Typically which investment below poses the greatest volatility risk to a government investment portfolio?

A floating or variable NAV money market fund generally poses the greatest volatility risk to a government investment portfolio due to the nature of how these funds are structured. Unlike traditional money market funds, which typically maintain a stable net asset value (NAV) of $1 per share, floating NAV funds do not have that guarantee and instead reflect the current market value of the underlying securities. This means that as interest rates fluctuate and the market values of the securities change, the NAV of the fund can also fluctuate, leading to potential gains or losses for investors.

This variability makes floating or variable NAV funds more susceptible to volatility, especially in different interest rate environments, compared to government investment pools (LGIPs) or traditional money market funds, which tend to have more stable returns. Investors in these funds must be prepared for changes in value that can occur quickly and without warning, contributing to higher volatility risk within the portfolio.