Complete Guide to Money Market Funds in Malaysia
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Money Market Funds (MMFs) are low-risk investment funds that invest in short-term, high quality financial instruments such as Treasury bills, commercial papers, and certificates of deposit. They provide investors with liquidity, stability, and returns that are generally higher than regular savings accounts. MMFs are ideal for individuals or businesses seeking a secure option to park excess cash while maintaining easy access to their funds.
Based on the latest report of Securities Commission Malaysia, the data indicates a strong preference for domestic investments, accounting to two-third (67.77%) of total AUM, while the remaining 32.23% is invested to foreign assets. MMFs play a crucial role in the investment landscape of Malaysia, as evidenced by the RM 124.98 billion allocated to them, which represent approximately 11.68% of the total asset allocation of RM1.07 trillion as of December 2024. This significant share highlights their importance as a stable yet liquid investment vehicle.
This trend reflects confidence in the local money market’s stability and accessibility. The growing reliance on MMFs underscores their roles in capital preservation, liquidity management, and short-term yield optimization, making them a vital instrument for both institutional and individual investors seeking financial stability in uncertain market conditions.
What is Money Market Funds
In general, MMFs are low-risk investment funds that invest in short-term, high-quality instruments. They are structured to offer stability, easy access to funds, and steady returns, an attractive option for investors aiming to safeguard their capital while maintaining liquidity for short-term financial needs.
MMFs typically invest in highly liquid and low-risk financial instruments with relatively short maturities. These include
● Treasury bills (T-bills): Short-term government securities that offer stability and minimal risk.
● Short-Term bonds: Highly rate corporate or government bonds with maturities of less than a year.
● Repurchase Agreements (Repos): Short-term lending agreements secured by collateral, often used by financial institutions.
● Certificates of Deposit (CDs): Fixed-term deposits issued by banks with predetermined interest rates.
● Commercial papers: Unsecured short-term debt instruments issued by corporations to fund operations.
MMFs are low-risk, low-return investments. Their primary objective is capital preservation and liquidity, positioning them as a preferred choice among risk-averse investors. Since they invest in short-term, high-quality instruments, MMFs are generally not subject to significant price fluctuations, unlike equities or long-term bonds. However, their returns are modest and typically higher than savings accounts but lower than equity-based investments.
One of the key advantages of MMFs is their high liquidity. Investors can typically redeem their units on demand with minimal processing time, making MMFs a convenient option for those seeking short-term investment opportunities. They are widely accessible to retail investors, often available through banks, asset management firms, and online investment platforms with low initial investment requirements.
The returns on MMFs depend on prevailing interest rates and the performance of underlying assets. In Malaysia, MMFs generally offer annualized returns ranging between 2 - 4%, although this can vary based on market conditions and central bank policies. While MMFs do not provide high growth potential, they serve as an efficient tool for cash management, emergency funds, and short-term investment strategies.
Types of Money Market Funds in Malaysia
| Fund Type | Description | Example Instruments |
|---|---|---|
| Conventional MMFs | Invest in short-term, interest-bearing instruments | Treasury bills, commercial papers, interbank deposits |
| Islamic MMFs | Shariah-compliant, avoiding interest-based instruments | Commodity Murabahah, Islamic Treasury Bills, Sukuk |
Why Invest in Money Market Funds
Investors in search of a low-risk, flexible and stable investment option often turn to MMFs. These funds offer a balance between safety and returns, providing several advantages that make them a practical investment vehicle. Below are key reasons why investors consider MMFs:
| Reasons | Description |
|---|---|
| Capital preservation with stable returns | MMFs prioritize capital preservation, ensuring that investors’ principal remains secure while earning steady, low-risk returns. |
| Higher returns than regular savings accounts | MMFs typically offer better returns compared to conventional savings accounts, making them a more efficient option for maximizing idle cash. |
| Useful for short-term cash parking | Investors can park their funds temporarily in MMFs while keeping them liquid and accessible, making them ideal for cash flow management and emergency funds. |
| Suitable for conservative and low-risk investors | With their focus on high-quality, short-term financial instruments, MMFs provide a secure and stable investment option for risk-averse individuals and institutions. |
Malaysia’s Money Market Landscape
Malaysia’s money market is critical in maintaining financial stability and liquidity, providing a platform for short-term borrowing and lending among financial institutions. It comprises both conventional and Islamic money market instruments, catering to different investor preferences and regulatory frameworks.
