Prime Money Funds Offer Higher Returns, Less Risk Than Treasury, Bank. A recent study by John Bilson, professor of finance at the Illinois Institute of Technology, supports the push to "allow broker/dealers to use AAA rated money funds" as "qualified securities" under Rule 15c3-3, an initiative spearheaded by Federated Investors and Treasury Strategies. The paper, "Eligible Securities for Customer Segregated Accounts" finds treasury funds generally riskier than prime money funds (the analysis uses statistical returns provided by Crane Data LLC). Bilson also argues for a zero percent "haircut" under Rule 15c3-3. Treasury money funds: offer lower rates of return not due to lower risk but "because of the regulatory demand"; offer more risk due to less "room for diversification" and longer average maturities; and, "may face higher operational risks" than prime funds, Bilson says. Copies of the study were provided to government officials and opinion makers.

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