What type of money market funds primarily invest in short-term corporate and bank debt securities?

Prime funds are a type of money market fund that primarily invests in short-term corporate and bank debt securities. These funds focus on a diverse range of creditworthy securities issued by corporations, which can include commercial paper, certificates of deposit, and other similar instruments. The objective of prime funds is to provide higher yields compared to government and treasury funds, as they take on slightly more credit risk by investing in these corporate and bank debt instruments.

Government funds, on the other hand, mainly invest in government securities and are considered very low-risk. Treasury funds specifically invest only in U.S. Treasury securities, which are even more secure but typically offer lower yields. Tax-exempt funds focus on bonds issued by local and state governments that are exempt from federal taxes, which is an entirely different investment strategy.

By focusing on short-term corporate debt, prime funds appeal to investors seeking higher returns while still maintaining a level of liquidity and stability. This makes prime funds a popular choice for investors looking to optimize their returns while still managing risk in the short-term investment landscape.