The interbank money market is where banks and financial institutions trade short-term funds to manage liquidity. Transactions typically involve overnight to one-year maturities, with common instruments including interbank deposits, repos, and Treasury Bills. This market ensures that banks can meet their reserve requirements and facilitates smooth financial operations.
As Malaysia’s central bank, Bank Negara Malaysia (BNM) plays a pivotal role in regulating, supervising, and stabilizing the money market. It manages liquidity through Monetary Policy Operations (MPOs), which involve wholesale and interbank market transactions to absorb or inject liquidity as needed. The primary objective of BNM’s monetary policy operations is to keep the average overnight interbank rate (AOIR) within the Overnight Policy Rate (OPR) corridor set by the Monetary Policy Committee (MPC) while ensuring the efficient functioning of the conventional and Islamic interbank money markets. BNM conducts daily monetary operations with approved interbank institutions, including standing facilities, through electronic auctions on the Fully Automated System for Issuing/Tendering (FAST). These auctions can take various forms, such as competitive variable rates, competitive single rates, or non-competitive bidding. Additionally, BNM can conduct bilateral operations with financial institutions or intervene via agent banks and money brokers when necessary.
The Overnight Policy Rate (OPR), set by BNM, has a direct impact on MMF returns. A higher OPR leads to increased yield on short-term instruments, making MMFs more attractive. Conversely, a lower OPR results in decreased MMR returns. Since MMFs invest in short-term deposits and money market securities, their performance is closely tied to interest rate movements and BNM’s monetary policy decisions.
Malaysia’s money market operates under a dual financial system, consisting of both conventional and Islamic money markets. While both serve the purpose of providing short-term liquidity and capital management, there are significant differences in term of their underlying structures, principles and instruments:
| Aspect | Conventional Money Market | Islamic Money Market |
|---|---|---|
| Underlying Principle | Interest-based system where returns are generated through lending at predetermined rates | Shariah-compliant, prohibiting interest and relying on profit-sharing, leasing, or trade-based contracts |
| Regulatory Framework | Governed by BNM under conventional banking laws | Supervised by BNM’s Shariah Advisory Council (SAC) to ensure compliance with Islamic finance principles |
| Key Instruments | Treasury Bills, Commercial Papers, Bankers’ Acceptances, Repurchase Agreements (Repos), and Interbank Deposits | Islamic Treasury Bills, Commodity Murabahah, Islamic Bankers’ Acceptances, and Wakalah deposits |
| Profit Mechanism | Earns interest from lending and borrowing activities | Generates returns through profit-sharing, cost-plus sales, or leasing |
| Risk & Stability | Stability depends on interest rate movements set by BNM, subject to interest rate fluctuations | More stable in volatile interest rate environments as returns are based on trade or profit-sharing mechanisms |
| Liquidity Management | Managed through BNM’s monetary policy tools such as OMO and OPR adjustments | Uses Shariah-compliant liquidity management such as Islamic Interbank Money Market (IIMM), Islamic Negotiable Instruments, and Sukuk issuances |
Where to buy Money Market Funds in Malaysia
1. Fund Management Companies (FMCs) and Banks
You can invest directly with licensed fund houses in Malaysia that offer MMFs as part of their unit trust offerings. These typically include:
| FMCs | Example of funds | Fees to the example fund | Shariah compliant funds availability |
|---|---|---|---|
| Public Mutual | Public Money Market Fund - Class A | up to 0.375% management fees; up to 0.02% trustee fees | Yes |
| UOB Asset Management | United Islamic Cash Management Fund | up to 0.5% management fees; up to 0.04% trustee fees | Yes |
| Maybank Asset Management | Maybank Retail Money Market-I Fund | up to 0.5% management fees; up to 0.02% trustee fees | Yes |
