What is the difference between a CNAV and a VNAV money market fund, and why does it matter for corporate cash?
A core Corporate Treasury interview question — asked in analyst and associate interviews across IB, PE, and the Big 4.
THE SHORT ANSWER
Money market funds are a common home for corporate surplus cash. A constant net asset value (CNAV/stable-NAV) fund aims to keep a fixed price per share (e.g., 1.00), redeemable at par, which corporates like for its cash-equivalent simplicity and accounting; a variable net asset value (VNAV) fund prices at a floating NAV that moves slightly with the portfolio's market value. Post-2008 and post-2014/2016 reforms (US and EU MMF regulation) restricted which funds can use stable NAV — broadly limiting it to government/public-debt funds — and introduced liquidity-fee and redemption-gate mechanisms that can apply in stress, plus categories like LVNAV in the EU. It matters because the fund type affects whether the holding behaves like cash, its accounting/classification, and crucially the redemption risk: in a stress event gates/fees can temporarily impair same-day access, so a treasurer must understand the fund structure, not assume all MMFs are instantly liquid par-value cash.
WHAT INTERVIEWERS LISTEN FOR
- ✓CNAV: stable par price; VNAV: floating market-value NAV
- ✓Reform limited stable NAV (mainly govt funds); added fees/gates, LVNAV
- ✓Affects cash-equivalent accounting/classification
- ✓Stress gates/fees can impair same-day liquidity
COMMON MISTAKES
- ✗Assuming all MMFs are par-value instant cash
- ✗Unaware of fees/gates in stress
- ✗Not knowing post-reform fund categories
Reading isn't the same as answering under pressure.
Interviewers don't hand you the model answer — you deliver yours on a clock. Practice this and 1,000+ questions with AI feedback on every answer.
RELATED QUESTIONS
- How would you structure an in-house bank?
- A company uses physical cash pooling in Germany and notional pooling in the US. The German pool has a surplus of €10M, the US pool has a deficit of $12M. The EUR/USD spot is 1.10. The German subsidiary has a tax rate of 30%, the US 21%. The CFO wants to cover the US deficit. How would you execute this optimally considering tax and FX?
- What is the cash conversion cycle and how does it impact a company's liquidity needs?
- How do you determine the appropriate size of a corporate liquidity buffer?
- Explain the cash conversion cycle and how it impacts a company's liquidity needs.
- When would you build a cash forecast using the direct method versus the indirect method, and what are the limits of each?