Check official terms: Money market fund rates, eligibility, and product availability change regularly. Verify current terms with your fund provider or financial institution before investing.
Money market funds are one of the most widely used short-term investment instruments for corporates, institutions, and treasurers managing liquidity. They offer a way to put idle cash to work — earning a return while keeping funds accessible. This guide explains what money market funds are, how they work, and why they matter for businesses and investors in Singapore.
Quick Summary
- What they are: Money market funds (MMFs) are short-term, professionally managed investment funds that pool capital into high-quality, low-risk debt instruments.
- Key instruments: Treasury bills, commercial paper, certificates of deposit, repurchase agreements, and short-term government bonds.
- Why they matter: They offer corporates and institutions a liquid, low-risk alternative to holding idle cash in a current account.
- Key stat: Global money market fund assets reached a record US$11.60 trillion at the end of Q4 2024, up 11.1% year-on-year — driven by higher interest rates and corporate treasury demand. (ICI Worldwide Regulated Open-End Fund Assets, Q4 2024)
- Key stat: Singapore-regulated MMFs must maintain a WAM of 60 days or less, a WAL of 120 days or less, and hold at least 10% in daily-maturing and 30% in weekly-maturing assets. (MAS Code on CIS, April 2026)
- DBS context: In November 2025, DBS partnered with Franklin Templeton to launch Singapore’s first tokenised retail money market fund — the Franklin Onchain U.S. Dollar Short-Term Money Market Fund — approved by MAS as an authorised scheme. (DBS/Franklin Templeton, November 2025)
“Franklin Templeton collaborates with DBS Bank to launch Singapore’s first tokenised retail money market fund.” — Franklin Templeton / DBS, November 2025
| Definition: What Are Money Market Funds? Definition: A money market fund is a type of mutual fund that invests exclusively in short-term, high-quality debt instruments — designed to preserve capital, provide liquidity, and generate a modest return. Also known as: MMFs, cash funds, liquidity funds, short-term investment funds. Key characteristics: Invest in instruments with maturities typically under 1 year.Aim to maintain a stable or near-stable net asset value (NAV)Offer daily or same-day liquidity in most cases.Managed by professional fund managers under regulatory oversightIn Singapore, regulated by MAS under the Securities and Futures Act and the Code on Collective Investment Schemes What they are not: Money market funds are not bank deposits. SDIC covers only SGD-denominated deposits in savings, fixed deposit, and current accounts — investment products, including money market funds, are explicitly excluded from SDIC coverage. While MMFs target capital stability, they carry some degree of investment risk. |
Why Money Market Funds Matter
For corporate treasurers, finance teams, and institutional investors, money market funds solve a specific problem: what to do with short-term cash surpluses that are too large to leave in a current account but too liquid to lock into longer-term investments. Global MMF assets hit a record US$11.60 trillion at the end of Q4 2024 — reflecting how central these instruments have become to institutional cash management worldwide. (ICI, Q4 2024)
Best used when:
- You need to deploy surplus cash for days, weeks, or months without locking it in.
- You want a higher return than a current account without significantly increasing risk.
- You need daily liquidity — funds accessible on short notice.
- Your treasury policy requires capital preservation as the primary objective.
Not ideal when:
- You need guaranteed capital protection — MMFs are not covered by deposit insurance.
- You require longer-term growth — MMFs are not designed for capital appreciation.
- Yield maximisation is the primary goal — longer-duration instruments typically offer higher returns.
For corporates and institutional investors seeking short-term liquidity solutions, DBS provides access to money market funds and instruments through its Global Financial Markets platform — supporting treasurers with both SGD and multi-currency options.
How Money Market Funds Work
Concept 1: Pooling and Investment
What it is: The core mechanics of how a money market fund collects and deploys capital.
How it works:
- Input: Multiple investors — corporates, institutions, individuals — contribute capital to the fund
- Process: The fund manager pools contributions and invests across a diversified portfolio of short-term, high-quality instruments — treasury bills, commercial paper, CDs, and repos
- Output: Investors receive units in the fund, earn a proportionate share of the yield, and can typically redeem on the same or next business day
Key note: Diversification across multiple instruments and issuers reduces concentration risk — a key feature distinguishing MMFs from holding a single instrument. Global MMF assets reached US$11.60 trillion in Q4 2024, with the US alone accounting for US$6.85 trillion (59.1% of the global total). (ICI, Q4 2024)
Concept 2: NAV and Pricing
What it is: How money market funds price their units and manage the objective of capital stability.
How it works:
- Input: The fund holds a portfolio of short-term instruments, each with a market value
- Process: The fund calculates its net asset value (NAV) per unit — either as a constant NAV (CNAV) targeting a fixed price, or a variable NAV (VNAV) that fluctuates with market values
- Output: Investors see their holding valued at or near the target NAV; yield is distributed as income or reinvested
Key note: CNAV funds aim to maintain a stable unit price (e.g., US$1.00 per unit), making them easier for treasury accounting. VNAV funds reflect true market value and are more common in certain regulatory frameworks.
