Where will the $ 3.8 trillion go?

Financial Times has an interesting article today. It is about the difficulties being faced by Money Market Mutual Funds. There are approximately $ 3,800 billion worth of funds in this category and the returns are essentially ZERO. The Asset Management Companies are not able to make any significant money managing these funds and neither are the investors. Many are contemplating closing down the funds.

An interesting comment was  “The Fed is trying to force investors out of a low-risk environment” Hence if the money market fund is closed, what option does the investor have? If an investor is keeping money with Citi or Bank of America he / she is anyway exposed to credit risk. Why not start looking at say a commercial paper of GE.

All the investment gurus who recommend holding cash in this environment will also have to specify where to stash all that cash. Mattresses anyone?