The Best Money Market Funds in Canada for December 2024

ByDan Kent Published On:

Canadians are really getting into money market funds lately. Many folks are looking to keep their money safe while still making a bit of extra cash from their savings.

In the situation we’re in right now with high policy rates, they’re even more popular. 

These funds offer stability, high yields, and liquidity, making them attractive to investors with a low-risk tolerance or those in need of a short-term investment vehicle.

Consumers are now starting to find out they can earn more outside of the high-interest savings account at their bank. As a result, they are seeking out low-risk, high-yielding opportunities.

Although money market funds typically provide lower returns than other particular investments, their safety and accessibility make them an essential addition to a well-diversified portfolio.

This article will explore the best money market funds available in Canada. However, I do want to go over one thing first.

The confusion with money market funds in Canada

Many investors tend to confuse the term money market fund with possibly a HISA ETF.

A money market fund is an ETF or mutual fund that invests in cash or cash equivalents and often short-term debt securities. HISA ETFs, on the other hand, invest in institutional-grade savings accounts. Although they are structured to be entirely cash and highly liquid, I wouldn’t classify them as a money market fund.

However, I feel you could be on this page because you’re looking for those HISA ETFs. They’ve exploded in popularity. So, I’m going to list them here anyway.

What are the best money market ETFs in Canada right now?

  • Purpose High-Interest Savings Fund (TSE:PSA)
  • Horizons Cash Maximizer ETF (TSE:HSAV)
  • Horizons High-Interest Savings ETF (TSE:CASH)
  • CI High-Interest Savings ETF (TSE:CSAV)
  • BMO Money Market Fund ETF Series (TSE:ZMMK)
  • iShares Premium Money Market ETF Comm (TSE:CMR)
  • Horizons 0-3 Month T-Bill ETF CAD (TSE:CBIL)
  • Horizons 0-3 Month U.S. T-Bill ETF (TSE:UBIL.U)

Purpose High-Interest Savings Fund (TSE:PSA)

The Purpose High-Interest Savings Fund (TSE:PSA) is a popular HISA ETF in Canada designed to provide investors with a high level of income and liquidity.

One of the key benefits of the fund is its leading yield. Although we are talking fractions of a percent here, Purpose can typically offer a higher net yield because it has a little lower fees than other competitors I’ll speak about below.

The fund takes your money and invests it into institutional savings accounts at Schedule 1 Canadian Banks. You benefit from a rate of interest you wouldn’t be able to access as a retail investor unless you have a ton of money.

These funds have come under heavy scrutiny from the major banks, primarily because they simply cannot match the overall yields with their products. Still, it seems like they’ll be sticking around.

They trade like stocks, meaning you have full liquidity in buying and selling. I know some people who invest all their savings in these funds outside of money they’ll need in the very short term.

The ability to sell it in your brokerage account and withdraw the money to cover expenses in just a few short days means you can earn high rates of interest on money you wouldn’t have been able to before.

As I’ll talk about more below, however, these funds are not CDIC insured, which does add, albeit a remotely small, risk to the funds if these banks were to go insolvent.

Horizons Cash Maximizer ETF (TSE:HSAV)

The Horizons Cash Maximizer ETF (TSE:HSAV) is a Canadian HISA ETF designed to provide unitholders with consistent monthly income while preserving capital and maintaining liquidity. 

The fund takes your money, invests it into institutional-grade savings accounts, which give it a higher interest rate than the consumer would earn, and then returns that interest to you.

HSAV is the more tax-efficient version of Horizon’s HISA ETFs because it does not pay a distribution, which would be taxed as interest income. Instead, you simply sell shares to generate a return. As a result, you’re taxed a capital gain, the more friendly variant.

As a result, there is no “yield” on this investment. However, it will accrue in price relative to the current rate of interest the savings account it is invested in offers. So, don’t worry about this one not increasing in price. Because the interest is paid into the fund, the net asset value increases, and the share price increases.

One of the notable features of the Horizons Cash Maximizer ETF is its low management expense ratio (MER) of 0.18%. This makes it an attractive option for investors seeking cost-efficient exposure to the Canadian money market.

In summary, the Horizons Cash Maximizer ETF offers investors a low-cost, low-risk way to earn a high savings rate. Keep in mind, however, that this HISA ETF will adjust what it earns based on the current rates of pay that the savings accounts offer. When policy rates go up or down, this ETF will pay more or less.

Horizons High-Interest Savings ETF (TSE:CASH)

Horizons High-Interest Savings ETF (TSE:CASH) is relatively the same as HSAV. However, CASH aims to pay out a monthly distribution to its investors.

A caveat for this ETF is the fact that it is not tax-efficient. In a taxable account, you will pay tax as interest income, arguably the worst form of investment tax. So, you must figure out your situation before purchasing, and if you can tax shelter it in an RRSP or TFSA, it may be wise to do so.

The fund has a low MER of 0.17%, which provides a cost-effective option for investors who are looking for a high-interest savings investment vehicle.

Much like HSAV, the fund’s overall return will go up and down depending on interest rates. When policy rates go down, it will pay less, and vice versa. 

You may notice the price action on this fund is relatively consistent. It starts at $50, grows throughout the month, and restarts the next month at $50. This is simply the distribution being paid to unit holders.

It’s been a very long time since investors have been able to lock in yields like this on savings. Although it is not CDIC insured, which is virtually the only risk present in HSAV and CASH, they’re exceptionally low-risk funds that provide high rates of return on your savings.

CI High-Interest Savings ETF (TSE:CSAV)

The CI High Interest Savings ETF (TSE:CSAV) is another popular high-interest savings ETF in Canada.

It works much like CASH in the fact it accrues interest payments in the savings accounts it holds your funds in over the month, and it pays those out at the end of every month.

