Rates on money market funds have been steadily marching lower, but investors hoping to make a little more money on their cash can do so – if they’re willing to take a little more risk. Even as the Federal Reserve has lowered its key interest rate to a range of 3.5% to 3.75% and yields on money market funds have come down sharply from their highs, investors continue to shovel cash into these funds. Assets in money market funds totaled $7.79 trillion in the week ended Feb.18 , according to the Investment Company Institute. The days of yields beyond 5% are in the distant past for these funds, but many are still offering rates in excess of 3%. While the vast majority of money market assets are held in government funds – which invest in cash, Treasurys and other securities backed by the U.S. government – investors can generate a little more interest income from a prime money market fund. “You can get that extra yield pickup by going to prime,” said Mark Alberici, global head of product innovation and strategic partnerships at State Street Investment Management. “There are strong regulatory requirements around it, and it’s short term and higher quality, allowing you to meet your liquidity needs.” The evolution of prime Prime money market funds give investors a little more risk exposure by holding some corporate commercial paper. These are short-term instruments issued by companies, with maturities that may run as long as 270 days but tend to average about 30 days, according to the Federal Reserve. “Years ago, prime used to be the dominant category,” said Peter Crane, founder of Crane Data , which closely tracks money market funds and publishes Money Fund Intelligence. That changed in 2008 when the Reserve Primary Fund saw its net asset value slip below parity of $1 per share because holdings included Lehman Brothers commercial paper. As a result, investors fled, causing the fund to put up redemption gates. Since then, the Securities and Exchange Commission has put in place reforms that raise minimum liquidity requirements and call for the funds to hold high-quality, short-term assets . “Today’s prime money funds are different from the ones in the past,” said Crane. “They need higher levels of liquidity, higher levels of government securities. It made them safer, but the yields are also lower” than they were. But today, prime money market funds can still give investors a bump in yield. Consider that the Crane 100 Money Fund Index has an annualized 7-day current yield of 3.5%, but the Invesco Premier Portfolio (IPPXX) yielded 3.75% as of Jan. 31 . The UBS Prime Reserves Fund (UPRXX) offers a yield of 3.65%. The newly debuted State Street Prime Money Market ETF (MMK) yields 3.62%. Take what the market gives Even as today’s prime money market funds are safer than their predecessors, investors ought to perform due diligence as they decide what works for their situation. “Understand what’s in there,” said Alberici. “What does it hold? What are the ratings? The price is the other thing: Look under the hood.” Crane warned that investors ought to be wary of any money market funds that are offering yields that are a little too rich. “You can tell everything you need to know by looking at the yield,” he said. “The fed funds rate is at 3.5% to 3.75%, and if you are yielding 4% now, you’re too high.” “The best way to stay safe is to take what the market gives you, don’t get greedy and stretch,” Crane added.