Concept 3: Liquidity and Redemption
What it is: How investors access their money when needed.
How it works:
- Input: An investor submits a redemption request — typically via the fund manager or platform
- Process: The fund manager uses the portfolio’s short maturity profile and cash buffers to meet redemptions without selling assets at a loss
- Output: Proceeds are returned to the investor — often same-day or T+1 depending on the fund and currency
Key note: MAS requires Singapore-regulated MMFs to maintain a WAM of 60 days or less and a WAL of 120 days or less, and to hold at least 10% in daily-maturing and 30% in weekly-maturing assets — ensuring funds stay liquid and interest-rate-sensitive positions remain short. (MAS Code on CIS, April 2026)
Examples of Money Market Funds in Practice
- Scenario: A Singapore corporate treasury team has S$20 million in surplus cash for 3 months before a major capex payment. Instead of leaving it in a current account, they invest it in an MMF — earning a yield above the bank rate while retaining daily liquidity.
- Scenario: A regional asset manager uses a USD money market fund as a cash parking vehicle between investment decisions. When a new opportunity arises, the fund is redeemed same-day to fund the trade.
- Scenario: A multinational’s Singapore treasury hub accesses DBS Global Financial Markets to manage both SGD and USD money market instruments — deploying short-term cash surpluses across currencies from a single platform. (DBS, April 2026)
Common Misconceptions
- Myth: Money market funds are the same as bank deposits.
Reality: MMFs are investment products, not deposits. SDIC covers only SGD-denominated deposits in savings, fixed deposit, and current accounts — money market funds are explicitly excluded from SDIC coverage.
- Myth: Money market funds always maintain a stable NAV.
Reality: While many MMFs target a stable or constant NAV, this is not guaranteed. In 2008, the Reserve Primary Fund fell below US$1.00 per unit after Lehman Brothers’ bankruptcy — a risk known as “breaking the buck” — triggering widespread investor redemptions.
- Myth: Money market funds are only for large institutions.
Reality: While MMFs are widely used by corporates and institutions, they are accessible to a broad range of investors. In November 2025, DBS and Franklin Templeton launched Singapore’s first tokenised retail money market fund — specifically designed to expand MMF access to retail investors. (DBS/Franklin Templeton, November 2025)
- Myth: All money market funds are the same.
Reality: MMFs differ by currency, regulatory framework, NAV type (CNAV vs VNAV), eligible instruments, liquidity buffers, and minimum investment. Always compare fund documentation before investing.
FAQs
What is a money market fund?
A money market fund is a professionally managed investment fund that pools capital into short-term, high-quality debt instruments — such as treasury bills, commercial paper, and certificates of deposit — with the goal of preserving capital and providing liquidity.
Are money market funds safe?
MMFs are low-risk but not risk-free. They are not covered by the Singapore Deposit Insurance Scheme (SDIC) — SDIC covers only SGD-denominated deposits in savings, fixed deposit, and current accounts. MAS-regulated MMFs must maintain a WAM of 60 days or less and a WAL of 120 days or less. Always read the fund’s prospectus before investing.
How liquid are money market funds?
Most MMFs offer daily or same-day liquidity. MAS requires Singapore-regulated MMFs to hold at least 10% in daily-maturing assets and 30% in weekly-maturing assets to ensure consistent liquidity. Redemption proceeds are typically received same-day or T+1.
What is the difference between a CNAV and a VNAV money market fund?
A CNAV (constant NAV) fund targets a fixed unit price — typically US$1.00 — making it easier for accounting purposes. A VNAV (variable NAV) fund reflects the true daily market value of its portfolio and fluctuates accordingly. Both are used in corporate treasury management.
How can I access money market funds through DBS?
DBS provides access to money market funds and instruments through its Global Financial Markets platform, supporting both SGD and multi-currency liquidity needs. In November 2025, DBS also partnered with Franklin Templeton to launch Singapore’s first tokenised retail money market fund, approved by MAS. Visit dbs.com.sg/global-financial-markets for current product availability and terms.
References
- DBS / Franklin Templeton. (November 2025). Franklin Templeton Collaborates with DBS Bank to Launch Singapore’s First Tokenised Retail Money Market Fund. https://www.franklintempleton.com.sg/press-releases/franklin-templeton-collaborates-with-dbs-bank-to-launch-singapores-first-tokenised-retail-fund
- DBS Global Financial Markets. (April 2026). Money Market Funds and Instruments. https://www.dbs.com.sg/global-financial-markets/rates/money-market-funds-instruments
- ICI. (Q4 2024). Worldwide Regulated Open-End Fund Assets and Flows — Q4 2024. https://www.ici.org/research/stats/worldwide
- MAS. (April 2026). Code on Collective Investment Schemes — Money Market Fund Requirements. https://www.mas.gov.sg
- SDIC. (April 2026). Deposit Insurance Scheme — Scope of Coverage. https://www.sdic.org.sg/di_scope_of_coverage/
- Investopedia. (2022). Breaking the Buck — Reserve Primary Fund. https://www.investopedia.com/terms/b/breaking-the-buck.asp
