LIC MF Money Market Fund: Good investment option for parking your idle funds

Retail investors usually keep surplus funds after paying for their regular expenses in their savings bank accounts. Over a period of time these surplus funds can accumulate to a substantial amount for which the investor gets very low return. Savings bank interest rate for major scheduled commercial banks are currently 2.5% (source: RBI, as of 5^th September 2025). Mutual funds provide highly liquid and relatively low risk investment options which can generate returns on your idle funds (see the chart below). In this article, we will discuss money market funds with spotlight on LIC MF Money Market Fund.

Source: Advisorkhoj Research, as on 16^th September 2025

What are money market funds?

Money market funds are debt mutual fund schemes which invest in money market instruments like commercial papers (CPs), certificates of deposits (CDs), Treasury Bills (T-Bills), Tri Party Repos (TREPs) etc, with maturities of less than one year. As per AMFI August data, money market funds as a category, has the second highest assets under management (AUM) among all debt fund categories. While money market funds are popular among corporates and institutional investors for their working capital and cash management needs, there is relatively low awareness about these funds among retail investors.

Characteristics of money market instruments

• Liquidity: Since these instruments mature within 1 year, they are highly liquid.


• Interest rate risk: Interest rate risk is directly related to the duration of debt or money market instruments. Since these instruments have very short durations (1day to 1 year), the impact of interest rate / yield changes on Net Asset Value (NAV) is low, in other words, low interest rate risk.


• Credit risk: T-Bills are government securities and hence have no credit risks. TREPs (overnight securities) are backed by G-Secs and therefore have practically no credit risk. CPs and CDs may have credit risks.

Current yield and interest rate scenario

The chart below shows the yield curve of G-Secs and the corresponding yield curve. You can see that the curve has steepened in the last 1 month. Yields may soften if the RBI cuts repo rates in the coming MPC meetings.

Source: Advisorkhoj Research, as on 16^th September 2025

About LIC MF Money Market Fund

LIC Mutual Fund is renowned in the mutual fund industry for their long track record and expertise in fixed income investments. LIC MF Money Market Fund was launched in August 2022.

• The fund will invest in money market securities with maturity of up to 1 year


• The fund is an actively managed fund which will adopt an investment strategy depending on the interest rate scenario


• The fund proposes to invest in high quality credits


• The maturity profile of instruments will be selected in line with the market outlook

Monthly Rolling Returns

The chart below shows the monthly rolling returns of LIC MF Money Market Fund. The monthly returns have ranged between 0.3% - 8%. The average and median monthly rolling of the fund was 0.51%. The average annualized average returns is 6.3%. In the last 1 year, the fund has given 6.67% returns (see the table below).

Source: Advisorkhoj Research, as on 31^st August 2025

Fund has started outperforming benchmarks

The fund has started to outperform the benchmark indices in the last few weeks (see the portion of the table marked in red).

Source: LIC MF Factsheet, as on 31^st August 2025. Fund: LIC MF Money Market Fund, First Tier Benchmark: NIFTY Money Market Index A-I, Additional Benchmark: CRISIL 1 Year T-Bill Index

Higher YTM and lower maturity

The average maturity, Macaulay duration and modified duration of the fund is 171 days. The YTM of the fund is 6.3% (Source: LIC MF Factsheet, as on 31^st August 2025). The YTM of the fund is higher than the category average, while the average maturity is lower than the category average. In other words, the risk reward trade-off of LIC MF Money Market Fund is superior compared to its peers.

Source: Advisorkhoj Research, LIC MF Factsheet, as on 31^st August 2025.

High credit quality

The credit quality of the fund is high. Almost 100% of the underlying portfolio is AAA or Sovereign and cash or cash equivalent.

Source: Advisorkhoj Research, LIC MF Factsheet, as on 31^st August 2025.

Who can invest in LIC MF Money Market Fund?

• Investors looking for reasonable returns with investment in high credit quality credits


• Investors looking for short term investment


• Investors seeking lower interest rate risk


• Suitable investment option for investors looking for a low risk fund for STP to a LIC MF equity fund


• Investors with an investment horizon of up to 1 year

Investors should consult with financial advisors or mutual fund distributors if LIC MF Money Market Fund is suitable for their investment needs.