• Cash, when thoughtfully managed, can serve as a strategic asset rather than dormant capital, providing investors with flexibility.
  
  
• Money market funds provide a way for investors to park cash and still earn a competitive rate of return. But these funds aren’t all created equal – structure and risk management matter.
  
  
• The Vanguard EUR Cash UCITS ETF offers a transparent solution for investors seeking liquidity in a short-term money market vehicle.

Investors are paying more attention to how they handle their cash. So far in 2025, euro-denominated money market ETFs have seen more than $9 billion of net inflows¹. 

First introduced in the US in the 1970s, money market funds are liquid, short-term investments that can offer more attractive levels of yield than traditional savings accounts – making them a compelling investment option for investors who need to park cash to fund near-term goals.

The Vanguard EUR Cash UCITS ETF, with an OCF² of 7 bps, provides a cost-effective vehicle for investors looking to capture these features.

Why cash matters

Investors face a landscape marked by economic uncertainty, fluctuating interest rates and high equity valuations. In this environment, cash is more than just a placeholder – it can serve as a strategic tool. Holding cash provides investors with the flexibility to respond to market opportunities and risks, acting as “dry powder” that can be deployed when needed.

Contrary to the perception that cash is idle or unproductive, it can play a vital role in both individual and professional portfolios. Cash shouldn’t simply be a passive holding; it is an active decision that can help manage risk, provide liquidity and enable timely investment decisions.

At the same time, a money market fund allows investors to enhance their return beyond what they could achieve in a basic deposit account. The ability to make active decisions with cash—beyond just letting it sit—can be a significant advantage in volatile markets.

Handle with care

A common misconception is that cash equals safety. In reality, cash is only as safe as the way it is managed. Leaving large balances in traditional savings or current accounts may expose investors to inflation risk or missed opportunities for yield. Moreover, not all cash management vehicles are created equal; the design and risk profile of cash funds can vary widely.

Money market funds, for example, are often seen as interchangeable, but their underlying structures and management approaches can lead to very different outcomes. Some funds may take on additional risk in pursuit of higher yields, while others prioritise capital preservation and liquidity. Understanding these differences is crucial for investors seeking to preserve capital and maintain access to their funds.

A cash ETF based on capital preservation and liquidity

Money market investors often focus on two things: capital preservation and liquidity. The Vanguard EUR Cash UCITS ETF aims to meet these demands by investing exclusively in high-quality, short-term government and government-related securities, in the form of certificates of deposit, commercial paper, floating and fixed-rate notes and repurchase agreements, all denominated in euros.

This focus on government-backed instruments helps minimise credit risk, especially at a time when investors are not compensated for taking on additional risk, particularly in the ultra-short end of the yield curve. The ETF’s structure is physically backed, not synthetic, and all holdings are visible to investors. By adhering to the EU Money Market Funds Regulation (MMFR), the ETF ensures compliance with strict European standards for liquidity, credit quality and risk management – offering investors peace of mind in uncertain times.

Additionally, our ETF’s managers employ strategies to minimise reinvestment risk, such as extending the fund’s duration with longer-maturity instruments and using a laddered approach across 3-, 6-, and 12-month government bonds. This helps reduce the risk of reinvesting at lower rates during rate-cutting cycles. 

Source: Vanguard, as at 30 November 2025. Diagram is provided for illustrative purposes only. 

Structure and differentiation: LVNAV vs. VNAV

Not all money market funds are structured the same way. The two most common types are Low Volatility Net Asset Value (LVNAV) funds, which aim to maintain a constant share price fixed at €1, and Variable Net Asset Value (VNAV) funds, which mark their NAVs to market daily and price shares to four decimal places. The Vanguard EUR Cash UCITS ETF is a VNAV fund, providing greater clarity on price movements, especially during periods of market stress.

This structural difference matters most when markets are volatile. VNAV funds’ detailed pricing can help investors better understand the value of their holdings as conditions change.