| CIMB Principal Asset Management | Principal Money Market Income Fund (Class AI) | up to 0.4% management fees; up to 0.015% trustee fees | Yes |
| RHB Asset Management | RHB Money Market Fund | up to 0.5% management fees; up to 0.05% trustee fees | Yes |
| AmInvest | AmIslamic Cash Management – Class D | up to 0.75% management fees; up to 0.08% trustee fees | Yes |
| Manulife Investment Management | Manulife Investment Money Market Fund - Class A | up to 0.35% management fees; up to 0.06% trustee fees | Yes |
| Kenanga Investors | Kenanga Money Market Fund | up to 0.5% management fees; up to 0.02% trustee fees | Yes |
| BIMB Investment Management | BIMB Shariah IncomePlus Fund | up to 0.15% management fees; up to 0.03% trustee fees | Yes |
| MIDF Amanah Investment Bank Berhad | MIDF Amanah Shariah Money Market Fund | up to 0.5% management fees; 0.07% trustee fees | Yes |
| Muamalat Invest | Muamalat Invest i-Institutional Money Market Fund | up to 0.5% management fees; 0.02% trustee fees | Yes |
You can visit their websites or physical branches to open an investment account and purchase MMFs; or via online fund supermarkets below
2. Online Fund Supermarkets
Online fund supermarkets are popular platforms that let you compare and invest in MMFs (Money Market Funds) from various fund houses — all in one place. They are ideal for retail investors who value transparency, convenience, and potentially lower sales charges compared to traditional distributors.
These platforms are especially useful if you want to compare returns, fees, and fund ratings before making a decision. Many offer Shariah-compliant MMF options, portfolio tracking tools, and regular market updates to help you stay informed.
| Platform | Features |
|---|---|
| FSMOne (Fundsupermart) | Offers both conventional and Shariah-compliant MMFs from multiple fund houses. Low minimum investment (as low as RM100), with tools to compare performance and fees. |
| iFAST Global Markets | Provides a wide selection of local and global MMFs, suitable for investors seeking diversification beyond Malaysia. Professional research tools are also available for more advanced users. |
| eUnittrust | A simple, bank-linked platform offering access to a curated list of MMFs. It’s a good choice for investors who prefer a familiar banking ecosystem and streamlined onboarding. |
These platforms often provide promotional offers or reduced sales charges during specific campaigns, making them attractive for first-time investors.
3. Robo-advisors and digital wealth platforms
Robo-advisors are becoming an increasingly popular option for investors looking for automated and diversified portfolios that include MMFs. In Malaysia, some robo-advisors offer MMFs as part of their cash management or low-risk investment portfolios, combining liquidity with yield.
For example, StashAway offers two cash solutions:
- StashAway Simple – A cash management portfolio with projected return of 3.6% p.a. and is suitable for short-term savings or emergency funds.
- StashAway USD Cash Yield – A USD-denominated cash solution with up to 4.3% p.a. yield to maturity, ideal for investors with USD exposure or those looking to diversify into global cash instruments.
Robo-advisors like StashAway make it easy to invest in MMFs without manually selecting funds. You also benefit from zero sales charges, no lock-in periods, and the ability to withdraw funds anytime, making them ideal for both beginners and passive investors.
4. Financial Advisors or Unit Trust Consultants
For investors who prefer professional guidance, licensed financial advisors or unit trust consultants can help you access MMFs through managed portfolios or tailored recommendations. This route is particularly helpful if you:
- Have complex financial goals that require personalised planning
- Want to integrate MMFs into a larger diversified investment strategy
- Prefer someone to manage fund selection, rebalancing, and monitoring on your behalf
However, it’s important to be aware of sales charges, management fees, or potential conflicts of interest, as some advisors may promote certain funds for commission. Always check that your advisor is licensed by the Securities Commission Malaysia (SC) or Federation of Investment Managers Malaysia (FIMM).
