Money Market Funds
DEGIRO believes that it is important that clients understand how the structure of these money market funds works. DEGIRO is not a bank but an investment firm. In the Netherlands, investment firms are not allowed to hold the money of clients. Therefore, when you become a client of DEGIRO, you give a standing order to invest money into a money market fund from either Morgan Stanley Investment Management or FundShare. As such, at DEGIRO you do not hold money. For every currency available in the WebTrader, a separate money market fund is also available. The objective of a money market fund is to realise a return that is equal to the market interest rate with as low risk as possible. An additional advantage to the low risk, is that your money market fund participations, just like your other investments, are kept strictly separate from the assets of DEGIRO.
Money market funds are often used by institutional investors, such as pension funds, to hold large amounts of money in a safe way. Approximately 1 trillion euros are currently being held in money market funds in Europe. (Source)
DEGIRO was originally founded as broker for institutional investors that demand a high degree of security. The structure of DEGIRO, including the money market funds, has been set up to comply with these requirements and has remained unchanged since its founding. Retail investors make use of the same structure wherein financial instruments, including money market fund participation, are protected in the unlikely instance of a bankruptcy of DEGIRO. This is done by placing the financial instruments of clients into separate custodian entities. As such, the assets of clients are not exposed to the company risks of DEGIRO. Therefore, in contrast to banks, a deposit guarantee scheme is rendered unnecessary to protect investors against a bankruptcy of its service provider.
"The objective of a money market fund is to realise a return that is equal to the market interest rate with as low risk as possible."