Rethinking the ‘investment product’ label: A modern approach to corporate cash management

Leaving surplus cash in a low-yield account can silently drag on business performance. But for many finance teams, the moment money market funds (MMFs) enter the conversation, progress stalls.

The reason is familiar: ‘We’re not comfortable putting operational cash into an investment product.’

It’s a valid concern. But it can also blur an important distinction. Not all investment products behave the same way. Regulators and fund managers design institutional MMFs for a very different job. For many treasury teams, they’re a practical way to manage cash, preserve liquidity, and reduce concentration risk.

That’s why some of the world’s most conservative corporate treasuries — including those at Apple, Siemens, and Nestlé — use MMFs as part of day-to-day cash management. They’re not treating them as speculative bets. They’re treating them as a valuable treasury tool.

Why products labelled ‘investment’ can be misleading

MMFs are regulated investment products. But in practice, low-volatility net asset value (LVNAV) funds are designed to behave much more like a stable cash vehicle. Under the European Money Market Funds Regulation (MMFR), these funds are legally defined as short-term vehicles that may offer a constant net asset value, provided they maintain strict liquidity buffers and their market value does not deviate from par by more than 20 basis points.

That starts with what they hold.

• High-quality instruments. These funds typically invest in short-term, low-risk assets such as government treasury bills, certificates of deposit, and commercial paper.

• Short duration. Fund managers keep average portfolio maturity low, which helps reduce exposure to broader interest-rate movements.

• Stable unit price. LVNAV structures are designed to maintain a stable unit price of 1.00, with income generally distributed separately rather than through swings in unit value.

This matters because the product’s legal classification does not tell the full story of how it functions within a treasury strategy.

Under both International Financial Reporting Standards (IFRS) and US Generally Accepted Accounting Principles (GAAP), certain MMF holdings may be treated as cash equivalents. In other words, they can sit much closer to operating cash than many finance teams assume.

Why treasury teams use MMFs at scale

Institutional MMFs are not a niche tool. They are a core part of global liquidity management.

ICI reports that US money market fund assets stood at US$7.89 trillion for the week ended 15 July 2026. Institutional investors accounted for US$4.81 trillion of that total.

That tells you something important. Sophisticated finance teams are not using MMFs as a fringe alternative. They are using them as a standard way to manage surplus cash while keeping liquidity close at hand.

The cash risk many businesses overlook

For many businesses, leaving cash with a bank feels safer simply because it feels familiar. But familiarity is not the same as diversification.

When a large share of your reserves sits with one institution, you are taking on concentration risk. And once balances move beyond deposit insurance thresholds, that risk becomes more pronounced.

Take the EU’s €100,000 deposit insurance cap as an example. Once your balance moves beyond that threshold, it no longer carries the same level of protection. At that point, your exposure depends on the credit profile of a single institution.

MMFs offer a different model. Instead of concentrating cash with one bank, they spread exposure across a diversified portfolio of highly rated issuers. In many cases, these funds allocate capital across 50 to 100 issuers, with limits on how much sits with any one name.

For treasury teams, that can be a more resilient way to manage surplus funds.

Why custody structure matters

A common question from finance teams is what happens if the fund provider runs into trouble. This is where structure matters.

When you place money in a bank, that money becomes a liability on the bank’s balance sheet. MMF assets, by contrast, are ring-fenced, segregated, and held by an independent third-party custodian, separate from the fund manager’s own balance sheet.

That means the assets do not usually form part of the fund manager’s estate if the manager becomes insolvent. Creditors, in principle, do not have a direct claim over those segregated holdings. For finance teams thinking carefully about counterparty exposure, that separation can be an important part of the risk picture.

A realistic view of ‘breaking the buck’

It’s also important to be clear about what MMFs are not. They are not insured bank accounts and do not carry government deposit protection. And like any investment product, they are not risk-free.

In a severe stress scenario, an MMF could fall below its 1.00 unit value. This is known as ‘breaking the buck’. That said, context matters. The historical examples most often cited came from very different fund structures, including retail and prime funds with higher-risk exposures.

• The 1994 incident: A retail fund declined to $0.99 after holding complex, interest-rate-sensitive derivatives.

• The 2008 incident: The Reserve Primary Fund fell to $0.97 due to a heavy concentration in Lehman Brothers debt.

These past events shaped the modern LVNAV frameworks that institutional treasury teams use today, forcing them to operate under far stricter rules around diversification, liquidity, and credit quality. The point is not that risk disappears. It is that the risk profile is often misunderstood.

Breaking the buck gets the headlines, but a well-run fund is built around managing a fuller set of risks day to day. Yield naturally moves with interest rates, which is why active duration management is a core part of running these funds well.

Credit exposure is managed through strict diversification limits, so no single issuer can dominate a portfolio in the way Lehman did for Reserve Primary in 2008. Liquidity is addressed through mandatory daily and weekly liquid asset buffers, designed specifically so that funds can meet redemptions even in stressed conditions, such as the 2020 ‘dash for cash’.

And regulatory frameworks — LVNAV rules chief among them — exist precisely because of events like the 1994 and 2008 crises, giving today’s institutional funds a materially stricter operating environment than their predecessors.

None of this makes an MMF risk-free — no investment is. But it does mean the risks are well understood, actively managed, and shaped by two decades of regulatory reform.

A better way to assess your current cash setup

Optimising cash management does not mean overhauling your entire treasury model. It means applying the same discipline to idle cash that you apply to the rest of the business.

A useful place to start is to answer three questions:

• Asset concentration: How much of your cash sits with one institution?

• Yield performance: What is the opportunity cost of leaving excess balances in low- or non-interest-bearing accounts?

• Counterparty exposure: Are your treasury policies aligned with deposit insurance thresholds and your real unsecured exposure?

For many finance teams, the goal is simple: improve returns on surplus cash without adding unnecessary operational complexity.

Why choose when you can have it all?

Treasury teams should not have to choose between yield, liquidity, and operational simplicity. For businesses looking to put idle cash to work without losing day-to-day flexibility, Airwallex Yield offers access to institutional-grade money market funds directly within Airwallex.

That typically means no lock-up periods, clear visibility, and a more streamlined way to manage surplus cash alongside the rest of your financial operations. Modern cash management should do more than protect capital. It should help your business move with more confidence.