Money Market Funds

Money Market Fund (MMF) is a fund that invests in short term government and corporate bonds, treasury and commercial bills, deposits with financial institutions or some other debt securities that you can name of. It is a fund that gives investors an alternative solution to fixed deposits. Some investors don’t like the idea of locking up their money in fixed deposits; therefore they choose to put them inside MMF.

Just like fixed deposits, MMF is a low risk but low return investment fund. Thus, investors who have low risk appetite prefer MMF to an equity fund. MMF also offers a convenient parking place for an investor’s cash reserve. He may choose to put his cash reserve in MMF while waiting for investment opportunity to arise.

There are many choices of MMFs that are offered to investors in Singapore. I have put up a list of some of them in the table below.

Money Market Fund	ER (%)	Fund Size (SGD million)	Launch Date	Holdings (May not be top 3)
Lion Global SGD MMF	0.46	116.4 (as at May 30, 2008)	1-Nov-99	Sing Investments & Finance Ltd MTN 4.36% 17/04/2009
				City Developments Ltd MTN 2.995% 16/10/2008
				F&N Treasury Pte Ltd SER MTN 3.065% 10/09/2008
Phillip MMF	0.61	407.31 (as at Mar 31, 2008)	16-Apr-01	Capitaland Commercial 4.26% 10/11/2008
				Tuas Power Ltd 4.5% 28/5/2009
				F&N Treasury Pte Ltd 3.065% 10/09/2008
DBS Enhanced Income SGD	0.44	453.44 (as at May 31, 2008)	6-Sep-00	City Development 2.3 20/02/09 MTN
				Woori Bank 2.82 20/08/08 EMTN
				Guocoland LTD FRN 19/10/08 MTN
DBS Navigator Ready Access	1.68	63.72 (as at Mar 31, 2008)	7-Sep-07	City Development 2.3 20/02/09 MTN
				Com Bank Australia 6 24/06/09 MTN
				Cadbury Schweppe 4.07 19/04/08
Fundsupermart Cash Fund	0.35	289.60 (as at April 29, 2008)	22-Jan-07	OCBC Bank Spore
				Landesbank Baden-Wurrttemberg Spore
				Credit Suisse Spore
Schroder $S Reserve Fund	0.37	456.60 (as at May 31, 2008)	1-Oct-01	Singapore T-bills 0% 12/06/2008
				Export-Import Bank Korea 2.835% 20/7/2008
				Singapore T-bills 0% 24/07/2008

Data is latest and correct as of this writing. Please refer to factsheet for latest information

Except for both DBS and Schroder funds, the other MMFs hold assets only in Singapore dollar. Therefore you may have to consider the risk of currency exchanges when investing in DBS or Schroder funds. These funds can also be more volatile as you can see from the one year charts.


Chart courtesy of Dollardex


Chart courtesy of Fundsupermart

DBS Navigator Ready Access is a classic example of how an expensive fund can perform poorly. The fund performs badly and is also volatile among all the funds. In my opinion, if you are looking for a temporary parking place and preservation of your cash reserve, Phillip MMF and Fundsupermart Cash Fund are good options to consider. These two funds offer same day switching when you are buying into stocks or unit trusts.

If you are conservative, looking for an alternative to fixed deposits and willing to keep for a longer term, you may consider Lion Global SGD MMF which gives slightly higher return than the other funds. However, take note that liquidity will be compensated for the higher return of this fund.

All of the MMFs described above can be bought at no sales charge from Dollardex, Fundsupermart or Phillip Capital. Lastly, as for the returns of the funds, you can expect them to be around SIBOR or Singapore dollar fixed deposit rates. They too can move up or down in line with the interest rate that we live in.

In my opinion, its return is not the main factor in considering a MMF. It is the liquidity and ability to preserve your capital that are the important factors in deciding for one. If you want a fund with higher return, then you should consider another asset class to achieve that.