The Federal Reserve kept the fed funds target rate in the extremely low 0.00% to 0.25% range in the second quarter of 2014 but continued reducing its asset purchases in $10 billion increments following its monetary policy meetings. Money market securities felt no impact from the tapering of asset purchases. We believe the Fed will complete winding down its asset purchases by the end of 2014 and that short-term interest rate increases are likely to begin sometime in mid- to late 2015.
The Summit Cash Reserves Fund returned 0.00% in the quarter compared with 0.00% for the Lipper Money Market Funds Average. For the 12 months ended June 30, 2014, the fund returned 0.01% versus 0.01% for the Lipper Money Market Funds Average. The fund's average annual total returns were 0.01%, 0.02%, and 1.61% for the 1-, 5-, and 10-year periods, respectively, as of June 30, 2014. The fund's expense ratio was 0.45% as of its fiscal year ended October 31, 2013. The fund's seven-day simple annualized yield as of June 30, 2014, was 0.01%. Its seven-day simple annualized yield without waiver was −0.29%.* The fund's yield more closely reflects its current earnings than the total return.
For up-to-date standardized total returns, including the most recent month-end performance, please click on the Performance tab, above.
Current performance may be lower or higher than the quoted past performance,
which cannot guarantee future results. Return and yield will vary.
An investment in money market funds is not insured or guaranteed by the FDIC
or any other government agency. Although the fund seeks to preserve the value
of your investment at $1.00 per share, it is possible to lose money by investing in the fund.
*In an effort to maintain a zero or positive net yield for the fund, T. Rowe Price has voluntarily waived all or a portion of the management fee it is entitled to receive from the fund. A fee waiver has the effect of increasing the fund's net yield. The 7-day yield without waiver represents what the yield would have been if we were not waiving our management fee. This voluntary waiver is in addition to any contractual expense ratio limitation in effect for the fund and may be amended or terminated at any time without prior notice. Please see the prospectus for more details.
The Fed's own forecasts suggest that short-term interest rates will move higher sometime in the middle to latter part of 2015. Obviously, those forecasts are subject to the ongoing flow of economic data. With that time frame just beginning to enter into our investment horizon, we are quite cognizant that some money market rates may move higher in anticipation of a rate hike. For now, we are maintaining the same strategy that has been successful in the recent past and keeping the portfolio's weighted average maturity longer than that of the average competitor. About half of the portfolio is allocated to commercial paper and medium-term notes. Municipal variable rate securities also remain a sizable portion of the portfolio. The remainder is invested primarily in U.S. Treasuries, certificates of deposit, and other U.S. government and agency securities.
Short-term rates are unlikely to rise significantly until the Fed signals that a short-term benchmark rate increase is imminent. If the likelihood of rate hikes begins to increase, we may focus more on the shortest-term securities so that we can reinvest in higher-yielding money market instruments as soon as they become available. What will remain constant is our focus on principal stability, quality, and liquidity, especially in the current low interest rate environment.