Playing a role in portfolios: Versatility for investors big and small

Money market funds are not only for parking cash – they serve multiple roles across different investor types. For individual savers, these funds offer accessibility and a steady yield, especially when interest rates are in flux. The slower adjustment of money market yields to policy changes can provide a short-term boost in yield compared to the near-instant response of savings account rates.

For asset allocators, money market funds can act as a liquidity buffer, a transition asset or a risk-control layer within a broader portfolio. Institutions may value these funds for their relative predictability and operational simplicity. The Vanguard EUR Cash UCITS ETF, with its focus on government securities, is designed to meet the needs of all these groups, offering a “true-to-label” cash solution that stands out for its transparency and aim for capital preservation.

Money market funds are not a replacement for fixed income allocations in portfolios, though, and we continue to believe investors should remain fully invested in a long-term, strategic mix of assets through all market environments. But there are times when investors need to hold cash – either to park funds or to meet their short-term needs. In such instances, money market funds can offer a convenient solution. 

Find out more about the Vanguard EUR Cash UCITS ETF.
 

¹ Source: Morningstar, as at 31 October 2025.

² The ongoing charges figure (OCF) covers management fees and service costs such as administration, audit, depositary, legal, registration and regulatory expenses incurred in respect of the funds. 
 

Investment risk information

The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.

ETF shares can be bought or sold only through a broker. Investing in ETFs entails stockbroker commission and a bid- offer spread which should be considered fully before investing.

Funds investing in fixed interest securities carry the risk of default on repayment and erosion of the capital value of your investment and the level of income may fluctuate. Movements in interest rates are likely to affect the capital value of fixed interest securities. Corporate bonds may provide higher yields but as such may carry greater credit risk increasing the risk of default on repayment and erosion of the capital value of your investment. The level of income may fluctuate and movements in interest rates are likely to affect the capital value of bonds.

An investment in a money market fund is not a guaranteed investment. An investment in a money market fund is different from an investment in deposits, as the amount invested in a money market fund is capable of fluctuation. Money market funds do not rely on external support for guaranteeing the liquidity of the money market fund or stabilising the Net Asset Value per share. The risk of loss of the amount invested shall be borne by the investor. 

For further information on risks please see the “Risk Factors” section of the prospectus on our website.

Important information

This is a marketing communication.

For professional investors only (as defined under the MiFID II Directive) investing for their own account (including management companies (fund of funds) and professional clients investing on behalf of their discretionary clients).

The information contained herein is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so. The information is general in nature and does not constitute legal, tax, or investment advice. Potential investors are urged to consult their professional advisers on the implications of making an investment in, holding or disposing of shares and /or units of, and the receipt of distribution from any investment.

Vanguard Funds plc has been authorised by the Central Bank of Ireland as a UCITS and has been registered for public distribution in certain EEA countries and the UK. Prospective investors are referred to the Funds' prospectus for further information. Prospective investors are also urged to consult their own professional advisers on the implications of making an investment in, and holding or disposing shares of the Funds and the receipt of distributions with respect to such shares under the law of the countries in which they are liable to taxation.

The Manager of Vanguard Funds plc is Vanguard Group (Ireland) Limited. Vanguard Asset Management, Limited is a distributor for Vanguard Funds plc.

The Indicative Net Asset Value (“iNAV”) for Vanguard’s ETFs is published on Bloomberg or Reuters. Refer to the Portfolio Holdings Policy.

For Dutch investors only: The fund(s) referred to herein are listed in the AFM register as defined in section 1:107 Dutch Financial Supervision Act (Wet op het financieel toezicht).For details of the Risk indicator for each fund listed, please see the fact sheet(s) which are available from Vanguard via our website.

Issued in EEA by Vanguard Group (Ireland) Limited which is regulated in Ireland by the Central Bank of Ireland.

Issued by Vanguard Asset Management, Limited which is authorised and regulated in the UK by the Financial Conduct Authority.

© 2025 Vanguard Group (Ireland) Limited. All rights reserved.

© 2025 Vanguard Asset Management, Limited. All rights reserved.