Money market funds are a type of mutual fund that invests primarily in short-term debt instruments such as government securities, certificates of deposit (CDs), and commercial paper. While some are passively managed, meaning the holdings are spread across a variety of government and corporate debt yields, other money market funds are actively managed. Active money market funds come with several positives that can make the extra effort of actively managing the fund well worth it for investors.

For starters, actively managed money market funds offer higher returns than similarly-structured passive funds. Active managers can take advantage of shorter-term opportunities in the market that an index fund or ETF may not be able to. This includes taking advantage of varying investment trends. They also have the ability to use leverage, or borrowed funds, to increase potential returns.

Furthermore, actively managed money market funds are often less susceptible to wild market swings than passively managed funds. Because actively managed funds offer a very conservative investment strategy they’re not subject to the same kinds of market volatility that a more completion-based portfolio might be. For example, in volatile times, an actively managed fund manages to avoid the more extreme ends of the spectrum by holding a more diversified portfolio. As such, investors in actively managed funds can rest assured knowing their investments are well-protected even in times of market chaos.

Another positive aspect of actively managed money market funds is that risk can be managed more effectively. With an actively managed fund, the underlying fund manager will often have discretion when constructing the portfolio. This gives active money market funds more options to shift into investments with lower risks when market conditions are uncertain.

Finally, actively managed money market funds provide investors with more control and flexibility. Fund managers have the freedom to advise investors when it’s the right time to enter or exit the market. This can give investors peace of mind knowing that their money is being actively monitored and managed with their best interests in mind.

Overall, actively managed money market funds are able to offer investors higher returns, a more conservative investment strategy, and an opportunity to manage risk more effectively than passively managed funds. Additionally, active funds generally provide investors with more control and flexibility, allowing them to tailor their strategies to their own investment goals.