The correct answer is C. Liquidity. According to the Investment Funds in Canada curriculum, the primary objectives of money market mutual funds are capital preservation and liquidity, with income as a secondary consideration. Money market funds invest in short-term, high-quality debt instruments such as treasury bills, bankers’ acceptances, and commercial paper, which mature in less than one year.
The CIFC text emphasizes that money market funds are designed to provide investors with easy access to cash, making liquidity their most important feature. These funds typically maintain a stable net asset value per unit (NAVPU), allowing investors to redeem units quickly with minimal price fluctuation.
Tax efficiency is not a defining feature of money market funds, as interest income is fully taxable in non-registered accounts. Money market funds also do not provide an inflation hedge because returns are generally modest and may not keep pace with rising prices. Yield is intentionally low relative to other asset classes because higher yields usually require higher risk, which contradicts the fund’s conservative mandate.
Because liquidity is the cornerstone of money market fund design and suitability, Option C is the correct and fully CIFC-verified answer.
