Money Market Fund Rankings: The entity dominating the sector and is it worth choosing?

Money market funds have become one of the most popular conservative savings channels in Israel. These mutual funds invest exclusively in short-term, safe instruments such as jumbo deposits and T-bills (MAKAM), yielding returns that hover near the Bank of Israel interest rate without locking away capital.

They offer full liquidity, allowing redemption on any trading day, and provide a tax advantage over traditional bank deposits. While yield differences between funds are minor due to their similar structure, for large portfolios, even a tenth of a percent can significantly impact net returns.

The latest rankings highlight the dominance of Meitav, which manages four of the five top-performing funds year-to-date. The table is led by two funds with an identical 2.64% yield: "Meitav (00) Money Market Jumbo" and "Yelin Lapidot Money Market Kosher." The remaining spots are held by Meitav funds with yields of 2.53% and 2.48%.

The impact of management fees

There is a critical detail here: while Meitav Jumbo and Yelin Lapidot share a 2.64% yield, their management fees differ significantly. Meitav charges 0.12%, whereas Yelin Lapidot charges only 0.06%—half the cost. In a sector where yield gaps are narrow, management fees become the deciding factor. For funds managing billions of shekels, a difference of a few basis points translates into millions in investor capital.

Money market funds vs. deposits

Year-to-date, these funds have returned 2.64%, translating to an annualized rate of approximately 4.2%. However, investors must consider the interest rate environment. The Bank of Israel has lowered rates three times this year to 3.5%, with further cuts expected.

• Money market funds: These update in real-time, tracking the Bank of Israel rate. They are highly attractive when rates rise, but their future yield erodes when rates fall.

• Deposits: These offer a fixed, locked-in rate. This is an advantage during a rate-cutting cycle, but the trade-off is a lack of liquidity and potential early-withdrawal penalties.

Taxation also differs: deposits are taxed at 15% on nominal profit, while money market funds are taxed at 25% on real profit (inflation-adjusted). In an inflationary environment, this often favors money market funds.

Ultimately, the choice depends on your strategy. If you believe rates will continue to fall and wish to lock in a yield, a long-term deposit may be a stable anchor. If you prioritize liquidity and flexibility, money market funds remain a highly relevant component of a conservative portfolio.