A Money Market Fund (MMF) is a type of investment fund designed to help investors earn returns on cash that would otherwise sit uninvested.
Rather than holding money in a single asset, an MMF invests in a diversified portfolio of short-term, high-quality financial instruments issued by governments, banks, and large institutions. MMFs are commonly used by businesses, financial institutions, and corporate treasury teams to manage excess cash while maintaining a high degree of liquidity.
Why businesses choose Money Market Funds
Many businesses have cash that isn't needed immediately for payroll, invoices, or day-to-day expenses.
Instead of leaving those funds idle, businesses often use MMFs to:
Keep cash accessible
Earn potential returns with low-risk
Diversify exposure
Benefit from professional fund management and strict EU requirements on liquidity, diversification, and credit quality
For many companies, MMFs offer an alternative way to manage short-term reserves while maintaining flexibility.
How Money Market Funds generate returns
Money Market Funds invest in short-term financial instruments that typically generate income through interest payments like:
government treasury bills
short-term corporate bonds
bank deposits
repurchase agreements (repos)
The overall yield of an MMF depends on prevailing market interest rates. When central bank rates (e.g. ECB rates in Europe) change, MMF yields typically adjust accordingly.
As market interest rates change, the returns generated by the fund may also change. Returns are variable and cannot be guaranteed.
How MMFs are priced
Unlike some other financial assets, Money Market Funds (MMFs) are not traded continuously throughout the day. This does not mean that buying or selling is restricted — you can place orders at any time during the day. However, the price of the fund does not change in real time.
Instead, all transactions are executed at a single daily price, known as the Net Asset Value (NAV). All investors executing on the same day receive the same price. This NAV is calculated based on the total value of the fund’s underlying assets at the end of the trading day.
After execution, the transaction follows a settlement cycle, which determines when the funds are actually transferred:
T+0 — same business day settlement (available for our MMF)
T+1 — next business day settlement (common in the market). This means your transaction may not appear immediately in your balance, even though it has already been executed.
Accessing your money
MMFs are generally designed to offer a high level of liquidity, meaning you can typically sell your holdings and access your funds when needed.
However, settlement times may vary depending on the specific fund and market conditions.
Money Market Funds compared to savings accounts
Although both products are commonly used to hold cash, they work differently.
A savings account is a banking product, while a Money Market Fund is an investment product.
This means that:
Returns are not guaranteed.
The value of your investment may fluctuate.
Deposit guarantee schemes generally do not apply.
Understanding the risks
Money Market Funds are generally considered lower-risk investments than many other investment products. However, they are not risk-free.
Like all investments, MMFs can be affected by market events, interest rate changes, liquidity conditions, and the creditworthiness of the underlying issuers. In exceptional circumstances, investors may receive less than the amount originally invested.
How your investments are protected
Your investments are held through regulated providers and segregated custody arrangements.
This means your assets are kept separate from the assets of Finom and our service providers in accordance with applicable regulatory requirements.