Best Cash & Money Market ETFs on the ASX

A cash or money market ETF invests in very short-term, high-credit-quality instruments like bank bills, term deposits, and repurchase agreements, aiming to deliver returns closely tracking the RBA cash rate. The two leading ASX options are AAA (BetaShares Australian High Interest Cash ETF) and BILL (iShares Core Cash ETF), both distributing income monthly. These ETFs function as a savings account alternative within a brokerage account, offering capital stability with minimal price fluctuation and CHESS-held ASX settlement rather than exposure to a single bank's balance sheet.

Compare net yields after fees - AAA charges 0.18% and BILL charges 0.07%, meaning BILL's lower fee directly translates to higher net returns since both target similar gross yields near the RBA cash rate. Check the credit quality of underlying holdings, ensuring the portfolio is invested in ADI (Authorised Deposit-taking Institution) obligations rated A-1+ or equivalent. Assess the ETF's tracking accuracy to the RBA cash rate benchmark, and consider that unlike bank deposits, money market ETFs are not covered by the Australian Government's Financial Claims Scheme ($250,000 guarantee), representing a different risk profile.

Cash ETFs like AAA and BILL offer competitive yields without introductory teaser rates that revert after a few months, unlike many bank savings accounts that advertise high rates requiring conditions like minimum deposits or age restrictions. Unlike term deposits, cash ETFs provide daily liquidity - you can sell on the ASX with T+2 settlement without break costs. However, savings accounts up to $250,000 per ADI carry the Financial Claims Scheme government guarantee, while cash ETFs do not, and savings account interest can be paid into offset accounts for mortgage holders, a structural benefit cash ETFs cannot replicate.

The primary risk is inflation erosion - when CPI exceeds the RBA cash rate, real returns are negative, meaning purchasing power declines despite nominal income. Interest rate risk is minimal due to ultra-short duration, but yields will fall when the RBA cuts rates, unlike locked-in term deposits. Distributions are assessable income with no franking credits, taxed at the investor's full marginal rate. Cash ETFs suit SMSF trustees needing a liquid reserve bucket, investors parking proceeds between trades, or conservative investors seeking capital preservation, but they should not form a long-term wealth-building allocation.