Glossary · Fund structure
Money market fund
A fund that lends money for short periods to governments, banks and large companies, aiming to keep its value steady and earn a return close to short-term interest rates.
A money market fund holds short-dated debt such as treasury bills, bank deposits and commercial paper that is repaid within weeks or months. Its return moves with short-term interest rates such as Bank Rate: it rises when rates rise and falls when they fall.
It is an investment, not a bank account. Its value can fall, and money in it is not a cash deposit covered by the Financial Services Compensation Scheme’s deposit protection. The rules for these funds limit how long the debt can run and how much can be lent to any one borrower.
Money market funds come as open-ended funds and as ETFs, in accumulating and distributing versions. After charges and inflation, their real return can be close to zero or below it.
On Fundology: Cash-like and short-term funds
Related terms
- GiltsBonds issued by the UK government: it borrows money, pays interest (usually twice a year) and repays the face value on a set date.
- Real returnA return after inflation has been removed — what the money can actually buy.
- OCFThe annual cost of running a fund, expressed as a percentage of the money you have invested in it.
More terms on fund structure
Definitions describe how a term is used on Fundology. This is information, not advice.