Ultrashort bond funds Ultrashort bond funds are mutual funds, similar to money market funds, that, as the name implies, invest in bonds with extremely short maturities. Unlike money market funds, however, there are no restrictions on the quality of the investments they hold. Instead, ultrashort bond funds typically invest in riskier securities in order to increase their return. Since these high-risk securities can experience large swings in price or even default, ultrashort bond funds, unlike money market funds, do not seek to maintain a stable $1.00 NAV and may lose money or dip below the $1.00 mark in the short term. Finally, because they invest in lower quality securities, ultrashort bond funds are more susceptible to adverse market conditions such as those brought on by the financial crisis of 2007–2010. Enhanced cash funds Enhanced cash funds are bond funds similar to money market funds, in that they aim to provide liquidity and principal preservation, but which: Invest in a wider variety of assets, and do not meet the restrictions of SEC Rule 2a-7; Aim for higher returns; Have less liquidity; Do not aim as strongly for stable NAV. Enhanced cash funds will typically invest some of their portfolio in the same assets as money market funds, but others in riskier, higher yielding, less liquid assets such as: Lower-rated bonds; Longer maturity; Foreign currency–denominated debt; Asset-backed commercial paper (ABCP); Mortgage-backed securities (MBSs); Structured investment vehicles (SIVs). In general, the NAV will stay close to $1, but is expected to fluctuate above and below, and will break the buck more often. Different managers place different emphases on risk versus return in enhanced cash – some consider preservation of principal as paramount, and thus take few risks, while others see these as more bond-like, and an opportunity to increase yield without necessarily preserving principal. These are typically available only to institutional investors, not retail investors. The purpose of enhanced cash funds is not to replace money markets, but to fit in the continuum between cash and bonds – to provide a higher yielding investment for more permanent cash. That is, within one's asset allocation, one has a continuum between cash and long-term investments: Cash – most liquid and least risky, but low yielding; Money markets / cash equivalents; Enhanced cash; Long-term bonds and other non-cash long-term investments – least liquid and most risky, but highest yielding. Enhanced cash funds were developed due to