Money market fund vs fixed deposit in Sri Lanka
In short
A money market fund holds short-dated instruments — treasury bills, commercial paper, bank deposits — and passes through what they earn after a fee, with no promised rate and no fixed term. A fixed deposit promises a rate for a set period and returns your capital at the end. The fund can usually be redeemed on any business day; the deposit normally cannot without a penalty.
This is the closest comparison in the whole market, because a money market fund holds many of the same instruments a bank would put your deposit into. The difference is the wrapper around them and who takes the risk.
It is also the comparison where the numbers are most often misread, because a money market fund’s price accrues so smoothly that its return looks like a rate. It is not one.
Side by side
What each one actually is, rather than what each returned.
| Money market fund | Fixed deposit | |
|---|---|---|
| What it holds | Treasury bills, commercial paper, repos, bank deposits, generally under a year | Whatever the bank chooses to lend it on to |
| What is promised | Nothing; you receive what the holdings earn after fees | A stated rate for a stated term |
| Term | None; redeem on a business day | Fixed at the outset |
| Early access | Usually any business day; check the exit fee | Penalty or reduced rate |
| Cost | Management fee, typically a fraction of a percent a year | No explicit fee; the bank keeps the margin |
| Transparency | The fund publishes what it holds and prices daily | The bank does not tell you where your money went |
| Regulator | Securities and Exchange Commission of Sri Lanka | Central Bank of Sri Lanka |
Why the fund’s return tracks treasury bill yields
A money market fund is mostly holding government paper and short bank instruments, so what it earns is close to what those instruments yield, less its fee. As at 25 August 2026 the 3-month treasury bill yielded 9.06% and the 12-month bill 9.67%, with the policy rate at 8.75%. When the Central Bank moves the policy rate, bill yields move, and the fund follows within weeks as its holdings mature and are reinvested — faster for a fund holding 30-day paper than one holding 180-day paper.
The fee matters more here than anywhere else
Because these funds hold near-identical instruments, what they earn before fees is very similar. That makes the management fee a large share of the difference between one fund and the next — and unlike the return, it is knowable in advance and applies every year. Our lowest-fee ranking exists for this reason, and it is a cut no other comparison in this market publishes.
The seven-day yield you will see quoted
Managers commonly publish a "7-day current yield" as at a date: the last week of price movement, annualised. For this category it is a reasonable summary, because the price moves smoothly enough that a week is representative. It is not comparable to an FD rate — it describes what the fund just did, not what it will pay — and where you compare it across managers, check the figures are as at the same date.
Tax
Tax treatment differs between deposits and unit trusts in Sri Lanka, and it has changed more than once in recent years. We do not publish tax rates here, because a rate that is wrong or out of date is worse than no rate at all on a page people may act on. Check the current position with the Inland Revenue Department or a qualified tax adviser, and ask the fund manager how distributions from the specific fund are treated before you assume.
What this page does not do
It does not tell you which of the two to choose. That depends on when you need the money, what else you hold, your tax position and how you would feel if the value fell, none of which we know. CeylonFunds is not a licensed investment adviser and does not provide investment advice. What this page can do is state precisely what each instrument promises and what it does not, so that the comparison you make is between the right two things.
Common questions
Are money market funds safe in Sri Lanka?
They are the category whose price moves least, because they hold short-dated instruments whose value barely changes. That is not a guarantee: the price can fall if something the fund holds defaults or reprices, and the fund manager does not guarantee your capital. We publish a measured volatility figure for every fund rather than describing them as safe.
Do money market funds beat fixed deposits?
Not a question that can be answered in advance, because one is a past measurement and the other is a forward promise. What can be said is that both are driven by the same short-term rates, and that the fund’s outcome is that yield minus its management fee, with no margin retained by an intermediary.
How quickly can I withdraw from a money market fund?
Most Sri Lankan money market funds accept redemption requests on any business day and settle within a few working days. The exact period is set by the fund and stated in its prospectus. Check whether an exit fee applies to how long you have held.
What is the minimum for a money market fund in Sri Lanka?
It varies by fund and is published on every fund page here. Across the money market funds we track, minimums run from a few hundred rupees to several hundred thousand.
This is general information about how two kinds of product differ. It is not advice about your circumstances, CeylonFunds is not a licensed investment adviser, and we do not publish bank deposit rates. Central Bank figures quoted are as at 25 August 2026. Past performance is not indicative of future results.
Related
Daily unit prices published by the Unit Trust Association of Sri Lanka (utasl.lk). Performance figures as published by the respective fund managers.