What is a money market fund?
A money market fund is an investment fund that invests in very short-term, high-credit-quality debt instruments: Treasury bills, bank notes, repos, and corporate debt with maturities of less than two years. Its objective is to preserve capital and generate returns linked to short-term interest rates.
Advantages over a bank deposit
- Daily liquidity: you can redeem your investment any day without penalty
- Variable return: linked to the short-term Euribor
- Tax deferral: You can transfer to another fund without paying taxes until you withdraw the money
- Automatic diversification: the fund invests in dozens of issuers
Disadvantages
- They are not covered by the Deposit Guarantee Fund (FGD) — although the risk is low, it does exist
- Returns may decline if the ECB cuts rates
- Some fund managers charge fees that reduce net returns
Money market funds available in Spain
The main money market funds available include the Fidelity ILF EUR, the Amundi Euro Liquidity, and the BlackRock ICS EUR Liquidity, available through brokers such as MyInvestor, Interactive Brokers, or Scalable Capital. The iShares EUR Ultrashort Bond ETF (ERNE) serves a similar purpose with stock market liquidity.
What are current returns?
With the ECB at around 2.5–3%, money market funds in EUR generate net returns of between 2.2% and 2.8% annually after fees. This is comparable to the best bank savings account, with the tax advantage of a transfer.
When does a money market fund make more sense than a deposit?
For capital exceeding €100,000 (where the Deposit Guarantee Fund no longer provides coverage), a diversified money market fund may be safer than a deposit held at a single bank. For smaller amounts, the tax advantage only materializes if you plan to reinvest in another fund.
Conclusion
Money market funds are an efficient tool for generating returns on liquidity in 2026, especially for large amounts or investors planning to reinvest. Compare them with direct government bonds to see which fits your situation best.