These vehicles are used as cash substitutes by both institutions and individuals. Maturities are typically measured in weeks, and the portfolio is constrained on weighted average maturity and credit quality.
They are not deposits and not guaranteed. In 2008 a large US fund holding Lehman paper priced below a dollar a share, and the resulting run forced an emergency government backstop. Post-crisis rules introduced floating NAVs for some categories plus liquidity fees and redemption gates for others.
The main risks are credit in the underlying paper, liquidity if redemptions spike, and the gap between a fund's yield and the policy rate when rates move quickly. See repurchase-agreement and redemption-gate.
Related: repurchase-agreement, redemption-gate, federal-funds-rate, liquidity, net-asset-value, open-end-fund