The Federal Reserve kept the fed funds target rate extremely low in the fourth quarter of 2014. However, the Fed ceased its monthly purchases of Treasuries and agency mortgage-backed securities in October. With quantitative easing no longer a factor, the market's focus now turns to when the Fed may start to tighten monetary policy by raising short-term interest rates. We believe rate hikes could begin around mid-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 December 31, 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%, 0.01%, and 1.54% for the 1-, 5-, and 10-year periods, respectively, as of December 31, 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 December 31, 2014, was 0.01%. Its seven-day simple annualized yield without waiver was −0.19%.* 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 uncertainty surrounding the end of the Fed's monthly asset purchase program and the question of whether short-term benchmark rates will be raised in 2015 had no impact on money market yields during the quarter. Rather, money market rates remained closely tied to the fed funds rate, currently targeted at between 0.00% and 0.25%. Short-term rates are not likely to rise significantly until the Fed clearly signals that a short-term rate hike is imminent. At the end of 2014, close to half the portfolio was allocated to commercial paper and medium-term notes. Municipal securities also represented a significant portion of the portfolio. The remainder was invested primarily in U.S. Treasuries, other U.S. government and agency securities, and certificates of deposit.
Rising short-term interest rates would be a welcome change for money fund investors who have endured near 0% yields since the end of 2008. However, the economic improvements that need to occur before the Fed begins raising short-term rates are not yet in place. While the future direction of rates is likely upward, the timing is less clear. We acknowledge the need for patience as we watch the rate situation evolve over the next several months. As always, we remain committed to managing a high-quality, diversified portfolio focused on liquidity and stability of principal.