What’s behind the rising demand for liquidity products?

Figure 1: Demand for MMFs soars even as rates fall

Money market fund (MMF) assets hit a record high of more than US$10tn globally at the end 2025, amid rising investor demand, despite leading central banks cutting interest rates.

We see three key tailwinds behind this trend:

A safe haven

MMFs – typically comprised of short-term, high-quality investments – can offer a lower-risk option, making them an attractive option in times of uncertainty or pronounced volatility. In the US, for example, consumer confidence has been dragged down by a weakening jobs market¹, higher prices and the ongoing uncertainty about tariffs², while investor confidence has been shaken by fears that the artificial intelligence (AI) boom might be coming to an end³.

Locking in higher yields

Despite policy easing, yields remain elevated on a historical basis and a return to a period of near-zero interest rates looks unlikely.

Further rate cuts are expected in 2026⁴, however, MMF portfolios typically operate a ‘laddered’ strategy – investing in securities of different maturities and purchased when rates are higher, prior to rate cuts, meaning yields on these portfolios decline at a slower rate, relative to the wider market – allowing investors to lock in higher yields for longer.

Innovation

Another boost to the popularity of MMFs is the rollout of tokenisation across the asset class, which allows the conversion of ownership rights or entitlements into digital tokens recorded on a blockchain, potentially allowing lower operational costs, enhanced liquidity, and faster settlement cycles.