"Money Market ETFs" Not True Money Markets But Enhanced Cash. TheStreet.com recently wrote "Money Market ETF Not as Safe as it Appears", describing a new Powershares VRDO Tax-Free Weekly Portfolio (PVI). The ETF invests in tax-exempt variable-rate demand notes, a staple of tax-exempt money market funds, and "seeks to replicate the Thomson Municipal Money Market Data VRDO Index. TheStreet incorrectly terms this new exchange traded fund a "Money Market", but PowerShares makes no such claim. Other ETFs -- iShares Lehman 1-3 Year Treasury Bond, SPDR Lehman 1-3 Mo T-Bill ETF, and the pending Bear Stearns Current Yield Fund -- have bordered on money markets but are really "cash plus" or "enhanced cash". None to-date offers the liquidity, safety and yield of a true money market fund. The Powershares launch is ill-timed given concerns in the municipal market over bond insurers, and given concerns over "enhanced cash" funds in general.
