Money Market Funds Make No Sense

EDITOR'S VIEWS: Are things so bad that you need to put your cash in a Money Market fund? And why investing doesn't always have to be for retirement

Holly Black 19 July, 2019 | 10:19AM
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Geeky confession alert: I love reading our monthly flows data. For all the movements of stock markets and speculation of fund managers and commentators, you can’t beat looking at the numbers in black and white and seeing where exactly investors are (and aren’t) putting their money to get an insight into sentiment.

Money Market Madness

Of course, even this is down to interpretation. As a whole, funds have suffered net outflows every month so far this year. It would easy to assume this is purely driven by negative sentiment – that worries about Brexit, trade wars and bond yield inversions are causing investors to run for the hills. That’s probably a major part of it. But let’s not forget that we have spent the past decade enjoying a record-long bull run – maybe people are just sensibly taking some profits too. I know I’ve certainly done that this year, particularly in a couple of my investments that have performed particularly well.

But what to do with that money? One thing I definitely haven’t done is put it in a Money Market fund. Yet that is where investors have stowed more than £2.5 billion over the past year, and £641 million in June alone. This absolutely blows my mind. A Money Market fund is akin to putting your cash under the mattress and being charged for it. The Premier UK Money Market fund, as an example, has returned 0.6% over the past year and has an ongoing charge of 0.28%. It yields 0.16%. I could earn more interest by putting my money in a bog standard high street savings account.

Yes, I understand that if you have your money in a pension or an Isa, you can’t very well just take it out and pop down to Halifax (other banks are available) with it. But the point is that these funds, by definition, can’t help your money grow. With inflation taken into account, you’re effectively losing money. Investing is, as I’m constantly harping on about, for the long-term, and while there are things to be nervous about for the coming weeks and months, surely it’s never so bad that guaranteeing a loss is the most attractive option?

Investing Isn’t Always for Retirement

Speaking of, investing for the long-term. This week’s Investor Views case study was a wonderful reminder that investing is not always just about how to fund your retirement or long-term care. Will Raunds dipped into his Isa funds to pay for his honeymoon.

While I wouldn’t recommend putting your life savings into emerging markets if you need that money back in a year’s time, it’s good to remember that investing can help achieve shorter-term goals such as saving for a house deposit or helping to pay a child or grandchild’s tuition fees too.

Having a mix of long-term and not-so-distant aims could be a more inspiring way to invest too. Rather than focusing on some far-off future, you will feel the tangible benefits of your efforts within your working life. It’s certainly got me thinking about what I’m saving for in the nearer-term.

Geffen & Sons

Sometimes I wonder if we’re all on some sort of Candid Camera show and investment companies are just doing bonkers things to see our reaction.

This week, there was an announcement about the promotion of a fund manager at boutique asset management group Neptune. Well done him, you might say. William Geffen must, surely, be an incredible talent to get the job of co-manager on three funds – after all, he only joined the firm as an intern last summer before being quickly promoted to analyst in February.

But, hang on … the surname Geffen rings a bell, doesn’t it? Oh, that’s right, his father Robin Geffen runs the firm. Maybe Geffen junior is an incredibly talented young man, but moves such as this raise serious questions about nepotism and do nothing to inspire trust in the industry, at a time when it is already battling a major image problem. Sometimes this industry really does nothing to help itself. 


The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Premier Miton UK Money Market A acc138.76 GBP0.04

About Author

Holly Black  is Senior Editor,


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