Money Market Fund

A Money Market Fund (MMF) is a SEBI debt-MF category that invests in money-market instruments with residual maturity up to 1 year — T-bills, commercial paper (CP), certificates of deposit (CD), CBLO/TREPS. Modified duration is typically 0.3-0.9 years. MMFs sit between Liquid Funds (overnight-90d) and Ultra-Short Funds (3-6m duration) on the risk-return spectrum.

Worked INR example

HDFC Money Market Fund portfolio YTM 7.45%, modified duration 0.55, expense ratio 0.22%, AUM ₹22,000 cr. Net expected return ~7.2% over the next 6-9 months. ₹10 lakh parked grows to ~₹10.36 lakh over 6 months. Better suited than savings account (3.5%) or sweep-FD (5.5%) for surplus cash that may be needed in 3-12 months, with NAV-based slab tax instead of TDS-on-interest.

When to use

• Parking funds for 3-12 months — emergency reserves, near-term goals
• STP (Systematic Transfer Plan) source for monthly transfers to equity funds
• Treasury management for HNI / family-office surplus

SEBI caveat

SEBI Category: Debt → Money Market Fund. Risk-o-meter typically "Low to Moderate". Post-Apr-2023 taxed at slab regardless of holding period. Compare with Liquid Fund (lower duration, slightly lower YTM) for sub-3-month parking.

Related terms: TER, STP, Modified Duration.