A Smarter Home for Short-Term Cash
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Article Type
Market Updates
Topic
Opinion
Published
March 16, 2026
Read time
5 mins
Authors
Edwin Boon
Jordy Hermanns, CFA
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In an environment where short-term interest rates have regained relevance, investors have more opportunities than ever to put their liquidity to work. Yet many institutional and corporate investors continue to rely on overnight funds or bank deposits out of habit rather than strategy. While these options provide convenience and immediacy, they often fall short when it comes to extracting meaningful yield from the front-end of the curve.

 

Money Market Funds

Money Market Funds, including the Aegon European Money Market Fund, offer a compelling alternative. Designed for investors who seek safety, liquidity, and enhanced returns, these funds operate within the strict framework of the European Money Market Fund Regulation while taking advantage of the entire short-term maturity spectrum. The result is a solution that has delivered better returns than pure overnight strategies, without taking on inappropriate risk.

 

Stepping Beyond Overnight—Without Stepping Up the Risk

Overnight funds and daily resetting deposits capture only the very shortest point of the interest rate curve. This ultrashort positioning provides convenience, but it also limits access to higher yielding short-dated securities. By contrast, money market funds are able to allocate selectively across maturities, typically from the very front-end up to 1 year fixed or 2 year floaters, while staying firmly within conservative parameters.

 

This flexibility allows to benefit from a broader universe of issuers, including high quality financials, corporates, and government ‑linked entities offering short-term commercial paper or certificates of deposit. These slightly longer tenors often provide an attractive premium over overnight rates, allowing to enhance returns without compromising liquidity or credit quality.

 

 

A Proven Record of Higher Returns

The advantage of stepping modestly out the curve becomes increasingly apparent when viewed over time. Even small daily yield differences compound into meaningful outperformance over weeks or months. With interest rates now firmly out of negative territory, every basis point matters and the structure of Money Market Funds – especially when combined with active management – allows to capture incremental value.

 

While maintaining a conservative risk profile, Money Market Funds have repeatedly delivered higher net yields than typical overnight alternatives. This outperformance is not the result of added risk, but of disciplined curve positioning, careful issuer selection, and an active approach to managing market liquidity.

 

In addition, the Aegon European Money Market Fund actively managed strategy has outperformed most peers in the universe, resulting in a top decile performance over the last 10 years. This has resulted in an attractive outperformance over the past years.

 

Indicative Returns

1Y

3Y

5Y

Money Market Funds*

2.7%

3.5%

2.0%

Overnight*

2.2%

3.1%

1.7%

Relative

50bp

40bp

30bp

*Note: The Aegon Money Market Fund is used as a reference of Money Market Funds. The ESTR Overnight (EUROSTR=) rate index (EUR) is used as a reference for overnight returns. Data as per 12/2025. Source: Aegon AM, Bloomberg. For illustration purposes only.

 

Safety First: Designed for Stability and Transparency

For many investors, liquidity management begins with reassurance. Most European Money Market Funds are built around three core principles:

  1. Safety
    Investing only in high quality, short-dated instruments that meet strict credit criteria. Comprehensive issuer research, internal limits, and continuous market monitoring ensure that the portfolio remains robust through different market conditions.  
  2. Liquidity
    Maintaining meaningful liquidity buffers, consistent with its regulatory framework, which is designed to meet investor redemptions efficiently, even in volatile markets.
  3. Regulatory Discipline
    Fully adhering to the European Money Market Fund Regulation, providing transparency, diversification safeguards, daily reporting, and strong oversight. These standards give investors confidence that the fund operates within a tightly controlled environment.

 

A Strategic Tool for Modern Cash Management

Money Market Funds serve as an effective tool for a wide range of investors, corporates, pension funds, insurers, fiduciary managers, and treasury departments, offering:

  • A secure destination for cash awaiting deployment
  • A defensive anchor in uncertain markets
  • A flexible alternative to bank deposits
  • A transparent, mark-to-‑market investment with strong governance

In addition, by allocating slightly further along the curve, investors avoid the drag associated with perpetual overnight reinvestment, without sacrificing the core characteristics that make cash management strategies valuable.

 

In a Higher Rate World, Liquidity Should Work Harder

The return landscape has shifted. Short-term yields in Europe once again offer attractive opportunities, and investors can no longer afford to let operational cash sit idle. Money Market Funds – including the Aegon European Money Market Fund – are designed to capture this opportunity: delivering liquidity, safety, and enhanced return in a single, efficient vehicle.

For investors seeking a smarter home for thei

r short-term liquidity, one that avoids unnecessary risk but doesn’t settle for overnight‑only returns. Money Market Funds provide a compelling, disciplined, and consistent investment solution.

Important information

Authors

Edwin Boon
Portfolio Manager
Edwin Boon is a portfolio manager in the fixed income, LDI and investment solutions team with a focus on sovereigns.
View profile
Jordy Hermanns, CFA
Portfolio Manager
Jordy Hermanns, CFA, is a portfolio manager in the multi-asset group and serves as an investment strategist in the asset allocation team.
View profile
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