As interest rates have gone up over the last few years money market funds (MMFs) have gone from niche to mainstream.
The number of Hargreaves Lansdown clients holding one is up 35% in the past year, and there are 26 times as many holders as five years ago. Across the market, retail investors put a record £6.9bn into MMFs in 2025 and another £3.8bn in the first half of 2026.
Many people still are not sure what MMFs are or how to use them. Research from the Investment Association (IA) found that only 31% of Cash ISA holders had heard of them. Once they'd had a clear explanation, 64% said they would consider investing in one*.
Start with your goals and when you’ll need the money, then choose the right mix of assets, and only then the funds. MMFs can support that plan, yet they should not replace the diversified investments that drive long-term growth.
What is a money market fund?
An MMF invests in short-term debt issued by governments, banks and companies with strong credit ratings. This includes Treasury bills, certificates of deposit and commercial paper, as well as cash deposits.
These holdings mature within months, and often within weeks, and is why MMFs are seen as one of the lowest-risk types of investment. They aim to give a return slightly above cash, after charges.
An MMF is still an investment, though, and it is not a bank account. Its value is not guaranteed and can fall, and it does not have the same FSCS (Financial Services Compensation Scheme) deposit protection as a savings account.
The return you get from an MMF will change as interest rates change. When rates rise, the yield should follow, and when rates fall, so will the yield.
Access is important too. Most MMFs settle the next working day, so they are not quite the same as instant-access cash. Some newer funds offer faster access, including the HL Money Market Fund, which – if the instruction is received before 8am – settles on the same day.
Five ways to use an MMF in your portfolio
A first step from saving into investing
For people who have only ever used cash, an MMF can be a lower-risk way to get used to how investing works. One in five people who come to HL for a Cash ISA open an investment account within six months.
Lowering risk as you near a goal
As retirement or a big purchase like a house deposit gets closer, moving part of your portfolio into an MMF can help protect what you've built from a badly timed market fall. This is especially useful in a Self-Invested Personal Pension (SIPP) or drawdown account, where you cannot use a normal savings account or Cash ISA.
A cash pot in retirement
Many people in drawdown split their money into pots for growth, income and short-term spending. An MMF can work well for the short-term pot, holding the next year or two of withdrawals so you are not forced to sell investments when markets are down.
A home for money between investments
If you've sold an investment and have not decided where to put the money next, an MMF lets it earn a return while you decide, instead of just sitting as uninvested cash.
Steadying a diversified portfolio
Professional investors almost always hold some cash. Of nearly 1,500 UK discretionary managed portfolios, 93% hold cash or cash-like assets, with an average allocation of 7%*. A small MMF holding can steady a portfolio and give you money ready to use when opportunities come up.
What an MMF is not
An MMF is not a replacement for an emergency fund in an easy-access savings account, and it is not a long-term investment.
Over periods of five years or more, a diversified portfolio of shares and bonds has a much better chance of beating inflation. The IA found that most MMF investors hold them for one to two years, which shows that people mainly use them to manage risk and keep money accessible.
Charges matter too because they come directly off the return you receive. When comparing funds doing a similar job, a lower ongoing charge leaves more of the return for you. Remember to include any platform or account charges too.
The bottom line
Cash for everyday spending and emergencies
MMFs for short-term flexibility
Diversified investments for long-term growth
The HL Money Market Fund has an ongoing annual charge of 0.06% and the HL annual account charge of 0.35% also applies.
This article is for information only and not personal financial advice. Investing can help your money grow, but the value of investments can rise and fall, so you could get back less than you put in. Yields are variable and not a reliable indicator of future income. Investing is for the long term, typically 5 years or more.
If you’re not sure whether investing is right for you, a financial adviser can help.
The HL MMF is run by Hargreaves Lansdown Fund Managers Ltd., part of the Hargreaves Lansdown Group.
* Survey of 1,000 Cash ISA holders and 1,000 investors conducted by Opinium and the Investment Association.