest. Short term investors wanted and needed a more robust return on their investment.
Bruce Bent II’s father was one of the founders of the money market fund. This ultimately lead Bent II into the financial world. He graduated from Northeastern with a Bachelor’s in Philosophy and soon after joined his father in the workforce. Bent II is currently the president and vice chairman of the board in the Double Rock Corporation.
Bent’s success in what he termed the “rules of the game” helped many investors establish their businesses in the short term. He continues to be a poweful influence in the financial sector today.