Presentation of money market funds

Money market funds offer a simple way of placing money for investors with a particularly low risk appetite and for temporarily freeing up cash for liquidity management.

These funds can invest their capital in bank deposits and bonds with the shortest maturity. Since these instruments offer a secure, predictable return, the prices of money market funds tend to rise steadily. Money market funds aim to achieve returns above or competitive with bank deposits. Their advantage over bank deposits is that savings do not have to be held in the scheme for a predetermined period of time, and the amount deposited in the fund is available at any time.

Liquidity funds

One group of money market funds is liquidity funds. The average residual maturity of deposits and bonds in the portfolio of these funds does not exceed 60 days. These funds can be used as an alternative to demand deposits for the shortest possible time – even a few weeks or months – to place funds and manage liquidity.

Money market funds

Funds with an average residual maturity of deposits and bonds in the portfolio of more than 60 days but not more than 6 months are called money market funds, as is the whole category. Money market funds, with their longer maturity structure, are no longer recommended for liquidity management, but rather as an alternative to fixed deposits for the placement of savings within the year.

Both liquidity funds and money market funds are characterised by a constinuous, steady increase in exchange rates and provide a flexible investment option available at any time for funds that are temporarily freed up or become available within a year.

Features of money market funds

• low risk
• short maturity
• liquidity
• invest in bank deposits and short-term bonds
• predictable returns