Money Market Funds (MMFs) function as vital short-term liquidity hubs, purchasing short-term corporate debt and government bills. However, their structural design makes them highly vulnerable to sudden investor runs during periods of market stress.

Stable NAV funds target a constant share price (e.g., $1.00 per share). If a fund’s underlying short-term credit assets experience significant downgrades or defaults, the fund risks falling below its stable value floor, a crisis event known as Breaking the Buck:

[Market Panic Spikes] ---> Short-Term Credit Assets Devalue ---> Fund Breaks the Net Asset Value Floor ---> Institutional Investors Run

When a fund breaks the buck, institutional investors have an incentive to withdraw their capital rapidly to avoid losses. This run can force the fund to liquidate its assets into a falling market, freezing short-term corporate paper markets and requiring emergency central bank intervention to stabilize funding lines.