Why are investors buying money market funds?

Money market funds (or cash funds) made a comeback in 2023 and have remained popular ever since - thanks largely to interest rates remaining higher for longer than expected. In fact, three of the top 10 best-selling ISA and SIPP funds on our platform in 2025 so far were money market funds. You can see what they are below.  

• You can see what cash funds investors were buying in March here
• How to invest in cash in a Stocks and Shares ISA

The latest decision by the Bank of England on 20 March to maintain the interest rate at 4.5% was driven by ongoing economic uncertainties and mixed signals from the UK economy. The Monetary Policy Committee voted 8-1 in favour of keeping the rate unchanged. It reflects the Bank's cautious approach among global trade tensions and domestic economic challenges, including a contraction in the UK economy and rising inflation. The Bank highlighted that while inflation remains a concern, the economy's weakening growth necessitates a careful balance in monetary policy.

Read and bookmark our latest update on interest rates here.

Why are money market funds so popular?  

If you’re not sure what a money market fund is, it’s a fund that invests in a portfolio of short-term cash deposits, money market instruments and high-quality bonds. And it’s designed to provide a high level of stability and liquidity while also delivering a modest investment return that has the potential to exceed short-term cash deposit in a bank or building society.  

Here are three reasons money market funds are popular right now. 

1. They’re a good place to park cash

Many customers like to park their ISA allowances as and when they can. Some do this at the start of the tax year. While some do it towards the end to ensure they don’t miss out on making use of their tax-efficient allowance - which for 2025/2026 is £20,000.   

Often investors leave this sitting as cash in their Stocks and Shares ISA or SIPP until they decide what to do with it.  

And while this does earn you interest (you can find out more about how we manage your money here and the interest we offer), money market funds could offer you more.  

2. They offer steady returns

The point about money market funds is that they aim to deliver a return either over and above the Bank of England’s base rate or the Sterling Overnight Index Average (which is a benchmark for short-term lending between financial institutions). Of course, this isn’t guaranteed. But given the still high interest rate, it does potentially offer an attractive return for risk-averse investors. Speaking of which…  

3. They are low risk

This is one of the main reasons investors look to money market funds. If you look at the online fund information, you’ll see there’s a tab for risk and rating. 

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. The value of shares may be adversely affected by insolvency or other financial difficulties affecting any institution in which the Fund's cash has been deposited. There is a risk that the issuers of bonds may not be able to repay the money they have borrowed or make interest payments. When interest rates rise, bonds may fall in value. Rising interest rates may cause the value of your investment to fall. Tax treatment depends on individual circumstances and all tax rules may change in the future. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.