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I am writing a paper about mutual funds and I was wondering if mutual funds get paid interest on the cash positions they have in their portfolio. If so, what kind of rate would this be?

Do funds use e.g. 1-month T-bills? Are these liquid enough such that the fund can still accommodate inflows and outflows or exploit short-term opportunities?

If possible, please provide sources. Thank you!

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    If available, perhaps a fund's financial statements might provide this?
    – Bob Baerker
    Commented Sep 11, 2022 at 19:39
  • T-bills are marketable, and highly liquid. Anyone (including a fund) can easily hold for one day if that's what is needed.
    – dave_thompson_085
    Commented Sep 14, 2022 at 7:08
  • @dave_thompson_085 Which maturity T-Bills do you think mutual funds would trade? 1-month? Are there any lower maturities?
    – Jean-Paul
    Commented Sep 15, 2022 at 8:28
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    Normal, scheduled T-bills can be 4,8,13,26, or 52 weeks. (There are also 'cash management' bills which can be only a few days, but their supply is erratic depending on variations in Treasury's cash balance.) Anyone wanting 'cash-like' behavior would want bills with short remaining term, but that could be either a newly-auctioned 4-week or a 26-week that was auctioned 22 weeks ago; these are economically equivalent and trade the same in the market.
    – dave_thompson_085
    Commented Sep 20, 2022 at 6:23

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Cash position in mutual funds are usually disclosed as short-term reserves and can be invested in money market funds that earned about 2% return, while providing same liquidity as cash. However, I would say the percentage of return varies depends on the type of money market funds.

https://www.investopedia.com/terms/m/mutual_fund_cash_level.asp

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