What is the difference to an overnight or fixed-term deposit account at a bank?

While bank deposits in call and time deposit accounts represent an unsecured liability of the bank on its balance sheet, the assets of the money market fund must be held separately from the balance sheet of the issuer (in the case of CashPlus SME, this is Goldman Sachs Asset Management). This has several advantages:

Segregated assets: money market funds are structured as separate entities (usually investment companies) that own the underlying assets, but which are held separately from the asset manager by an independent custodian. In contrast, bank deposits are unsecured liabilities on a bank’s balance sheet.

Diversified counterparty risk: Money market funds are inherently diversified as they invest in a broad portfolio of underlying assets. As a result, money market funds are better diversified than the deposits of a single bank, which represent a singular counterparty risk.

Liquidity benefits: Money market funds invest in a large number of highly liquid securities to provide investors with same-day (T+0) or next-day (T+1) liquidity. Unlike some bank deposits, redemptions can be made without a minimum transaction size, lock-up period or penalties.

It is also important to emphasize that no deposit protection applies and a positive return cannot be guaranteed.