Pros and Cons of MMFs
MMFs are known for their low-risk profile and short-term nature, making them a go-to option for conservative investors or those managing cash reserves. Here's a closer look at their benefits and trade-offs:
| Pros | Cons |
|---|---|
| Low risk and stable returns: MMFs invest in short-term, high-quality instruments like government securities and deposits, offering relatively stable yields with minimal price fluctuation. | Lower returns compared to equity or bond funds: While stable, MMF returns generally don’t match the long-term growth potential of equities or fixed income funds. |
| High liquidity: Most MMFs allow easy redemption, often within one business day — making them ideal for cash flow or short-term parking. | Not protected by PIDM: Unlike bank savings or fixed deposits, MMFs are not covered by the Perbadanan Insurans Deposit Malaysia (PIDM). |
| Ideal for emergency funds: Because of their capital preservation and easy access, MMFs are commonly used for emergency savings or temporary cash holdings. | Returns may be eroded by inflation: In a high-inflation environment, MMF yields may not keep pace with rising prices, leading to a potential loss in real value. |
| Accessible through various platforms: MMFs are now easily accessible via fund supermarkets, robo-advisors, and digital wealth platforms. | Still subject to market risks: Though very low, MMFs are still exposed to credit and interest rate risks, especially in volatile markets. |
MMFs vs Other Cash Alternatives
If you're deciding where to park your short-term funds, it helps to compare MMFs with other low-risk options like savings accounts, high-yield savings, or fixed deposits (FDs). Each has its strengths, depending on your needs for liquidity, return, or safety.
| Feature | MMFs | Savings Account | High Yield Savings Accounts | Fixed Deposits (FD) |
|---|---|---|---|---|
| Risk | Low | Very low | Very low | Very low |
| Liquidity | High | Very high | High | Low |
| Returns | ~ 2–4% p.a. | < 1% p.a. | ~ 2–3.5% p.a. | ~ 2–3.5% pa.a |
| Accessibility | Via fund platforms | Bank | Bank | Bank |
| Best for | Short-term parking, idle cash, emergency fund | Daily expenses, salary deposits | Flexible savings with better yield | Long-term cash storage with fixed returns |
Taxation and Regulatory Aspects
In Malaysia, MMF gains are typically tax-exempt for individual investors. However, corporate investors may be subject to taxation depending on their tax status. Unlike fixed deposits, which may have withholding tax on interest for non-residents, MMF distributions are generally not subject to immediate tax deductions.
MMFs are regulated by the Securities Commission Malaysia (SCM) under the Capital Markets and Services Act 2007. Fund managers must adhere to strict guidelines on portfolio composition, liquidity management, and invest protection. This ensures transparency and compliance with investment standards.
In contrast to fixed deposits and savings accounts, which are insured by Perbadanan Insurans Deposit Malaysia (PIDM) up to RM 250,000 per depositor per member bank, MMFs are not protected by PIDM. This means that while MMFs are considered low-risk, they do not have the same government-backed guarantee as bank deposits.
Future-Proofing Your Portfolio: Harnessing MMFs as a Stable Hedge
In today’s unpredictable market environment, holding cash isn’t just about staying safe, it’s about staying smart. Money Market Funds (MMFs) offer a powerful way to turn liquidity into strategy, providing stable returns without locking up your capital. Rather than letting idle cash sit unproductively in low-interest accounts, investors can use MMFs as a dynamic buffer that cushions volatility while keeping funds readily accessible.
But MMFs shouldn't be viewed in isolation. When thoughtfully integrated into a broader investment plan, they serve as the foundation upon which more growth-oriented assets can thrive. Whether you’re preparing for short-term needs, hedging against market swings, or rebalancing with flexibility, MMFs offer the stability and structure to help you move confidently but not reactively.
In a world where uncertainty is the only constant, MMFs give your portfolio the breathing room it needs so you can stay invested, stay calm, and stay on course.
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