With assets under management north of $8B, this fund is more than double the size of Horizons, but it is virtually the same.

It has a management expense ratio of around 0.16%, making it one of the lower fee options on this list. However, we’re speaking in fractions of a percent here, and most of these funds will have relatively close management fees.

If you’re a stickler for large funds, you may prefer CSAV over other alternatives.

BMO Money Market Fund ETF Series (TSE:ZMMK)

Now that we’re done speaking on the HISA ETFs, we can begin to get into actual money market ETFs.

The BMO Money Market Fund ETF Series (TSE:ZMMK) is a popular choice for Canadian investors seeking a reliable and efficient money market fund. Managed by BMO Global Asset Management, this fund aims to provide investment results that closely track the FTSE Canada 30-Day T-Bill Index.

ZMMK primarily invests in Canadian dollar-denominated money market instruments. Some common investments in its portfolio include government treasury bills, commercial paper, and other high-quality short-term investments. The fund’s management fee is also relatively competitive, at 0.14%.

So, what is the difference between something like this and the HISA ETFs? Lower risk, primarily. While the HISA ETFs invest in institutional savings accounts, something like ZMMK will mainly invest in treasury bills, government bonds, and other short-term investments that have virtually 0 risk of default.

As a result, yields do tend to be a bit lower. You’ll typically see a fund like this yield anywhere from 0.25%-0.50% less than a HISA ETF. However, suppose you’re a stickler for investing savings into funds with virtually zero risk of capital loss.

In that case, you’ll likely prefer this over something like CASH or other high-interest savings ETFs.

Although they’re both virtually risk-free, there is an added element of risk with the savings ETFs in case of a bank insolvency.

iShares Premium Money Market ETF Comm (TSE:CMR)

The iShares Premium Money Market ETF Comm (TSE:CMR) is a popular investment option among Canadians looking for a stable and secure place to park their cash. This money market fund aims to provide investors a way to earn high-interest rates on savings with very little default risk.

Managed by BlackRock Asset Management, the iShares Premium Money Market ETF invests primarily in high-quality, short-term Canadian dollar debt securities. These include federal and provincial government bonds, as well as corporate bonds with a maximum remaining maturity of 375 days.

The fund has a much wider variety of funds than BMO’s, consisting of multiple provincial and government bonds, along with Canada T-Bills.

The management expense ratio is identical to ZMMK, at 0.14%.

Horizons 0-3 Month T-Bill ETF CAD (TSE:CBIL)

The Horizons 0-3 Month T-Bill ETF CAD (TSE:CBIL) is a popular and relatively new money market fund option in Canada. 

The ETF seeks to replicate the performance of the Solactive 1-3 Month Canadian T-Bill Index, providing investors with a low-risk and highly liquid investment alternative. The Government of Canada guarantees Treasury Bills. So, in terms of default risk, there is none. Or at least, there never has been in history.

Of course, there is an added element of interest rate risk, but it is reduced by the fact that this fund invests primarily in short-term T-Bills that mature in less than three months. If rates continue to rise, you’ll get new bills in the fund that offer higher rates rather than being locked into one with a longer maturity.

T-bills can be a pain to buy and sell. This fund allows you to do so just like selling or buying a stock. It’s an outstanding option for those looking to hold a multitude of short-term treasuries at the click of a button.

It yields less than almost all of the funds listed above, often by anywhere from 0.25%-1%. However, this isn’t surprising, considering short-term T-Bills will not offer the same interest rates.

The fund has the lowest management expense ratio out of any on this list, likely due to the low maintenance of the fund itself. It comes in at 0.10%.

Horizons 0-3 Month U.S. T-Bill ETF (TSE:UBIL.U)

Let’s say you don’t want to own Canadian T-Bills. Well, Horizons has something for you as well, and that is their US Treasury Bill ETF. Remember, the fund trades in USD, so you must exchange currencies to own it.

There isn’t much more to explain about UBIL that I haven’t described above in the CBIL section. Horizons 0-3 Month U.S. T-Bill ETF (TSE:UBIL.U) aims to invest in short-term US treasuries, ranging from 0-3 months in maturity. 

Because this fund is a little more niche, the management fees are a bit higher. However, they’re still very competitive, coming in at 0.12%.

Whether you’re looking for Canadian or US treasury exposure, both funds can do it for you.

Understanding money market funds

Money market funds are a type of mutual fund that invests in short-term debt securities and cash equivalents. 

These funds aim to provide investors with a steady stream of interest income and preserve the capital invested. 

Money market funds are often considered a safe, low-risk investment option due to their focus on high-quality, short-term assets and their liquidity.

Investors looking for a relatively safe investment with a modest yield may find money market funds appealing. These funds typically invest in assets such as government and corporate debt, certificates of deposit (CDs), commercial paper, and Guaranteed Investment Certificates, among other money market instruments. 

The short-term nature of these investments helps to minimize the risk of capital loss and maintain a stable net asset value (NAV).

One of the key benefits of money market funds is their liquidity. Due to the short-term nature of their investments, these funds can quickly buy and sell assets, making them an attractive option for investors looking to park their cash for a short period or maintain a liquid emergency fund. 

This is in stark contrast to some other investments, which may require a longer time horizon or may have higher transaction costs.

In terms of returns, money market funds generally offer lower overall returns than riskier investments, such as stocks or long-term bonds. However, their return potential is higher than simply holding cash in a savings account. 

The interest income generated by the fund’s assets is typically distributed to investors regularly, either monthly or quarterly.

While money market funds are considered relatively safe, investors should still be aware of the associated risks. For instance, there is still the potential for minimal capital loss if the value of the short-term debt securities the fund holds decreases.